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Industry Dynamics and

Change
Knud Jensen
Ted Rogers School of Management, Ryerson University

2008 Knud Jensen, Rein Petersen, Neil Wolff

Industry Dynamics and Change

Understanding how to
grow requires an in-depth
understandingand clarification
of the external environment
in which the organization
exists.
2008 Knud Jensen, Rein Petersen, Neil Wolff

Information is Important
Information about the following is important:

Industry

Market

Industry structure

Competitors

Buyers/consumers

Technology

2008 Knud Jensen, Rein Petersen, Neil Wolff

The Big Three


1. Where are we currently?
2. Where do we want to go?
3. How do we get there?

2008 Knud Jensen, Rein Petersen, Neil Wolff

The Why of Why?

Asking why? questions basic beliefs and gets to the


real cause of problems, issues, roadblocks, etc.

Challenges lead to insight


Toyotas 5 whys

2008 Knud Jensen, Rein Petersen, Neil Wolff

More Questions
Externally Focused Questions:

How and at what pace is the companys market


evolving?

What factors are driving market change and what


impact will they have?

What are competitors up to? In what ways are


competitive conditions growing stronger or weaker?

What does the changing market and competitive


landscape mean for the companys business over the
next five years and beyond?

2008 Knud Jensen, Rein Petersen, Neil Wolff

Industry Dynamics and Change


THE OBJECTIVES OF THE INFORMATION
MUST ALWAYS BE KEPT IN MIND:
1. To develop a deep understanding of where the
company is now with respect to the external
environment.
2. To clarify the complex forces impacting on the
company.

2008 Knud Jensen, Rein Petersen, Neil Wolff

Industry Dynamics and Change


We need to understand magnitudes,
market limitations, and most
important, prospects for future growth.
Example:

Size and 2 5 years historical growth

Simple growth trends can generate a lot of discussion

2008 Knud Jensen, Rein Petersen, Neil Wolff

Industry Dynamics and Change


Complexity:

You may be part of one industry

You may be part of several industries (via


products/services, customers, suppliers)

2008 Knud Jensen, Rein Petersen, Neil Wolff

Industry Dynamics and Change


Tools For The Industry:

Boundaries (What is your sandbox?)

Industry structure

Driving forces

Key success factors

Competitor analysis

Maps

2008 Knud Jensen, Rein Petersen, Neil Wolff

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Analyzing Competitive Forces

Rivalry amongst competing sellers

Threat of new competitors

Threat of substitute products

Supplier bargaining power

Buyer bargaining power

2008 Knud Jensen, Rein Petersen, Neil Wolff

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Driving Forces
Driving forces are variables that have the capacity to
change not only demand, but also the very nature of an
industry.
Driving forces should be identified for your industry.
Changes result in:
Buyer behaviour modification
Structural change
Competitive reaction
Product portfolios
Disruptions

2008 Knud Jensen, Rein Petersen, Neil Wolff

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Typical Driving Forces

Demographics

Technology

Innovations, inventions

Social and cultural changes

New products/services

Changes in buyer attitudes

Government regulations, policy, changes in law

2008 Knud Jensen, Rein Petersen, Neil Wolff

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Strategic Group Map Illustration

2008 Knud Jensen, Rein Petersen, Neil Wolff

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Strategic Group Map

Identify competitive characteristics that differentiate firms


in your industry. Choose two possible axes that you
consider appropriate. Some possible axes to consider are:

Price/Quality (high, medium, low)


Geographic coverage (local, national, international)
Degree of vertical integration (none, partial, full)
Product-line breadth (wide, average, low)
Use of distribution channels (narrow, average, low)
Degree of service offered (no-frills, limited, full)

2008 Knud Jensen, Rein Petersen, Neil Wolff

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Complete Your Own Map

2008 Knud Jensen, Rein Petersen, Neil Wolff

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Key Success Factors (KSFs)

Think about what it takes to be successful in your industry

There are must have and there are nice to have

Identify the gap or gaps that exist between your success


factors and those in the industry

If you want to grow, you have to fill the gaps

KSFs are not stable and they are not equal, but they are
necessary

2008 Knud Jensen, Rein Petersen, Neil Wolff

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SWOT
A summary of the characteristics of
strengths, weaknesses, opportunities, and
threats
Strengths:
Something we do well
Valuable know-how
Competitive capability
Attributes
Ventures, alliances

2008 Knud Jensen, Rein Petersen, Neil Wolff

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SWOT
A summary of the characteristics of
strengths, weaknesses, opportunities, and
threats cont
Weaknesses:
Something we do poorly
A disadvantage
A deficiency in expertise or competence
Lack of assets (physical, human, intangible)
Missing capabilities

2008 Knud Jensen, Rein Petersen, Neil Wolff

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SWOT
A summary of the characteristics of
strengths, weaknesses, opportunities, and
threats cont
Opportunities:
Best prospects
Competitive advantage
New customers, markets, products
Change in industry structure

2008 Knud Jensen, Rein Petersen, Neil Wolff

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SWOT
A summary of the characteristics of
strengths, weaknesses, opportunities, and
threats cont
Threats:
Competitive behaviour
New product/service
Demographics
Technology

2008 Knud Jensen, Rein Petersen, Neil Wolff

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SWOT
A summary of the characteristics of
strengths, weaknesses, opportunities, and
threats cont
Growing From SWOT Analysis:
Build on the organizations strengths
Recognize weaknesses and correct, where possible
Take advantage of opportunities this is what drives
growth
Recognize threats to the organization and take steps to
minimize the effects

2008 Knud Jensen, Rein Petersen, Neil Wolff

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Before executives can chart


a new strategy, they must
reach common
understanding of the
companys current position.

W. Chan Kim and


Renee Mauborgne

2008 Knud Jensen, Rein Petersen, Neil Wolff

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