industry analysis
DESCRIPTION
industry analysis for building a portfolioTRANSCRIPT
Porter’s five forces analysis of banking industry:
Banks are making good profit in our country. There are 47 banks operating all over the
country. Among all these banks, the foreign banks and private commercial banks are
performing well. The government owned banks are still in the phase of improvement. Five
forces analysis of this banking industry is given below:
Forces Component parts Intensity of
components
Power of
forces
Final Strength
Bargain power of
buyer
01. Switching cost
02. Seller availability
03. Importance of
savings/borrowings
04. Interest rate bargain
power
05. Investment opportunity
Low
High
High
Low
Low
High
High
Low
Low
Low
Low
Threat of new
entry
01. Govt. restriction
02. Capital requirement
03. Learning effect
04. Sole access to
distribution channel
05. Economies of scale
High
High
Low
High
High
Low
Low
High
Low
Low
Low
Rivalry among
competitors
01. Industry growth
02. Fixed cost
03. Emotional barriers
04. Specialized asset
05. Govt. restriction
High
Low
Low
Low
High
Low
Low
Low
Low
High
Low
Pressure from
substitute products
- Low Low Low
Bargain power of - Low Low Low
supplier
From the above analysis we can see the banking industry is very much attractive industry to
invest. The bargain power of buyer, bargain power of supplier, rivalry among competitors and
pressure from substitute products are very low. One of the greatest advantages is that the
government is not giving any permission to open any new bank in the country. For this reason
no new commercial bank has started its operation in the country since 2000. So this industry
should be given priority in case of investment.
Macroeconomic and marker analysis of banking industry:
Current rule of SEC is not to provide any margin loan facility for purchasing the shares of
companies whose PE ratios are greater than 40. But we know the PE ratios of most
banks are below 40. So the share price of banking industry will increase in near future.
The government has increased CRR to 5.5% and SLR to 18.5% which will lessen the risk
of banks failure. So the banking sector will flourish.
The compliance of all banks with BALSE II will also lessen the risk of failure.
ROA, ROE, Net interest margin for banks are very good.
The opportunity of stock splitting will raise the share price in future.
Profits of small investors are free from tax. So more people will come to the capital
market which bears positive sign.
Newer services (like ATM, Credit card, Visa card etc.) of banks making life easier. So
people are becoming dependent on banks.
Porter’s five forces analysis of insurance industry:
Insurance industry is one of the most prospective industries in our country. Five forces
analysis of this industry is given below:
Forces Component parts Intensity of
components
Power of
forces
Final Strength
Bargain power of
buyer
01. Switching cost
02. Seller availability
High
High
Low
Low Low
Threat of new
entry
01. Economies of scale
02. Differentiation
03. Capital requirement
04. Learning effect
05. Sole access to
distribution channel
High
High
High
Low
High
Low
Low
Low
High
Low
Low
Rivalry among
competitors
01. Industry growth
02. Fixed cost
03. Emotional barriers
04. Specialized asset
05. Govt. restriction
High
Low
Low
Low
High
Low
Low
Low
Low
High
Low
Pressure from
substitute products
-
Low Low Low
Bargain power of
supplier
-
Low Low Low
From the above analysis we can see the insurance industry is very much attractive industry to
invest. The bargain power of buyer, bargain power of supplier, rivalry among competitors and
threat of new entry are very low. Although in case of life insurance there is a alternative way of
investing in bank deposit but incase of general insurance there is no substitute. So this industry
should be given priority in case of investment.
Macroeconomic and market analysis of Insurance industry:
Current rule of SEC is not to provide any margin loan facility for purchasing the shares of
companies whose PE ratios are greater than 40. But we know the PE ratios of most
insurance companies are below 40. So the share price of insurance industry will increase
in near future.
ROA, ROE, Net interest margin for insurance companies are very good.
