Industry Dynamics and
Change
Knud Jensen
Ted Rogers School of Management, Ryerson University
© 2008 Knud Jensen, Rein Petersen, Neil Wolff
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Industry Dynamics and Change
Understanding how to
grow requires an in-depth
understanding and clarification
of the external environment in
which the organization exists.
© 2008 Knud Jensen, Rein Petersen, Neil Wolff
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Information is Important
Information about the following is important:

Industry

Market

Industry structure

Competitors

Buyers/consumers

Technology
© 2008 Knud Jensen, Rein Petersen, Neil Wolff
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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
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The Why of Why?

Asking why? – questions basic beliefs and gets to the real
cause of problems, issues, roadblocks, etc.

Challenges lead to insight

Toyota’s 5 whys
© 2008 Knud Jensen, Rein Petersen, Neil Wolff
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More Questions
Externally Focused Questions:

How and at what pace is the company’s 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 company’s business over the
next five years and beyond?
© 2008 Knud Jensen, Rein Petersen, Neil Wolff
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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
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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
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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
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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 con’t
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 con’t
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 con’t
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 con’t
Growing From SWOT Analysis:
 Build on the organization’s 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
company’s current position.”
W. Chan Kim and
Renee Mauborgne
© 2008 Knud Jensen, Rein Petersen, Neil Wolff
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