Industry and Competitor Analysis

Industry analysis – business research that focuses on the potential of an industry (group of firms producing a similar product or service

Competitor analysis – detailed evaluation of a firm´s competitors.

INDUSTRY ANALYSIS

- Answer 3 questions before pursing the idea: 1) Is the industry accessible? 2) Does the industry contain markets that are ripe for innovation or are underserved? 3) Are these positions in the industry that will avoid some of the negative attributes of the industry as a whole?

- The art of war (importance of knowing your competitors)

#The importance of industry X firm-specific factors##

- Firm-level factors = firm´s assets, products, culture, teamwork among its employees, reputation and other resources.

- Industry-specific factors = the threat of new entrants, rivalry among existing firms, the bargaining power of suppliers and others.

- Both firm and industry level factors are important in determining a firm´s profitability, there are firms that do well in unattractive or moderately attractive industries if they are well positioned.

#The Five Competitive Forces that determine industry profitability#

- 5 forces = The threat of substitutes, the entry of new competitors, rivalry among existing firms, the bargaining of substitutes and the bargaining power of buyers. They determine the average rate of return for the firms in an industry.

- The Threat of substitutes à offer more than just the product to avoid costumers go o prefer other products or places. Industries are more attractive when this threat is low.

- The Threat of New Entrants à Industries are more attractive when this threat is low. Means that competitors cannot easily enter the industry to copy what the industry incumbents are doing. HOW? Barriers to entry EXAMPLES? Economies of scale (unless they accept a cost disadvantage), Product differentiation (the brand like Coca or Pepsi, its really difficult to entry in their business unless you send a lot with adverting or exclusive licensing agreements like just you can produce games involving NFL), Capital requirements (airline industry or electronic games), Cost advantages independent of size, Access to distribution channels (space in the store shelf), Government and legal barriers (biotechnology and software, patents…)

- Rivalry Among Existing Firms à Four primary factors that determines the nature of intensity among existing firms: Number and balance of competitors (more competitors more likely to "prices war"), Degree of difference between products (if the product has no difference from the others the competition will be about the prices), Growth rate an industry (competition