Discussion 6

Industry & Competitor Analysis: * Industry Analysis done after feasibility determined

positive

* Competitor Analysis & Matrix one of the most

important elements

2

What is Industry Analysis?

• Industry • An industry is a group of firms producing a similar

product or service, such as airlines, fitness drinks, furniture, or electronic games.

• Industry Analysis • Is business research that focuses on the potential of

an industry.

3

Why is Industry Analysis Important?

Industry Analysis

Importance • Once it is determined that a new

venture is feasible in regard to the

industry and market in which it

will compete, a more in-depth

analysis is needed to learn the ins

and outs of the industry.

• The analysis helps a firm

determine

if the target market it identified

during feasibility analysis is

favorable for a new firm.

4

Three Key Questions

When studying an industry, an entrepreneur must answer three questions before pursuing the idea of starting a firm.

Is the industry accessible—in other words, is it is realistic

place for a new venture to enter?

Are there positions in the industry that avoid some of the negative

attributes of the industry as a whole?

Does the industry contain markets that

are ripe for innovation or are underserved?

Question 1 Question 3Question 2

5

Techniques Available to Assess Industry Attractiveness

Study Environmental and Business Trends

The Five Competitive Forces Model

Assessing Industry Attractiveness

6

Studying Industry Trends

• Environmental Trends • Include economic trends, social trends, technological

advances, and political and regulatory changes.

• For example, industries that sell products to seniors are benefiting by the aging of the population.

• Business Trends • Other trends that impact an industry.

• For example, are profit margins in the industry increasing or falling? Is innovation accelerating or waning? Are input costs going up or down?

7

The Five Competitive Forces Model 1 of 3

• Explanation of the Five Forces Model • The five competitive forces model is a

framework for understanding the structure of an industry.

• The model is composed of the forces that determine industry profitability.

• They help determine the average rate of return for the firms in an industry.

• You should have studied Five Forces prior to this course (please review in depth)

8

The Five Competitive Forces Model 3 of 3

9

First Application of the Five Forced Model 2 of 2

Assessing Industry Attractiveness Using the Five Forces Model

10

Second Application of the Five Forces Model 1 of 2

• Second Application of the Model • The second way a new firm can apply the five forces model to help

determine whether it should enter an industry is by using the model to answer several key questions.

• The questions are shown in the figure on the next slide, and help a firm project the potential success of a new venture in a particular industry.

11

Second Application of the Five Forces Model 2 of 2

Using the Five Forces Model to Pose Questions to Determine the Potential Success of a New Venture in an Industry

12

• Emerging Industries • Industries in which standard operating procedures

have yet to be developed. • Opportunity: First-mover advantage

• Fragmented Industries • Industries that are characterized by a large number of

firms of approximately equal size. • Opportunity: Consolidation

Industry Types and the Opportunities They Offer 1 of 3

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• Mature Industries • Industries that are experiencing slow or no increase in

demand. • Opportunities: Process innovation and after-sale service

innovation

• Declining Industries • Industries that are experiencing a reduction in demand.

• Opportunities: Leadership, establishing a niche market, and pursuing a cost reduction strategy

Industry Types and the Opportunities They Offer 2 of 3

14

• Global Industries • Industries that are experiencing significant

international sales. • Opportunities: Multidomestic and global strategies

• Global Industries re-shoring • Industries that are de-risking and moving operations

closer to the end market.

Industry Types and the Opportunities They Offer 3 of 3

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Competitor Analysis

• What is a Competitor Analysis? • A competitor analysis is a detailed analysis of a firm’s

competition.

• It helps a firm understand the positions of its major competitors and the opportunities that are available.

• A competitive analysis grid is a tool for organizing the information a firm collects about its competitors.

16

Identifying Competitors

Types of Competitors New Ventures Face

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Sources of Competitive Intelligence 1 of 3

• Collecting Competitive Intelligence • To complete a competitive analysis grid, a firm must first understand

the strategies and behaviors of its competitors.

• The information that is gathered by a firm to learn about its competitors is referred to as competitive intelligence.

• A new venture should take care that it collects competitive intelligence in a professional and ethical manner.

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Sources of Competitive Intelligence 2 of 3

Ethical ways to obtain information about competitors

• Attend conferences and trade shows.

• Purchase competitors’ products.

• Study competitors’ Web sites.

• Set up Google and Yahoo! e-mail alerts.

• Read industry-related books, magazines, and Web sites.

• Talk to customers about what motivated them to buy your

product as opposed to your competitor’s product.

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Completing a Competitive Analysis Grid

• Competitive Analysis Grid • A tool for organizing the information a firm collects about its

competitors

• A competitive analysis grid can help a firm see how it stacks up against its competitors, provide ideas for markets to pursue, and identify its primary sources of competitive advantage.

• The Competitor Matrix or grid is perhaps the single most important tool in analyzing competition for your business plan.

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Competitive Analysis Grid for Element Bars