Your industry

How is the whole industry doing? Is it a profitable industry? Is it in decline? Is it competing with other industries? Are you ahead of the pack? But then, there are different models for analyzing an industry? How high are the entry barriers?

This analysis is called the competitive forces model

Based on "The fundamentals of strategic analysis" Geoffrey Lewis in Australian and New Zealand Strategic Management 2nd ed. (Sydney: Prentice Hall, 1999) pp. 176-195. Originally published in M.D. Porter, Competitive Strategy (New York: Free Press, 1980).

Area 1. Could new competitors come into the market?

An industry will be more profitable if it is difficult for new players to come into the market. Consider these factors:

  1. Existing players could have very strong brands and loyal constituencies.
  2. It could be very expensive to get into the industry.
  3. It could be legally difficult to get into a highly regulated industry.
  4. It might need economies of scale to be in the industry. (Only organizations with critical mass size can make a profit.)
  5. Existing players might have products that can't be duplicated (e.g. patents, expertise base, proprietary software)
  6. Existing players could retaliate against new competitors.

Area 2. How much power do suppliers have over the industry?

An industry will be more profitable if suppliers have little power over the industry. Consider these factors:

  1. It might be expensive for you to switch suppliers.
  2. Your main suppliers might be monopolies.
  3. Different suppliers might have exactly the same product.
  4. You might need to buy large volumes to be able to buy.
  5. Other businesses might be able to get control of multiple stages in the industry supply chain.

Area 3. Could buyers get a substitute product from an indirect competitor?

An industry will be more profitable if buyers can't get a substitute product from an indirect competitor. Consider these factors:

  1. Will substitutes cost less?
  2. Will buyers have to pay extra to switch to a substitute?
  3. Buyers like to try substitutes.

Area 4. How competitive is the industry?

An industry will be more profitable if it is not very competitive. Consider these factors:

  1. Is the industry growing and able to support the number of players?
  2. How fixed is the value adding?
  3. How different are the products of different players?
  4. Is there overcapacity sometimes?
  5. How strong are the brands?
  6. How much does it cost a buyer to switch products?
  7. What would it cost a player to leave the industry?

Area 5. How much power do buyers have over the industry?

An industry will be more profitable if buyers have little power over the industry. Consider these factors:

  1. The main buyer might be monopolies or concentrated groups.
  2. The channels of distribution might be inflexible.
  3. It might be difficult to expand to different kinds of buyers.
  4. Buyers might have considerable bargaining power.
  5. Other businesses might be able to get control of multiple stages in the industry supply chain.

Task

Analyze your industry according to pp. 65-70.

 

Write up

  1. Write up a PEST analysis of the Political, Economic, Social, and Technological developments in a global context . Collate and interpret statistical data, and show the trends.
  2. Write up a SWOT analysis of your organization's Strengths, Weaknesses, Opportunities and Threats.
  3. Consider co-operative ventures. For each one:
    1. Do a risk analysis
    2. Do a cost-benefit analysis.
    3. Check that their organizational vision, mission and values are consistent with those of your organization
    4. Provide for due diligence, including managing risks.
  4. What is your assessment of these trends and changes?
  5. What likely and potential effects could they have on your organization?
  6. What are the implications for each one? Explore them as much as the information allows.
  7. What future scenarios do you anticipate? Why?
  8. What do you recommend as an ongoing strategy for getting accurate, current information on trends and changes in the community that could affect impact your organization and its clients? (It should include membership of professional associations, research organizations, and networks.
  9. How do you assess your organization in terms of:
    1. the relevance of services to high need individuals and groups?
    2. broad directions and corporate goals?
    3. policy against broad directions for relevance, gaps and compliance?
  10. What opportunities do these trends create for your organization?
  11. How could your organization effectively respond to these trends? Present a set of concrete recommendations for ongoing strategic direction. It must include:
    1. an adequate explanation to make it useful for decision-makers. (In other words, How do you know your strategies are appropriate?)
    2. identified priorities and processes for reviewing, amending or developing policy.
    3. a strategy for complying with organizational and legal requirements.
  12. Who needs to be kept informed of trends? How will you do it?

Include the following: