characteristics of an industry 1

7/24/2019 Characteristics of an Industry 1

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Characteristics of Industries

11

Dominant Economic FeaturesChart 3.1 page 57

Thompson & Strickland


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The External Environmentgeneral environmentindustry environmentcompetitor environment

An attractive industryan industry whose characteristics andstructure suggest an above averagereturn

Strategy FormulationSelection of strategy linked to above average returns in a particular industry

Assets and SkillsAssets and skills to implement a chosenstrategy

Strategy Implementationhoice of strategic actions linked witheffective implementation of selectedstrategy

I/O Model

1. The external environment exerts pressures and constraints on a

Firm which infuences the choiceo strategy

2. Most Firms competing within an

industry control similar resource and pursue similar strategies in

o those resources

3. Resources are highly moile acro !rms and can e replicated. Res

ased advantages are short live

". #rgani$ational decisions are rati and refect pro!t maximi$ing e

%ostulates

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What is an Industry?

An Industry is a collection of firms that offer goods and ! or services that are close substitutes of each other" Therefore# firms directly compete with one another"

Industries can be classified in a variety of ways" The $ational lassification odes list %& types of Industries

&road 'lassi!cationTextile (ndustry

)arments (ndustry

Fashion )arments (ndustry

Textile Manuacturing (ndustry

*peci!c 'ategory

More than 2++ years old

,ew -ge /igh 0elocity

Industry Structure refers to the number and si'e distribution of firms in an Industry and theway they work"

Si'e distribution of firms is important for both business policy and public policy"

(ore the number of firms in an industry# greater is the competition"

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44

1. Maret *i$e )rowth Rate *tage o the !rm in the ie 'ycle 'urve

Predominant Features

of an Industry


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Life ycle urve

55


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Life ycle

Stages

What is the focus of a CEO at dierent stagesof a Life Cycle?

)roduct *evelopment + ,-* on )roduct haracteristics

(arket Surveys# $eed Analysis Segmentation - )ositioning+

4evelopment

(ntroduction

)roduct Awareness

)roduct )ricing to rapidly increase *emand

.uilding (anufacturing Facilities

.uilding *istribution hannels

)rowth Expanding *istribution)roduct )romotions

)erfecting Economies of Scale

*e+.ottlenecking

onsolidating osts

Maturity Increasing *istribution

Accuracy in Sales Forecasting)roduct *ifferentiations $ew Features# /ine Extensions

ompetitive 0fferings )rice+1alue ,atio

ost utting

4ecline /i2uidating Inventory*e+investing from (anufacturing /ines

Selling .rand 66


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2. *cope o Rivalry Fragmentation numer o Rivals.


of an Industry


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If all firms in an industry are small, relative to the size of the industry, it is called

a Fragmented Industry. Such industries. normally, have 3 /ow Entry .arriers

3 ommodity type products

3 4igh Industry capacities compared to demand resulting in price competition

3 Advantages are territorial"

When a small number of firms controls a large share of industry output, it is

called a Consolidated Industry.

34igh )rofitability with stringent Entry .arriers

3 4igh ,eliability and 5uality

3 6ider product basket

3 Advantages lie in large 7eographic coverage"

Tyes of Industries ! ometition "ased#

88


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99


2. *cope o Rivalry Fragmentation numer o Rivals.

3. 'ompetitive 5nvironment 'ustomer *egments6 )eographic Territories


of an Industry


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1010

5xternal5nvironment

,ational5nvironment

)eneral5nvironment

'ompetitive5nvironment

)loal5nvironment

The $nvironment

P$STL$


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1111

The $%ternal $nvironment &nalysis

A continuous process which includesA continuous process which includes

Scanning: Identifying early signals of environmental changes and trends

Monitoring: *etecting meaning through ongoing observations of environmental

changes and trends

Forecasting: *eveloping pro8ections of anticipated outcomes based on monitored

changes and trends

Assessing: *etermining the timing and importance of environmental changes andtrends for firms9 strategies and their management


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1212

'eneral $nvironment !"S#$"%

Sociocultural segmentSociocultural segment 6orkforce availability and diversity6orkforce availability and diversity Attitudes about 2uality of worklifeAttitudes about 2uality of worklife oncerns about environmentoncerns about environment Shifts in work and career preferencesShifts in work and career preferences Shifts in product and service preferencesShifts in product and service preferences

Economic segmentEconomic segment

Inflation ratesInflation rates Interest ratesInterest rates Trade deficits or surplusesTrade deficits or surpluses .udget deficits or surpluses.udget deficits or surpluses )ersonal savings rate)ersonal savings rate .usiness savings rates.usiness savings rates 7ross domestic product7ross domestic product

)olitical!/egal Segment)olitical!/egal Segment Antitrust lawsAntitrust laws Taxation lawsTaxation laws *eregulation philosophies*eregulation philosophies 6orkforce ertification laws6orkforce ertification laws Educational policiesEducational policies

Technological SegmentTechnological Segment )roduct innovations)roduct innovations Applications of knowledgeApplications of knowledge )rivate and government+supported)rivate and government+supported

,-* expenditures,-* expenditures $ew communication technologies$ew communication technologies

7lobal Segment7lobal Segment Important political eventsImportant political events ritical global marketsritical global markets (arkets in industriali'ed countries(arkets in industriali'ed countries

*emographic Segment*emographic Segment

)opulation si'e)opulation si'e

Age structureAge structure 7eographic distribution7eographic distribution Ethnic mixEthnic mix Income distributionIncome distribution


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omany

&uyers

*ustituteproducts

,ew

5ntrants

Rival Firms

*uppliers$ational

Industry

7lobal

Fiscal%olicies

Regulatory5nvironment

*ill4evelopment

4emographics'onsumption

%atterns

Economy

Inter ountry

,elations

Societal 1aluesInternational /aws

Technology

(riving Forcesare the

underlying causes for changing

the shape of an industry or its

operating norms"

)FS are competitive

factors that influence the

potential for success of abusiness

)ey Factors of Industry $nvironment


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(riving Forces

The factors that influence an Industry9s decisions regarding its operations in future"

*riving Forces are the ma8or underlying causes of changing the shape of an industry

or its operating norms"

(riving Forces may *

&. 'riginate from the "nvironment

Standard of /iving:purchasing capacities; consumption levels; societal values

characteristics of an industry 1

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