Industry and Competitor Analysis ICS

Industry and Competitor Analysis ICS - Industry Analysis...

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Industry Analysis Chapter 6
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What is Industry Analysis? Industry An industry is a group of firms producing a  similar product or service, such as airlines,  fitness drinks, furniture, or electronic games. Industry Analysis Is business research that focuses on the potential  of an industry.
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What is Industry Analysis Important? Once it is determined that a new venture is feasible  in regard to the industry and market in which it will  compete, a more in-depth analysis is needed to  learn the ins and outs of the industry. The analysis helps a firm determine if the niche  market it identified during feasibility analysis is  favorable for a new firm.
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Three Key Questions When studying an industry, an entrepreneur must  answer three questions before pursuing the idea of  starting a firm. Is the industry accessible—in other words, is it is realistic place for a new  venture to enter? Are there positions in  the industry that avoid  some of the negative  attributes of the  industry as a whole? Does the industry contain markets that are ripe for innovation  or are underserved? Question 1 Question 3 Question 2
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Forces Model The five competitive forces model is a  framework for understanding the structure  of an industry. The model is composed of the forces that  determine industry profitability.
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Forces Model • Each of the five-forces impacts the average rate of  return for the firms in an industry by applying  pressure on industry profitability. • Well managed firms try to position their firms in  a way that avoids or diminishes these forces—in  an attempt to beat the average rate of return of the  industry.
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Forces Model
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Threat of Substitutes The price that consumers are willing to pay for a  product depends in part on the availability of substitute  products. For example, there are few if any substitutes for prescription medicines,  which is one of the reasons the pharmaceutical industry is so profitable. In contrast, when close substitutes for a product exist,  industry profitability is suppressed, because consumers  will opt out if the price gets too high.  Rivalry Rivalry Entrants Entrants Suppliers Suppliers Substitutes Substitutes Buyers Buyers
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Threat of Substitutes Initially, a customer could easily  get a cup of coffee cheaper at one  of Starbuck’s competitors. To decrease the likelihood of  this, Starbucks offered high- quality fresh coffee, good  service, and  a pleasant  atmosphere: “third space” Starbucks therefore reduced the  threat of substitutes. 
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Threat of New Entrants • If the firms in an industry are highly profitable, the  industry becomes a magnet to new entrants. • Unless something is done to stop this, the 
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Industry and Competitor Analysis ICS - Industry Analysis...

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