Analyzing an Industry

• Segmentation (BO path 4) Customer Characteristics: • Age, gender, income, level of use• Employee characteristics, (Pop Copy)

• Competitors: 1. leader 2. Challenger 3. Follower 4. Nichers • http://www.youtube.com/watch?v=ioVHaAUhgEk

• Pop Copy = Leader, ‘Bad Service’ segment

StrategyA View from the Top

Chapter 4: Analyzing an Industry

John ShonkBob Odgers

Donald Ewalt

What is Industry?Products

> function> technology

CustomersGeographyStages in production-distribution

pipelineMarkets served

Porter’s Five Forces Model

1. Threat of new entrants2. Bargaining power of customers3. Bargaining power of suppliers4. Threat of substitute products or

services5. Jockeying among current rivals

Threat of EntryEconomies of scaleProduct differentiationCapital requirementsCost disadvantages that are

independent of sizeAccess to distribution channelsGovernment regulations

Bargaining Power of Customers

Few customers and/or buy in large volume

Product is relatively undifferentiated, making it easy to switch other suppliers

Buyers’ purchases represent a sizable portion of the sellers’ total revenues

Buyers can integrate backward

Bargaining Power of Suppliers

Only a few dominant and are more concentrated than the industry they serve

Component supplied is differentiated, making switching among suppliers difficult

Few substitutesSuppliers can integrate forwardIndustry generates a small

portion of the suppliers’ revenue base

Threat of Substitute Products or Services

Show improvements in price performance relative to the industry average

Produced by companies with deep pockets

Jockeying among Current Rivals

Competitors are numerous and relatively equal in size and power

Industry growth is slow and the competitive battle is more about existing customers than creating new customers

Fixed costs are high or the product or service is perishable

Capacity increases are secured in large increments

Exit barriers are high

*Influence of Complementary Products

Alignment with complementorsNew technologies or approaches

can upset the existing order

Analyzing an Industry

• Segmentation (BO path 4) Customer Characteristics: • Age, gender, income, level of use• Employee characteristics, (Pop Copy)

• Competitors: 1. leader 2. Challenger 3. Follower 4. Nichers • http://www.youtube.com/watch?v=ioVHaAUhgEk

• Pop Copy = Leader, ‘Bad Service’ segment

Analyzing Products/Market

• “Research used to assist in predicting the direction of the markets based on technical data” 1. Market size (current and future)

2. Market growth rate

3. Market profitability

4. Industry cost structure

5. Distribution channels

7. Market trends

8. Technology changes

Analyzing Products/Market

• Example: Venezuela, oil Market. Avoidable?http://www.washingtontimes.com/news/2009/may/12/nationalization-continuing/

Four Trajectories of Change

•Radical- threatened with both obsolescence at the same time…. Ex. Airline industries•Progressive- not threatened with either obsolescence… Ex. Long-haul trucking •Creative- core assets are threatened, but core activities retain value… Ex. Movie studios•Intermediating- core assets retain value, but core activities are threatened… Ex. Museums

Structure, Concentration, and

Product DifferentiationStructure- Vertical integration,

horizontal integration, or both?Concentration- Market share and unit

costs are inversely related, and the “Rule of Three and Four.”

Differentiation- Mature markets sometimes become less concentrated.

Product Life CycleIntroductory Growth Maturity Decline

Competition is unsure of targets

Less uncertain No sales growth

Unattractive

Potential customers are unfamiliar

More intense competition

Most competitively stable

Good strategies can produce

Large amount of experimentation

Usually most rivals

Product development and give a spark

New PatternsFighting for the right

convergence… HD TV's and Cell Phones

Industry evolution… Three phases

The lines are getting blurredChanging with experience