The Securities and Exchange Commission (SEC) has recently fixed the minimum IPO size
of a company willing to float its shares for public subscription at Tk 400 million. So the
insurance companies which are already in market with issued capital less than Tk 400
million may issue bonus or right shares. So the price of the share of the insurance
companies may rise.
Porter’s five forces analysis of cement industry:
The history of cement industry in our country is not very old. It is very new. In past, the country
imported cement from outside the country. But in present time the attitude of the people and
the government has changed. They buy locally produced cement. The local cement is
sometimes much better than the imported cement. So there is a big prospect of cement
industry in our country. The porters five forces analysis of this industry is -
Forces Component parts Intensity of
component
s
Power of
forces
Final Strength
Bargain power of
buyer
01. Switching cost
02. Customer availability
04. Import restriction
05. Quality
06. Industry Fragmentation
Low
High
High
High
High
High
Low
Low
Low
High
Low
01. Economies of scale
02. Differentiation
High
Low
Low
High
Threat of new
entry
03. Capital requirement
04. Learning effect
06. Govt. assistance
High
High
High
Low
Low
High
Low
Rivalry among
competitors
01. Industry growth
02. Fixed cost
03. Emotional barriers
04. Specialized asset
05. Govt. encouragement of
local production
06. Subsidy to export
07. Raw material subsidy
High
High
Low
High
High
Low
High
Low
High
Low
High
High
High
High
High
Pressure from
substitute products
01. Availability of Substitute Low Low Low
Bargain power of
supplier
01. Fragmentation of
supplier
02. Importance of Industry
to supplier group
Low
Low
High
High
High
From the above analysis we can say the industry is a good one to invest. Cement is an emerging
industry in Bangladesh. In the past time Bangladesh government imported the cement from
outside the country for public construction. But at present the government has decided to use
the local cement for public construction. In recent budget for 2010-2011 the government
declared huge public development project. If the government uses the local cement for this
purpose the industry growth will be very high. So there is a huge opportunity for the cement
company to expand their business and capture huge earnings. Besides these the construction
works are increasing at an increasing rate in the country. So the industry is in a boom position.
Macroeconomic and market analysis of cement industry:
The government’s plans to set up several flyovers in Dhaka under the strategic
transport plan and build 142 bridges across the country are expected to bring
vibrancy to the cement sector.
Government decided not to import cement from outside the country for public
construction.
The demand for cement to the general public is increasing day by day as the need for
accommodation is increasing.
Our country has huge cost benefit of production as we have the availability of low cost
labor.
Cement consumption in Bangladesh is witnessed a growth of 13 percent in 2009, rising
from 8 percent in the previous year.
ROA and ROE of ceramic companies are very good.
The opportunity of stock splitting will raise the share price in future.
Profits of small investors are free from tax. So more people will come to the capital
market which bears positive sign.
Porter’s five forces analysis of ceramic industry:
World class ceramic products are being produced in our country locally. There is a huge
demand of ceramic products in the local market. So the ceramic companies can easily become
lead performer in the country.
Forces Component parts Intensity of
component
s
Power of
forces
Final Strength
01. Switching cost Low High
Bargain power of
buyer
02. Customer availability
04. Import restriction
05. Quality
High
High
High
Low
Low
Low
Low
Threat of new
entry
01. Economies of scale
02. Differentiation
03. Capital requirement
04. Learning effect
06. Govt. assistance
High
High
High
High
High
High
Low
Low
Low
High
Low
Rivalry among
competitors
01. Industry growth
02. Fixed cost
03. Emotional barriers
04. Specialized asset
05. Govt. encouragement of
local production
06. Subsidy to export
High
High
Low
High
High
High
Low
High
Low
High
High
Low
Indifferent
Pressure from
substitute products
01. Availability of Substitute Low Low Low
Bargain power of
supplier
01. Fragmentation of
supplier
02. Importance of Industry
to customer group
Low
Low
High
High
High
From the above analysis we can say the industry is a good one to invest. Ceramic is an emerging
industry in Bangladesh. In the past time Bangladesh imported the ceramic products from China.
