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G9-[BS-2]External Analysis, Structure, Conduct and Performance - Coggle…
G9-[BS-2]External Analysis
industry analysis
industry environment
macro environment
The PESTEL Framework
economic
ecological
political
legal
technological
socio-cultural
the environment outside the company
industry environment
analysis
competitor
suppliers and buyers
potential substitute products or services
complimentors
our definition
multiple nested layers
Dynamic industry analysis
steps
2.Know the structure of the 5 forces
3.Conduct the strength evaluation of the 5 forces
4.Combine the assessment of the 5 forces and evaluate the profitability
The weakness force is the key of the profitability
5.explore the dynamics of the industry
1.Distinguish the 5 forces
the sixth force
compliment
approach
use PESTEL framework
rely on know patterns of industry evolution over time
.e.g. industry life circle
demand growth
scale economics
product innovation
goal
explain and predict profitability of the industry
application
figure out where and how they can intervene strategically to improve the attractiveness or profitability of their industry.
resource allocation
make decisions such as entry and divestment decisions across an entire portfolio of product markets
provides deep insights into the reasons why industries are more or less profitable
industry stucture
Upsream
Midstream
Downstream
Five forces framework
key actors
substitutes
suppliers and buyers
potential entrants
competitors
threat of new entrants
3) Capital requirement
Further compounded by high risk
4) Product differentiation
Customers are loyal to existing products and brand
Intangible product attributes and emotional
attachment
2) Learning curve economi
Costs decline with total cumulative production over time
5) Access to distribution channels
Shelf space may be limited
Logistics distribution may be difficult
1) Scale and scope economics
Scale
Costs decline with scale of production
Scope
Costs decline when multiple products are made
The threat of substitutes
High differentiation cause less competition
e.g. taxicab industry
Rivalry among industry firms
3) Fixed storage costs
4) Demand growth
2) Product differentiation
5) Over-capacity
6) Exit barriers
1) Industry concentrations
So-called four firm or HHI
HHI 100 = Monopoly
Low industry concentrations lead to more price rivalry
The bargaining power of
buyers
The more concentrated the buyer's industry, the
better they're able to bargain
Errors
Only describe but no analysis
Too focus on structural attribute
Keeping track actors in check of the five
forces
Using one force to explain another
Too broad or narrow
Not being clearly about industry
7.Stopping with the 5 forces,and not evaluating overall profitability
9.Confusing short run industry profits with long run profitability
8.Assessing profitability as an average of the 5 forces
10.Not examimg dynamics or implications for managerial action
The bargaining power of
suppliers
The more suppliers rely on firms ,the lower the
bargain power
industry
a set of similar firms associated with a single product-market
Structure, Conduct and Performance