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AWARE ORGANIZATION
Demographic
Sociocultural
Political/Legal
Technological
Economic
Global
DEMOGRAPHIC SEGMENT
Aging population
Rising affluence
General
Environment Changes in ethnic composition
Geographic distribution of
population
Greater disparities in income
levels
Demographic
Sociocultural
Political/Legal
Technological
Economic
Global
SOCIOCULTURAL
SEGMENT
More women in the workforce
Increase in temporary workers
General Greater concern for fitness
Environment Greater concern for
environment
Postponement of family
formation
Demographic
Sociocultural
Political/Legal
Technological
Economic
Global
POLITICAL/LEGAL
SEGMENT
Tort reform
General Americans with Disabilities Act (ADA)
Environment Repeal of Glass-Steagall Act in 1999
Deregulation of utility and other
industries
Increases in federally mandated
minimum wages
Demographic Taxation at local, state, federal levels
Sociocultural Legislation on corporate governance
Political/Legal
Technological reforms (Sarbanes-Oxley Act)
Economic
Global
TECHNOLOGICAL
SEGMENT
Genetic engineering
Emergence of Internet technology
General
Computer-aided design/computer-aided
Environment
manufacturing systems (CAD/CAM)
Research in synthetic and exotic
materials
Pollution/global warming
Demographic Miniaturization of computing
Sociocultural technologies
Political/Legal Wireless communication
Technological Nanotechnology
Economic
Global
ECONOMIC SEGMENT
1
The
The Objectives
Objectives of
of Industry
Industry Analysis
Analysis
2
From
From Environmental
Environmental Analysis
Analysis to
to Industry
Industry
Analysis
Analysis
Government Social
Socialstructure
structure
& Politics
3 key influences:
1. The value of the product to customers
5
The
The Spectrum
Spectrum of
of Industry
Industry Structures
Structures
Perfect
Oligopoly Duopoly Monopoly
Competition
Product Homogeneous
Differentiation Potential for product differentiation
Product
Perfect
Information Imperfect availability of information
Information flow
6
Porter’s
Porter’s Five
Five Forces
Forces of
of Competition
Competition
Framework
Framework
SUPPLIERS
Bargaining power of suppliers
INDUSTRY
COMPETITORS
BUYERS
7
The
The Structural
Structural Determinants
Determinants of
of
Competition
Competition
SUPPLIER POWER
• Buyers’ price sensitivity
• Relative bargaining
power (see Buyer Power
for details)
8
Threat
Threat of
of Substitutes
Substitutes
9
Threat
Threat of
of New
New Entrants
Entrants
Capital requirements
Economies of scale
Absolute cost advantage
Product differentiation
Access to channels of distribution
Legal and regulatory barriers
Retaliation
10
Bargaining
Bargaining Power
Power of
of Buyers
Buyers
11
Rivalry
Rivalry Between
Between Established
Established
Competitors
Competitors
12
Profitability
Profitability and
and Market
Market Growth
Growth
ROI (%)
30
25
20
15
10
0
Return
Return onon sales
sales Return
Return onon investment
investment Cash
Cash flow/Investment
flow/ Investment
-5
Less than -5% -5% to 0-5% to 00 to 5%
< -5% 0 to 5% 5%
5% toto 10%
10% > 10% Over 10%
25
20
Profitability (%)
15
ROI (%)
10 ROS (%)
0
0% 1%-35% 36%-60% 61%-75% over 75%
Strategic Positioning
• Once we know which structural features of the
industry support profitability and which depress
profitability, we can choose a favorable positioning
within the industry.
Strategies to Improve Industry Profitability
• Which of the structural variables that are depressing
profitability can we change by individual or collective
strategies?
15
Drawing
Drawing Industry
Industry Boundaries:
Boundaries:
What
What is
is the
the Relevant
Relevant Market?
Market?
What industry is Jaguar Ltd. in:
The Motor Vehicle industry (SIC 371)
The Automobile industry (SIC 3712)
The luxury car industry?
Is its industry global, regional (Europe) or national (UK)?
16
THE VALUE NET
Adapted from Exhibit 2.9 The World Automobile Industry: Strategic Groups
SUMMARY:
SUMMARY: What
What Have
Have We
We Learned?
Learned?
Forecasting Industry Profitability
Past profitability a poor indicator of future profitability.
If we can forecast changes in industry structure we can predict
likely impact on competition and profitability.
21