But now the government decided not to import ceramic products from china rather the subsidy
and all other facilities will be given to the local producers to produce the same locally. So within
very few years the ceramic sector will flourish here.
Macroeconomic and market analysis of ceramic industry:
Government decided not to import low quality ceramic products from china rather they
produce it locally.
The export promotion will be conducted jointly by the Govt. and Bangladesh Ceramic
Ware Manufacturers Association (BCWMA).
Bangladesh will be able to produce ceramic products with lower cost than China and
Canada.
European Union is a big market for Bangladeshi ceramic products.
The export of ceramic products registered an average growth of 20 per cent during the
last one decade. The six-year projection has been made on the basis of the average 20
per cent growth for the last decade.
ROA and ROE of ceramic companies are very good.
The opportunity of stock splitting will raise the share price in future.
Profits of small investors are free from tax. So more people will come to the capital
market which bears positive sign.
As population increases the need for ceramic products also increases. So the industry
will flourish very soon.
Porter’s five forces analysis of financial Institution:
There are around 29 non bank financial institutions in the country. These institutions are doing good job
to cut a good profit. Porters five forces analysis of this industry is given below:
Forces Component parts Intensity of
components
Power of
forces
Final Strength
Bargain power of
buyer
01. Switching cost
02. Seller availability
Low
High
High
Low Indifferent
01. Economies of scale
02. Brand Recognition
High
High
Low
Low
Threat of new
entry
03. Capital requirement
04. Learning effect
High
Low
Low
High
Low
Rivalry among
competitors
01. Industry growth
02. Fixed cost
03. Emotional barriers
04. Specialized asset
05. Govt. restriction
06.Exit Barrier
High
Low
Low
Low
High
High
Low
Low
Low
Low
High
High
Low
Pressure from
substitute products
-
High High High
Bargain power of
supplier
-
Low Low Low
From the above analysis we can see the financial Institution industry is very much attractive
industry to invest. Threats of new entry, bargain power of supplier, rivalry among competitors
are very low. Only pressure from substitute product is high. So this industry should be given
priority in case of investment.
Macroeconomic and market analysis of financial Institution:
Bangladesh got its first sovereign credit rating which will help the country in
international transaction and attract more foreign investment.
The financial sector in Bangladesh remained stable and liquidity conditions remained
normal during global financial crisis. So there is no so much correlation between
Bangladesh economy & global economy so investment in this sector is more attractive.
An attempt to strengthen and consolidate the financial base of non bank financial
institutions (NBFIs), Bangladesh Bank (BB) plans to implement Basle II capital
framework.
Porter’s five forces analysis of Tannery Industry :
Tannery is basically an export oriented industry in our country. The five forces analysis of this
industry is-
Forces Component parts Intensity of
components
Power of
forces
Final Strength
Bargain power of
buyer
01. Switching cost
02. Customer availability
Low
Low
High
High High
Threat of new
entry
01. Economies of scale
02. Differentiation
03. Capital requirement
04. Learning effect
05. Sole access to
distribution channel
High
Low
High
High
High
Low
High
Low
Low
Low
Low
Rivalry among
competitors
01. Industry growth
02. Fixed cost
03. Emotional barriers
04. Specialized asset
05. Govt. restriction
High
High
Low
High
High
Low
High
Low
High
High
High
Pressure from
substitute products
- Low Low Low
Bargain power of
supplier
- Low Low Low
From the above analysis we can see the tannery industry is moderately attractive industry to
invest. The, bargain power of supplier, threats of new entrants and pressure from substitute
products are very low. The bargain power of buyer and rivalry among competitors are high.
Macroeconomic and market analysis of Tannery industry:
ROA, ROE of this industry are good.
Porter’s five forces analysis of food and allied industry:
Although this industry has a great opportunity to flourish but the companies are not being
able to be successful. There might be some technical problem but the strategic problem of
the company is also responsible for this situation.
