Pertemuan Kesembilan Industry Analysis 1

Pertemuan Kesembilan
Industry Analysis
Markets and Industries: What’s
The Difference?
• An industry is a group of firms that offer a
product or class of products that are similar and
are close substitutes for one another.
• The difference between markets and industries
is an important one. Sellers who look only to
others in their own industry as competitors are
likely to overlook other very real rivals and risk
having their markets undercut by innovators
from other industries.
Challenges in Market and Industry
• Levels of analysis:
– Industry,
– Product class,
– Product type
• Examples: Morning meals
Driving Forces
• Proter’s five competitive forces:
– Rivalry among present competitors:
• There is high investment intensity; that is, the
amount of fixed and working capital required to
produce a dollar of sales is large.
• There are many small firms in an industry or no
dominant firms exist.
• There is little product differentiation
• There is a high cost to changing suppliers
Driving Forces
– Threat of new entrants:
• When strong economies of scale and learning
effects are present, since it takes time to obtain the
volume and learning required to yield a low relative
cost per unit.
• If the industry has strong capital requirements at
the outset
• When strong product differentiation exists
• If gaining distribution is particularly difficult
• If a buyer incurs switching costs in moving from
one supplier to another
Driving Forces
– Bargaining power of suppliers
– Bargaining power of buyers
– Threat of substitute products
• Example: perfect competition, monopoly,
oligopoly market
• Companies are more likely to be
successful in generating sales and profits
if the opportunities they pursue are
blessed with the following conditions:
– Driving forces for the industry are favorable
– The industry’s five forces are,on balance
– Local competitive conditions are favorable