Chapter 8-INDUSTRY AND COMPETITOR ANALYSIS

MEANING

Industry analysis

INDUSTRY ANALYSIS is a business research that focuses on the potential of an industry.

1) Actual and potential industry size

2) Industry growth

3) Industry structure

4) Industry setting

5) Industry attractiveness

6) Industry performance

7) Key success factors

8) Cost structure

Dimensions of an industry analysis

Actual & Potential Industry Size

Knowledge of industry size not only can help evaluate investment decisions but also serves to define market share of various competitors.Estimate of industry size can be based upon governtment source of trade associations.Another approach is to obtain competitor sales from published sources and from competitor’s employees.

Industry Growth After the size of the industry, the focus turns to the growth

rate.The best strategy is to identify and invest in growth contexts and identify and disinvest from declining situations.

It refers to the structure in which economic and technical forces operate.The following are the types of industry structure:

1. PURE MONOPOLY (only one seller)2. PURE OLIGOPOLY ( few sellers)3. PURE COMPETITION (large number of sellers)4. MONOPOLISTIC COMPETITION (combination of monopoly &

pure competition)

Industry Structure

Industry Setting

Industry setting deals with the pattern of industries.Porter has classified the various industries into five categories:

1. FRAGMENTED INDUSTRY2. EMERGING INDUSTRY3. MATURING INDUSTRY4. DECLINING INDUSTRY5. GLOBAL INDUSTRY

Industry Attractiveness

It consists of various factors prevailing in the industry concerned which affect the profitability of an organisation.It is determined by the following factors:

1. NATURE OF DEMAND2. INDUSTRY POTENTIAL3. PROFIT POTENTIAL

Industry Performance

It is related to the current & future factors which determine the performance of an industry, it is measured by the following factors:

1. PROFITABILITY2. OPERATIONAL EFFICIENCY3. INNOVATION

Key Success Factors Identification of the key success factors for

strategic groups in the industry is very important.There are specific assets & skills that are needed to be successful and perhaps even to survive.

An understanding of the cost structure can provide insights into present and future key success factors.

Cost structure

COMPETITION ANALYSIS

1. ANALYSIS OF COMPETITIVE FORCES

2. COMPETITOR ANALYSIS

Competiton analysis should also be taken to understand the exact nature of opportunities and threats.Two types of analysis are required

Analysing the competitive forces

An understanding of competitive forcs is essesntial for a market-planner to survive the competition and sustain its growth.Porter has identified five forces

i. Threats of entryii. Bargaining power of buyersiii. Bargaining power of suppliersiv. Substitute productsv. Rivalry

Competitor Analysis

It can be defined as a set of activities which examines the comparative position of competing enterprises within a given strategic sector.It helps in getting insights into competitors’ strategies-past,present and potential.It also provide basis for developing future strategies to establish advantages over its competitors.

Steps in competitor analysis

PORTER’S GENERIC COMPETITIVE STRATEGY

1. Cost LeadershipIn cost leadership, a firm sets out to become the low cost producer in its industry. The sources of cost advantage are varied and depend on the structure of the industry. A low cost producer must find and exploit all sources of cost advantage. if a firm can achieve and sustain overall cost leadership, then it will be an above average performer in its industry. 2. DifferentiationIn a differentiation strategy a firm seeks to be unique in its industry along some dimensions that are widely valued by buyers. It selects one or more attributes that many buyers in an industry perceive as important, and uniquely positions itself to meet those needs. It is rewarded for its uniqueness with a premium price.

3. FocusThe generic strategy of focus rests on the choice of a narrow competitive scope within an industry. The focuser selects a segment or group of segments in the industry and tailors its strategy to serving them to the exclusion of others.The focus strategy has two variants.(a) In cost focus a firm seeks a cost advantage in its target segment, while in (b) differentiation focus a firm seeks differentiation in its target segment. Both variants of the focus strategy rest on differences between a focuser's target segment and other segments in the industry.  

COMPETITIVE INFORMATION SYSTEM or competitive intelligence

Competitive Intelligence is a process of gathering , analysing & applying information about what competitors are intending to do both in short-term as well as long-term.The following information is analysed:

1. CURRENT AND PAST STRATEGIES OF COMPETITORS2. COMPETITOR’S ORGANISATION AND CULTURE3. COST STRUCTURE

SUBMITTED TO : MRS PRAGATI MA’AM

SUBMITTED BY: DEEPALI KAPOOR