Forces Component parts Intensity of
components
Power of
forces
Final Strength
Bargain power of
buyer
01. Switching cost
02. Customer availability
03. Threat of buyers to
enter the industry
Low
High
Low
High
Low
Low
Low
Threat of new
entry
01. Economies of scale
02. Differentiation
03. Capital requirement
04. Learning effect
05. Sole access to
distribution channel
High
High
Low
High
Low
High
Low
High
Low
High
High
Rivalry among
competitors
01. Industry growth
02. Fixed cost
03. Emotional barriers
04. Specialized asset
05. Govt. restriction
Low
Low
High
Low
Low
High
High
High
Low
Low
High
Pressure from
substitute products
- High High High
Bargain power of - Low/High Low/High Low/high
supplier
From the above analysis we can see the prospect of food and allied industry is good but not so
much attractive to invest. The bargain power of buyer is low but threats of new entrants, rivalry
among competitors, and pressure from substitute product are high. Before investing this
industry the investor have to monitor the fundamentals of the prospective companies.
Macroeconomic and market analysis of food and allied industry:
Most of the companies have good ROA, ROE. But there have also some companies
which have poor ROA and ROE.
The opportunity of stock splitting will raise the share price in future.
Profits of small investors are free from tax. So more people will come to the capital
market which bears positive sign.
Porter’s five forces analysis of fuel & power industry:
Development and investment in the power and energy sector is different from other sectors
due to the sector specific characteristics. Huge primary asset accumulation and procurement
are required for investment in the power and energy sector. Extraction of gas and fuel needs so
much automation and risky process.
Electricity is supplied by government and private sector. Government alone supply 63% and purchase
remaining from private sector at a fixed price. So DESCO and other electric supply company cannot
increase unit price at their will.
Forces Component parts Intensity of
component
s
Power of
forces
Final Strength
Bargain power of
01. Switching opportunity
02. Seller availability
Low
Low
Low
Low Low
buyer 05. Quality High Low
Threat of new
entry
02. Capital requirement
03. Learning effect
04. Govt. assistance
05. Technology availability
High
High
High
Low
Low
Low
High
Low
Low
Rivalry among
competitors
01. Industry growth
02. Fixed cost
03. Emotional barriers
High
High
Low
Low
High
Low
Low
Pressure from
substitute products
01. Availability of Substitute Low Low Low
Bargain power of
supplier
- Low Low Low
Though government posses the full controlling power of this industry, the industry is very much
attractive. Because there is a huge demand of power (electricity & gas) and existing
infrastructure are unable to meet this demand. Government is also expecting private
investment in this industry. Government will purchase electricity from private power house at
a market price and deliver it to consumer at subsidized price. So, private producers are not
affected by the government pricing power.
Macroeconomic and market analysis of fuel & power industry:
There is a huge demand for electricity all over the country.
ROA and ROE of electric companies are very good.
The opportunity of stock splitting will raise the share price in future.
Profits of small investors are free from tax. So more people will come to the capital
market which bears positive sign.
Porter’s five forces analysis of Pharmaceutical industry:
Now-a- days, lots of medicine of our country are being exported. The companies which are
making quality medicine are flourishing very rapidly. The five forces of this sector is given
below:
Forces Component parts Intensity of
components
Power of
forces
Final Strength
Bargain power of
buyer
01. Switching cost Low High High
Threat of new
entry
01. Economies of scale
02. Brand Recognition
03. Capital requirement
04. Sole access to
distribution channel
05. Quality Regulation
High
High
High
High
High
Low
Low
Low
Low
Low
Low
Rivalry among
competitors
01. Industry growth
02. Fixed cost
03. Govt. restriction
High
Low
High
Low
Low
High
Low
Pressure from
substitute products
-
Low Low Low
Bargain power of
supplier
-
Low Low Low
From the above analysis it is seen that threat of new entry, pressure from substitute products,
bargain power of supplier, rivalry among competitors are low. So the analysis is showing that
pharmaceutical industry is very attractive industry for investment.
