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INDUSTRY TYPES AND DYNAMIC Steps in an industry analysis

INDUSTRY TYPES AND DYNAMIC Steps in an industry analysis

Purchasing and Supply Chain Management
Purchasing and Supply Chain Management
6th Edition
ISBN:9781285869681
Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Publisher:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Chapter6: Category Strategy Development
Section: Chapter Questions
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INDUSTRY TYPES AND DYNAMICS ILLUSTRATION 3.3 Steps in an industry analysis There are several important steps in an industry analysis before and after analysing the five forces. Emily wants to start a coffee shop and perhaps even try 4 Assess the overall industry structure and attractiveness. to grow the business into several outlets. She needs to consider the following steps and questions: • How attractive is the industry? Why? • Which are the most important competitive forces? Which control profitability? • Are more profitable competitors better positioned in relation to the five forces? 1 Define the industry clearly. Do the actors in the industry face the same buyers, suppliers, entry bar- riers and substitutes? • Vertical scope: What stages of the industry value For Emily several of the forces are quite strong, but chain/system? • Product or service scope: What products or ser- addition, some competitors, like large coffee chains, vices? Which ones are actually parts of other, are better positioned versus the five forces than others. separate industries? What segments? • Geographic scope: local, national, regional or global competition? some are relatively more important for profitability. In 5 Assess recent and expected future changes for each force. • What are the potential positive/negative changes? How likely are they? • Are new entrants and/or competitors changing the industry structure in any way? Emily should consider that many diverse businesses serve coffee. They include not only local cafés and coffee shop chains, but fast food chains, kiosks and restaurants. The definition also depends on whether For example, Emily needs to consider the proliferation Emily intends to start in an urban or rural area. of coffee chains during the last few years and that pubs and bakers have improved their coffee offerings lately. 2 Identify the actors of each of the five forces and, if Maybe she can also spot possible changes in consumer relevant, define different groups within them and the trends and growth. basis for this. Which are the ... • competitors that face the same competitive 6 Determine how to position your business in relation forces? (compare point 1 above) • buyers and buyer groups (e.g. end customers vs intermediaries, individual vs organisational)? • suppliers and supplier groups (e.g. diverse supplier categories)? • potential entrants? • substitutes? to the five forces. Can you: • exploit any of the weak forces? • neutralise any of the strong forces? • exploit industry change in any way? • influence and change the industry structure to your advantage? To cope with the forces Emily could possibly identify a Provided there is a clear industry definition the iden- concept that would attract a certain group of customers tification of the actors for each force should be rather even if buyers have many choices in urban areas. This straightforward for Emily, but groups within them need could neutralise threats from competition and entry some- to be considered. On the supplier side, for example, what and perhaps provide loyalty from some customers. they include not only inputs like coffee but also the Sources: M.E. Porter, The five competitive forces that shape strategy', Harvard Business Review, vol. 86, no. 1 (2008), pp. 58-77; J. Magretta, Understanding Michael Porter: The Essential Guide to Com- location of the premises and labour supply. 3 Determine the underlying factors and total strength petition and Strategy, Harvard Business Review Press, 2012. of each force. • Which are the main underlying factors for each force? Why? • Which competitive forces are strong? Which are weak? Why? Questions Not all underlying factors on the five force checklists will be equally relevant for Emily. With respect to buy- ers, for example, the products' degree of standardi- sation and prices matters most, while others are less important. 1 Help Emily and go through each step above. Answer the questions and make a complete analysis. What is your assessment of the industry? 2 Based on your analysis: How should Emily handle the different forces? What strategic options should she consider? 75
Transcribed Image Text:INDUSTRY TYPES AND DYNAMICS ILLUSTRATION 3.3 Steps in an industry analysis There are several important steps in an industry analysis before and after analysing the five forces. Emily wants to start a coffee shop and perhaps even try 4 Assess the overall industry structure and attractiveness. to grow the business into several outlets. She needs to consider the following steps and questions: • How attractive is the industry? Why? • Which are the most important competitive forces? Which control profitability? • Are more profitable competitors better positioned in relation to the five forces? 1 Define the industry clearly. Do the actors in the industry face the same buyers, suppliers, entry bar- riers and substitutes? • Vertical scope: What stages of the industry value For Emily several of the forces are quite strong, but chain/system? • Product or service scope: What products or ser- addition, some competitors, like large coffee chains, vices? Which ones are actually parts of other, are better positioned versus the five forces than others. separate industries? What segments? • Geographic scope: local, national, regional or global competition? some are relatively more important for profitability. In 5 Assess recent and expected future changes for each force. • What are the potential positive/negative changes? How likely are they? • Are new entrants and/or competitors changing the industry structure in any way? Emily should consider that many diverse businesses serve coffee. They include not only local cafés and coffee shop chains, but fast food chains, kiosks and restaurants. The definition also depends on whether For example, Emily needs to consider the proliferation Emily intends to start in an urban or rural area. of coffee chains during the last few years and that pubs and bakers have improved their coffee offerings lately. 2 Identify the actors of each of the five forces and, if Maybe she can also spot possible changes in consumer relevant, define different groups within them and the trends and growth. basis for this. Which are the ... • competitors that face the same competitive 6 Determine how to position your business in relation forces? (compare point 1 above) • buyers and buyer groups (e.g. end customers vs intermediaries, individual vs organisational)? • suppliers and supplier groups (e.g. diverse supplier categories)? • potential entrants? • substitutes? to the five forces. Can you: • exploit any of the weak forces? • neutralise any of the strong forces? • exploit industry change in any way? • influence and change the industry structure to your advantage? To cope with the forces Emily could possibly identify a Provided there is a clear industry definition the iden- concept that would attract a certain group of customers tification of the actors for each force should be rather even if buyers have many choices in urban areas. This straightforward for Emily, but groups within them need could neutralise threats from competition and entry some- to be considered. On the supplier side, for example, what and perhaps provide loyalty from some customers. they include not only inputs like coffee but also the Sources: M.E. Porter, The five competitive forces that shape strategy', Harvard Business Review, vol. 86, no. 1 (2008), pp. 58-77; J. Magretta, Understanding Michael Porter: The Essential Guide to Com- location of the premises and labour supply. 3 Determine the underlying factors and total strength petition and Strategy, Harvard Business Review Press, 2012. of each force. • Which are the main underlying factors for each force? Why? • Which competitive forces are strong? Which are weak? Why? Questions Not all underlying factors on the five force checklists will be equally relevant for Emily. With respect to buy- ers, for example, the products' degree of standardi- sation and prices matters most, while others are less important. 1 Help Emily and go through each step above. Answer the questions and make a complete analysis. What is your assessment of the industry? 2 Based on your analysis: How should Emily handle the different forces? What strategic options should she consider? 75
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