| Why do we analyse industry and sector? | Industry analysis focuses on industry + competitor part of the ‘cake’ (See pic). It is important as the industry and competitors is an important factor in creating the strategy as it shows some of the opportunities and threats. |
| How is an industry, sector and market defined? | 1. An industry is a group of firms producing products and services that are ‘essentially the same / serve the same need. e.g. the airline industry
2. A sector is is a broad industry group. The terms is often used with regard to public service industries
3. A market is a group of customers for specific products or services that are essentially the same (e.g. the market for luxury cars in Germany). |
| What are the most important parts of the industry for strategy purposes? | 1. Who and what is included? Don’t assess too broadly or too narrowly. [example: taxi business Stockholm ref p.44]
2. What part of the value chain are we in? Don’t include too little or too much of the value chain
3. What functional level are we at?
• Can be different geographic areas
• or different service segments, e.g. business vs. leisure
• or difference between products/services, e.g. hardware vs software |
| What is Porters Five Forces, and why is it good to analyse industry & sector? | Porters Five Forces is a model that helps determine an industry's various forces, sources of power, and conditions of competition. This will inform strategy.
5-Force analysis helps managers figure out factors of competition, competitor or supplier power, and attractiveness of an industry through the following 5 things:
1. Suppliers (What is bargaining power of suppliers?)
2. New entrants (Are new entrants a threat?)
3. Buyers (What is the bargaining power of buyers?)
4. Substitutes (What is the threat of substitutes?)
5. How is competition between current actors on market? |
| What are the main two strategies to pick within the industry space? | There are mainly two strategies to pick within the industry space, red ocean versus blue ocean.
1. Red Ocean Strategy
Compete in existing market space, beat competition, exploit existing demand, make the value-cost trade-off.
2. Blue Ocean Strategy
Create uncontested market space, make the competition irrelevant, create and capture new demand, break the value-cost trade-off. |
| What are the 5 steps in industry analysis | 1. Define the industry/sector/subsector clearly. Apply model at right level.
2. ID the actors behind each of the 5 forces. Who are competitors, suppliers, buyers, substituters, complementers, potential entrants.
3. Determine the underlying factors and total strength of each force.
4. Assess attractiveness of the industry / or which parts are more attractive. / Which competitors are most powerful, ref the 5 forces.
5. Determine strategy (positioning and how-to-win actions) with reference to the 5 forces. What can you do to exploit weak forces, mitigate strong forces, change industry structure. |
| Why is Porters 5 Forces a good model for industry analysis | • Helps determines an industry’s framework and conditions of competition
• Helps to set a strategic agenda e.g. strategy to control excessive rivalry, or blunt supplier power, defend barriers
• Helps management find a position where the company can exploit its advantages
• Helps determine the attractiveness of an industry. Where many forces are ‘high,’ the industry is not attractive. |
