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Environmental Scanning : Industry Analysis, AZYURA HUMAIRA, 120310180025 -…
Environmental Scanning : Industry Analysis
Porter’s approach to Industry Analysis
Threat of New Entrants
the possible barriers to entry are:
Economies of scale
Scale economies in the production and sale of microprocessors
Product differentiation
Capital requirements
The need to invest huge financial resources
Switching costs
to switch to a new program because of the high training costs.
Access to distribution channels
Cost disadvantages independent of size
Government policy
Governments can limit entry into an industry through licensing requirements by restricting access to raw materials
Rivalry among Existing Firms
A competitive move by one firm can be expected to have a noticeable effect on its competitors and thus may cause retaliation
intense rivalry is related to the presence of several factors:
Amount of fixed costs
Capacity
Product or service characteristics
Height of exit barriers:
Rate of industry growth
Diversity of rivals
Number of competitors
Threat of Substitute Products or Services
Subtitute product: a product that appears to be different but can satisfy the same need as another product.
Effective substitutes are a limiting factor for companies
The Bargaining Power of Buyers
factors of powerful buyers
Changing suppliers costs very little
The purchased product represents a high percentage of a buyer’s costs,
A buyer has the potential to integrate backward by producing the product itself
A buyer earns low profits
A buyer purchases a large proportion of the seller’s product or service
Alternative suppliers are plentiful because the product is standard or undifferentiated
The purchased product is unimportant to the final quality or price of a buyer’s products or services
The Bargaining Power of Suppliers
factors of powerful suppliers
A purchasing industry buys only a small portion of the supplier group’s goods and services
Suppliers are able to integrate forward
Substitutes are not readily available
Its product or service is unique and/or it has built up switching costs
The supplier industry is dominated by a few companies, but it sells to many
Competitive intelligence
Definition
a formal program of gathering information on a company’s competitors
Sources of Competitive Intelligence
outside organizations
“information brokers"
in-house libraries and computerized information systems
Internet
industrial espionage
Monitoring Competitors for Strategic Planning
Why do your competitors exist? Do they exist to make profits or just to support another unit?
Where do they add customer value—higher quality, lower price, excellent credit terms, or better service?
Which of your customers are the competitors most interested in?
What is their cost base and liquidity? How much cash do they have? How do they get their supplies?
Are they less exposed with their suppliers than your firm? Are their suppliers better than yours?
What do they intend to do in the future? Do they have a strategic plan to target your market segments?
How will their activity affect your strategies? Should you adjust your plans and operations?
How much better than your competitor do you need to be in order to win customers?
Will new competitors or new ways of doing things appear over the next few years? Who is a potential new entrant?
If you were a customer, would you choose your product over those offered by your competitors?
Forecasting
Danger of Assumptions
Faulty underlying assumptions are the most frequent cause of forecasting errors
Useful Forecasting Techniques
extrapolation
Time-series
Brainstorming
Definiton: non-quantitative approach that simply requires the presence of people with some knowledge of the situation in order to concept out the future
Expert opinion
non-quantitative technique in
which experts in a particular area attempt to forecast likely developments
Delphi Technique
combined and sent back to each expert for fine-tuning until agreement is reached
Statistical
modeling
quantitative technique that attempts to discover causal or at least explanatory factors that link two or more time series together
Prediction markets
enabled by easy access to
the Internet
Scenario writing
focused descriptions of different
likely futures presented in a narrative fashion.
cross-impact analysis (CIA) and
trend-impact analysis (TIA)
AZYURA HUMAIRA
120310180025