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Comprehensive Industry Analysis: Key Factors Affecting Market Trends and Competition

This guide delves into the key elements of industry analysis, focusing on market trends and competitive factors that affect various industries. Utilizing frameworks like Michael Porter's Five Forces, we explore market size, growth rates, and competitive dynamics, including buyer and supplier power, the intensity of rivalry, and the threat of substitutes. Additionally, we cover macro-environmental factors such as technological, economic, social, political, and regulatory considerations necessary for understanding consumer behavior and making informed business decisions.

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Comprehensive Industry Analysis: Key Factors Affecting Market Trends and Competition

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  1. Industry Analysis Key Issue: Analyzing a Market’s Trends and Attractiveness Key Assumption: Level of Competition has been set*

  2. Key Elements of IndustryAnalysis** • Market Factors (at the Aggregate Level)* • Competitive Factors* • Michael Porter’s Framework* • Environmental Factors

  3. What You Need to Do/Know First • Choose the “Right” Level of Competition Ex) Product Category Level  Soft Drinks; Snack/Health Bar • Industry Analysis = (Product) Category Analysis • Level of Discussion for Industry Analysis: An industry! (not an individual firm)

  4. Beer Ice cream Tea Regular colas Diet lemon limes Diet-Rite cola Wine Product form competition: Diet colas Diet Pepsi Diet Coke Juices Fast food Fruit flavored colas Product category competition: Soft drinks Video rentals Lemon limes Bottled water Generic competition: Beverages Coffee Baseball cards Budget competition: Food and entertainment Levelsof Competition*

  5. I. Market Factors for Industry Analysis* • Category Size: Sales Volume or $$ • http://www.beerinsights.com • http://www.npd.com • http://www.autonews.com • http://www.beverage-digest.com/ • Growth Rate • Stage in Product Life Cycle* • Cyclicity & Seasonality • Marketing Mix (General Trends) • Product differentiation: Macro (http://www.census.gov) and Micro (advertising $$ or number of product lines or skus) • Profits & Financial Ratios (http://www.sec.gov) SIC: 5600 http://www.hbsp.harvard.edu • Library source of information:

  6. II. Competitive Factors for Industry Analysis Industry Concentration* 1. Intensity of Rivalry* 2. Power of Buyers (Two Types) 3. Power of Suppliers 4. Pressure from Substitutes 5. Threat of Entries and Exits Capacity Utilization

  7. Industry Concentration Measures • The share of the largest firm • The combined shares of the three largest firms • The number of firms with at least x percent of the market (e.g., 1 percent) • The share of the largest firm divided by the share of the next three largest competitors • Herfindahl-Hirschman Index (HHI): -The Sum of Squared Shares of the Firms in the Industry • Use • http://factfinder2.census.gov/faces/tableservices/jsf/pages/productview.xhtml?pid=ECN_2007_US_31SR13&prodType=table • Thresholds: below 1000; 1,000 to 1,800; above 1,800

  8. Characteristics of Intensive Rivalry • Many or Balanced Competitors • Slow Growth • High Fixed Costs • Lack of Product Differentiation • Any Example?

  9. Buyer Power Is Higher When • Buyer accounts for a large percentage of the industry’s output. • Product is undifferentiated. • Threat of backward integration. • Buyer has full information. • Example:

  10. Supplier Power Is Higher When • Suppliers are concentrated. • No or few Substitute for the product. • Differentiated product/high switching cost. • Limited Supply. • Example: LCD in the past

  11. Industry Attractiveness based on Market Factors Attractiveness Market Factors

  12. Industry Attractiveness based on Competitive Factors Attractiveness Competitive Factors

  13. III. (Macro) Environmental Factors • Technological* • Economic* • Social • Political • Regulatory* For your project, choose 1 or 2 only the most relevant factors from above

  14. Major Topics for Consumer Behavior • Consumer Decision Process • Types of Buying Decisions • Influences on the Rate of New Product Adoption (RCCDC)

  15. What We Need to Know about Current and Potential Customers* • Who buys and uses the product? • What customers buy and how theyuse it? • Where customers buy? • When customers buy? • How customers choose? • Why they prefer a product over others? • How do they respond to marketing programs? • Will they buy it (again)?

  16. For competitor analysis, you need to know • Who are Your Major Competitors? • Analyzing Product Features* • Major Competitors’ Objectives • Major Competitors’ Strategies* = behavior • Segmentation • Target Market • Core Strategy (Positioning) • Marketing Mix of Each Firm • Major Competitors’ Capabilities/Resources

  17. Example) Energy Bars: Competitor Feature/Strategy Matrix*

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