Chapter 5: Industry and Competitor Analysis

1. What is Industry Analysis?

Definition: It's a type of business research that focuses on the potential of an industrya group of firms

producing similar goods/services.

Examples:

- Yoga studios = part of the wellness industry.

- Electric car manufacturers = part of the automotive industry.

- Streaming platforms like Netflix and Hulu = part of the digital entertainment industry.

2. Why is Industry Analysis Important?

Purpose: To assess if the identified target market is favorable for a new venture after a feasibility study.

Examples:

- A mobile banking startup needs to analyze the fintech industry before entering.

- A startup selling eco-friendly products checks if consumers are becoming more eco-conscious.

- A food delivery business checks how competitive and growing the market is.

3. Three Key Questions in Industry Analysis

1) Is the industry accessible?

2) Are there niches with fewer negative forces?

3) Is there space for innovation?

Examples:

- Accessibility: Online tutoring is easy to enter due to low startup costs.

- Favorable niches: Luxury pet products in a saturated pet industry.

- Innovation: Subscription-based plant delivery in gardening.

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4. Industry vs Firm-Level Factors

Firm-Level Factors: Assets, team culture, products, reputation.

Industry-Level Factors: Competition, buyer/supplier power, new entrants, substitutes.

Examples:

- A firm with a great team (firm-level) can still fail in a declining industry (industry-level).

- An innovative startup can survive in a tough industry by leveraging firm-level uniqueness.

- Luxury fashion thrives due to brand reputation despite intense industry rivalry.

5. Techniques to Assess Industry Attractiveness

- Environmental Trends (economic, social, political)

- Business Trends (profit margins, innovation)

- Porters Five Forces Model

Examples:

- An aging population boosts demand for senior health services.

- Low margins in retail = unattractive business trend.

- A rise in e-commerce = positive environmental and business trend.

6. Porters Five Competitive Forces

Threat of Substitutes:

- Generic medicine vs. branded prescription.

- Coffee shop vs. instant coffee at home.

- Uber vs. public transport.

Threat of New Entrants (Examples of Entry Barriers):

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- Economies of Scale: Coca-Cola's massive production scale.

- Capital Requirements: Starting an airline is very expensive.

- Strong Branding: Apples strong brand loyalty.

- Legal Barriers: Broadcasting needs licenses.

- Nontraditional: Unique business model, strong team.

Rivalry Among Existing Firms:

- Airline industry: fierce price wars.

- Luxury brands: less rivalry due to brand uniqueness.

- Fast food: intense competition in slow-growth markets.

Bargaining Power of Suppliers:

- Intel supplying processors = high power.

- Organic ingredient suppliers in niche food markets.

- Pharma companies with rare drugs can charge high prices.

Bargaining Power of Buyers:

- Walmart forces suppliers to lower costs.

- Auto companies buying from many parts suppliers.

- Amazons bulk buying reduces supplier power.

7. Applications of Five Forces Model

First Application: To assess industry attractiveness.

Second Application: To evaluate a new ventures chances of success.

Example: A subscription box startup analyzing suppliers, substitutes, customer loyalty, and trends.

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8. Industry Types & Opportunities

| Type | Characteristics | Opportunities |

|--------------|-------------------------------|-------------------------------------------|

| Emerging | No fixed rules | First-mover advantage |

| Fragmented | Many equal-sized firms | Consolidation (mergers) |

| Mature | Little/no growth | Process innovation |

| Declining | Shrinking demand | Niche markets, cost leadership |

| Global | Global sales | Multidomestic or global strategies |

Examples:

- Emerging: Virtual reality education.

- Fragmented: Local gyms merging to form a chain.

- Mature: Automobiles (focus on electric innovations).

- Declining: DVDsniche collectors market.

- Global: Fashion or tech brands like Samsung.

9. Competitor Analysis

Definition: Deep study of rivals to understand their position, strengths, weaknesses, and strategies.

Example: Analyzing Amazon, Flipkart, and Daraz before launching e-commerce.

10. Competitive Intelligence (Ethical Ways):

- Attend trade shows.

- Study competitor websites and reviews.

- Talk to customers.

- Use Google alerts.

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11. Competitive Analysis Grid

Definition: Table comparing your business with competitors on key parameters.

Example:

| Feature | Your Firm | Competitor A | Competitor B |

|--------|-----------|--------------|--------------|

| Price | Medium | Low | High |

| Service| Excellent | Good | Average |

| Innovation | High | Low | Medium |

Purpose: To find competitive advantages and opportunities.

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