Industry is “a group of firms whose products have same and similar attributes such that they compete for the same buyers.”
Industry and competitive analysis begins with an overview of the industry’s dominant economic features. Dominants economic features are those factors which are significant in taking decision to carry on business or not.
In profiling an industry’s dominant economic features the factors to be considered are fairly standard and are given as follows:
- Cluster Location
- Capital
- Competitors
- Competitive Industries
- Customers
- Communication and Distribution
- Others
- Market
- Product
- Profit
- Experience Effect
- Technology
- Efficiency
- Cluster Location - Whether key industry participants are clustered in a particular location, for example, lock industry in Aligarh, Saris and diamonds in Surat, information technology in Bangalore. Similarly, there is also concentration of business in different countries on account of geographical and other reasons?
- Capital - Capital requirements and the ease of entry and exit.
- Competitors - Number of rivals and their relative market share. Whether and to what extent industry rivals have integrated backward and/or forward.
- Competitive Industries -Scope of competitive rivalry (local, regional, national, international, or global).
- Customers - The number of buyers and their relative sizes.
- Communication and Distribution - The types of distribution channels used to access consumers.
- Others such as economies of scale in purchasing, manufacturing, transportation, marketing, or advertising..
- Market - Size and nature of market. Market growth rate and position in the business life (early development, rapid growth and take off, early maturity, saturation and stagnation, decline).
- Product - Whether the products and services of rival firms are highly differentiated, weakly differentiated, or essentially identical, production process innovation and new product introductions.
- Profit - Whether industry profitability is above/below par?
- Experience Effect - Whether certain industry activities are characterized by strong learning and experience effects (“learning by doing”) such that unit costs decline as cumulative output grows?
- Technology- The pace of technological change in both production process innovation and new product introductions.
- Efficiency- Whether high rates of capacity utilization are crucial to achieving low-cost production efficiency?
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