UNIT 7:
STRATEGIC ANALYSIS:
INDUSTRY, COMPETITORS,
CUSTOMERS
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INDUSTRY ANALYSIS
Purpose
• Match strategy to industry conditions
• Identify opportunities and threats posed by
the state of the industry
• Industries differ in terms of characteristics
and attractiveness. Understanding of
industry attractiveness important.
• Making entry/exit decisions
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Key questions (Issues)
• Degree of competition in the industry
• Dominant economic features
• Drivers of change in the industry
• Key success factors in the industry
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A. Competition in the industry
•
1.
2.
3.
4.
5.
•
Industry competition depends on five basic
forces: (Michael Porter, 1980)
Threat of new entrants
Rivalry within the industry
Threat of substitute
Bargaining power of Suppliers
Bargaining power of buyers
Collective strength of forces determines
industry attractiveness
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Value Creation
Suppliers
Industry
R
C
Buyers
R
C
Cost Accumulation
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B. Industry dominant economic features
• Industries differ in character and structure
• Need to understand an industry’s dominant
features. Such features include:-
- Market size and growth rate
- Scope of competitive rivalry (Local, regional,
national, international, global)
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- Number of rivals (competitors) and their relative
sizes
- Number of buyers and their relative sizes
- Extent of product differentiation
- Extent of vertical integration
- Distribution channels used
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- resource requirements and ease of entry/exit
- Any learning and experience effects
- Industry profitability (attractiveness)
- Capacity utilization – levels required to achieve
production efficiency
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c. Drivers of change in the Industry
• How is the industry environment changing?
• What are the driving forces for change in the
industry? These include:- Changes in long term industry growth rate
- Changes in who buys the product and how they
use it
- Product innovation
- Technological change
- Marketing innovation
- Increasing globalization of industries
- Government policy changes
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D. Key success factors in the industry
• Key success Factors (KSF)→The thing that most
affects the ability of a company to succeed in the
market place.
• A company must develop competence on its
industry’s key success factors if it has to remain
successful
• Key success factors are few in each industry
• Key success factors vary across industries
• Sound strategy incorporates efforts to be
competent on all key industry success factors
and to excel on at least one factor
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Competitor Analysis
•Identification of competitors (at least
the major ones)
• Strategies used by competitors
• Performance of competitors
Strategic moves competitors are likely
to make
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• Components of competitor analysis include:- Competitors’ future goals
- Current strategy
- Assumptions
- Competitor capabilities
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• Managers need to provide answers to the
following questions:
- Is the competitor satisfied with current position?
- Any likely competitor strategy
- Where is the competitor vulnerable?
- What is likely to provoke competitor retaliations?
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• Sources of competitor information include:
- Published sources
- Electronic media (advertising)
- Sales people
- Middlemen
- Surveys by the company
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MARKET ANALYSIS
• The essence of any business is the Customers
• Customer information important
• Successful companies tend to be marketoriented
• Strive to create value
• See value through the eyes of the customer
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- Maintain true customer focus
- Customer is the focal point of all company
activity
- Customer is the starting point for company
action
- Everyone defines their job in terms of satisfying
customers
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• Question to be answered include:
• Who are our customers
• Where are they located?
• Any changes in customers?
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• What do customers see as important?
• What are customer preferences?
• Can the customers be segmented?
• Any unserved segments?
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