• Industry
o An industry is a group of firms producing a similar product or service, such as airlines, fitness drinks, furniture, or electronic games.
• Industry Analysis
o Is business research that focuses on the potential of an industry.
What is Industry Analysis Important?
• 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 niche market it identified during feasibility analysis is favorable for a new firm.
How Industry and Firm-Level Factors Affect Performance
• Firm Level Factors
o Include a firm’s assets, products, culture, teamwork among its employees, reputation, and other resources.
• Industry Level Factors
o Include threat of new entrants, rivalry among existing firms, bargaining power of buyers, and related factors.
• Conclusion
o In various studies, researchers have found that from 8% to 30% of the variation in firm profitability is directly attributable to the industry in which a firm competes.
The Five Competitive Forces Model
Industry Types and the Opportunities They Offer
• Emerging Industries
o Industries in which standard operating procedures have yet to be developed.
§ Opportunity: First-mover advantage.
• Fragmented Industries
o Industries that are characterized by a large number of firms of approximately equal size.
§ Opportunity: Consolidation.
• Mature Industries
o Industries that are experiencing slow or no increase in demand.
§ Opportunities: Process innovation and after-sale service innovation.
• Declining Industries
o Industries that are experiencing a reduction in demand.
§ Opportunities: Leadership, establishing a niche market, and pursuing a cost reduction strategy.
• Global Industries
o Industries that are experiencing significant international sales.
§ Opportunities: Multidomestic and global strategies.
Competitor Analysis
• What is a Competitor Analysis?
o A competitor analysis is a detailed analysis of a firm’s competition.
o It helps a firm understand the positions of its major competitors and the opportunities that are available.
o A competitive analysis grid is a tool for organizing the information a firm collects about its competitors.
Types of Competitors New Ventures Face