Macroeconomic and market analysis of Pharmaceutical industry:
In recent years, local drug makers have attempted to increase sales of pharmaceuticals to
both emerging markets and developed states, such as Australia and the UK.
Growing health awareness among the population will flourish the industry.
Porter’s five forces analysis of textile industry:
It is one of the export oriented industry of our country. It is a fragmented industry. A lot of
small textile mills have been originated so far for its greater profitability. The forces of this
industry is-
Forces Component parts Intensity of
component
s
Power of
forces
Final Strength
Bargain power of
buyer
01. Switching cost
02. Seller availability
03.pricing power
Low
High
High
High
High
High
High
Threat of new
entry
01. Economies of scale
02. Differentiation
03. Capital requirement
04. Learning effect
04. Govt. assistance
High
Low
High
Low
High
Low
High
Low
High
High
High
Rivalry among
competitors
01. Industry growth
02. Fixed cost
03. Specialized asset
Moderate
Low
Low
Moderate
Low
Low
Low
Pressure from
substitute products
01. Availability of Substitute Low Low Low
Bargain power of
supplier
O1.Pricing power of
machine & chemical
supplier
Low
Low
Low
Low
Low
02. Pricing power of labor
union
Although bargaining power of buyer is high, this industry is profitable and attractive to
investors. We have cheap labor than any other country. The per hour labor payment in
Bangladesh is 31 cent which is lowest in the world. Textile industry is growing and earning much
more foreign dollar. So it will give a good return to investors.
Macroeconomic and marker analysis of textile industry:
A huge market is already created for the quality clothes of the country.
Recently many buyers have expressed their wish to buy clothes from our country rather
buying from China and India.
There is a huge cost benefit in this sector as the labors are very cheap here.
Porter’s five forces analysis of Information Technology Industry:
Bangladesh is not technologically sufficient. Still there is a huge opportunity to flourish very
quickly.
Forces Component parts Intensity of
components
Power of
forces
Final Strength
Bargain power of
buyer
01. Switching cost
02. Customer availability
Low
High
High
High
High
Threat of new
entry
01. Economies of scale
02. Differentiation
03. Capital requirement
04. Learning effect
05. Govt. restriction
High
High
High
High
High
High
Low
Low
High
Low High
Rivalry among
competitors
01. Industry growth
02. Fixed cost
High
High
High High
Pressure from
substitute products
- High High
Bargain power of
supplier
Supplier Availability High Low Low
From the analysis we can see that bargain power of buyer, threat of new entry, rivalry among
competitors, pressure from substitute products are high. Though bargain power of supplier is
low but this sector is not so much attractive for investment.
Macroeconomic and market analysis of Technology industry:
People are being able to adapt with the newer technology very quickly. So new business
can easily flourish.
People have positive mindset about the technological industry.
Porter’s five forces analysis of Chemical Industry
Forces Component parts Intensity of
components
Power of
forces
Final Strength
Bargain power of
buyer
01. Switching cost
02. Seller availability
Low
High
High
Low Indifferent
Threat of new
entry
02. Differentiation
02. Capital requirement
03. Govt. Restriction
Low
High
Low
Low
Low
High
Low
Rivalry among
competitors
01. Industry growth
02. Fixed cost
03. Exit Barrier
04. International
Competition
High
High
High
High
Low
High
High
High
High
Pressure from
substitute products
-
High High High
Bargain power of
supplier
-
High High
From the analysis it is seen that, rivalry among competitors, pressure from substitute products,
bargain power of supplier are high. So we should not invest in this industry.
Mutual fund (Stock exchange perspective)
The mutual fund companies operating in Bangladesh cannot give stock dividend. Investors
prefer stock dividend much more than cash dividend. So investor’s perception about mutual
fund is bad.