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Chapter 5: Industry & Competitor Analysis

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fatihah ali

on 28 June 2015

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Transcript of Chapter 5: Industry & Competitor Analysis

4. Bargaining Power of Suppliers
3. Rivalry Among Existing Firm
Chapter 5: Industry & Competitor Analysis
Industry Types & Opportunity they Offer
Competitor Analysis
1. Identifying Competitors
Industry Analysis
Is it the position in that industry will provide the firm a competitive advantage?
Useful for new firm to think about its position at
company level
- Determine company's position related to its competitor.
product & service level.
Industry Analysis
Industry: group of firms producing similar product or services
Industry Analysis:
business research focus on potential industry.
Helps a firm determine if the target market is accessible & the best point of entry of new firm
Studying Industry Trend
Environmental Trends
social trends
economic trends
technological advances
political and regulatory changes
FIVE FORCES MODEL
Business Trends
other business related trends.

eg: The firms in some industries benefit from an increasing ability to outsource manufacturing or service functions to lower-cost foreign labor markets, while firms in other industries don’t share this advantage.
eg: demand of motorcycle will increased when price of petrol increased.
Assessing Industry Attractiveness
FIVE FORCES MODEL
5. Bargaining Power of Buyers
Buyer Group of Concentration
-
few large buyers, large number of suppliers can pressure the suppliers to lower cost & affect profitability of the industry.
Buyer's Cost
-
greater importance of an item cause the buyer to be more sensitive to the price it pays.
Degree of Standardization of Supplier's Product
-
how a supplies product differs from its competitors and how it affects the buyer.
Thread of Backward Integration
-
there is credible threat that the buyer might enter the supplier's industry.
1. Threat of Substitutes
Industries are more attractive when the threat of substitutes is

low
.
Be different
Eg:
low threat of substitutes is medicine. (pharmaceutical industry)
high threat of substitutes is express mail
2. Threat of New Entrants
Industry are more attractive when the threat of entry is
low
Industries are more attractive when the bargaining power of suppliers is
low.

Factors that Prevent Profitability of the Industry
Barriers
to Entry
Economies of Scale
Mass producing of product result in lower average cost.

eg: computer components
Product Differentiation
Capital Requirements
Cost Advantage independent of size
Access to distributional channel
Government and Legal Barriers
Primary Factors that Determines the Nature of Rivalry
Number of balance competitors.
-more competitors lead to more price cutting.
Degree of difference between products
-how product differ from one producer to another.
-eg: commodity industry like Paper
Growth rate of an industry
-fast growth of the industry, low the competition.
-eg: pharmaceutical industry.
Level of fixed cost
-high level of fixed cost may lead to price cutting
Supplier Concentration
-
few suppliers to provide a critical product to a large number of buyers.
eg: pharmaceutical industry
Switching Cost
-
fixed costs that buyers
encounter when switching
or changing from one supplier to another.
eg: computer software; save learning efforts without changing to new suppliers.
Attractiveness of Substitutes
-
supplier power is enhanced if there are no attractive substitutes for the products or services the suppliers offers.
Threat of Forward Integration
-
power of a supplier is enhanced if there is high possibility that the supplier might enter the buyer's industry.
-Differentiation through innovation
eg: Apple regularly improving the feature on its line of MacBooks
-the need to invest large amount of money to gain entrance to an industry
-existing competitors in an industry may have purchased land & equipment in the past when the cost has far less than new entrants would have to pay for the same assess at the time of their entry.
-require licensing by public authority
The Value of Five Forces Model

To help a firm determine whether it should enter a particular industry
Whether it can carve out an attractive position in that industry.
Competitor Analysis


A detailed evaluation of a firm's competitor.
2. Sources of Competitive Intelligence

Key Words
:
Competitive Intelligence :
I
nformation gathered by a firm to learn about its competitors.
Public Traded Firm :

Description of the firm's business is available through annual report field with SEC.
Private Company:

Does not required to publicize the information.
Competitive Analysis
3. Completing a Competitive Analysis Grid

A tool for organizing the information a firm collects about its competitors.
Help firms to :
-see how it stacks up its competitors.
-provide ideas for markets to pursue.
-identify its primary sources of competitive advantage.
Full transcript