Transcript Conducting an industry analysis

Module 3
Market Analysis
FRE 302 Fall 2016
Lecture 5
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Content
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Industry What & Why?
Conducting an industry analysis
 Steps 1 to 4 including application and examples of Industry
Analysis Models :
 Description
 PESTLE
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Custom Textbook
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Factsheets
Market Analysis p117
Readings
Industry Analysis P133
3. Industry Analysis PEST p139
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Industry analysis: What & Why?
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Industry Analysis: Terms
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Industry
 An industry is a group of firms producing a similar product or
service, such as airlines, fitness drinks, furniture, or electronic
games.
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Industry Analysis
 Research that focuses on the potential of an industry.
 Summarizes industry’s attractiveness in terms of entry, growth,
sustainability and profit potential
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Soda Pop Worldwide
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Industry Analysis: What?
What?
 Strategic tool designed for market assessment to provide a business
with an idea about complexity and industry attractiveness in terms
of entry, growth, sustainability and profit potential
 involves research & presentation of key elements of the industry suited to specific industry
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Industry Analysis: Why?
Why?
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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Industry Analysis: Why?
Why?
 Support for the hard and soft numbers used in other parts of plan
 Provides evidence that the business idea will succeed
 Proving that people want or need your product (e.g., trends and
level of demand)
 Prove to audience of plan that you know what the industry is all
about
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Not just data collection .. But information relevant to your
product or service that will assist you in developing a solid
market plan.
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Conducting an industry analysis
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Conducting an industry analysis
1 - Identify the Industry
2 - Identify information sources
3 –Apply Models
 Description Method
 PESTLE
4 –Write up the Industry Analysis
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Conducting an industry analysis –
1. Identify the Industry
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Consider the industry in terms of geographic location, product and
customer
 Inaccurate industry – inaccurate competition, profit potential …
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example
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example
Ex: Canadian snack manufacturers
 Rivals - USA snack manufacturers
 Substitutes – beverages, deli, savories, baked goods
Ex: cookie manufacturers
 Rivals - other Canadian & USA cookie manufacturers
 Substitutes – chips, crackers, nuts etc..
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example
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Conducting an industry analysis
1.Identify the Industry
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Markets are merging and morphing
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Conducting an industry analysis
1. Identify the Industry
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Conducting an industry analysis
2. Identify Sources
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Where will you get info?
Evaluate
Summarize
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Consider market research section!
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Conducting an industry analysis
3. Apply the Models: Description
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Industry and not firm focus
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Presents the industry’s 5 to 7 dominant economic features
 industry size, growth rate, sale projections
 industry characteristics (e.g., structure, nature of participants,
marketing channels, product innovation, financial ratios, key
success factors)
 industry trends (e.g., consumption, demand, production,
demographics, price, regulatory, input costs, or profit margins)
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Varies with industry Organize information in graphics or
meaningful text
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Conducting an industry analysis
3. Apply the Models: Description
Ideas ..
 Industry Stage, Growth & Trends
 Dominant Firms: Type of Firms and Market Share
 Structure of the industry in terms of market power & channels
 Regulatory & Trade Environment
 Role of government and associations in industry
 Technology adoption or future trends
 Labeling or product development trends
 Consumer likes and dislikes, health claims, trends
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The illusion of diversity: visualizing ownership in the soft drink
industry: Phil Howard,1 Chris Duvall2 and Kirk Goldsberry3
August, 2010
 https://www.msu.edu/~howardp./softdrinks.html
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Coke vs Pepsi Commercial
https://www.youtube.com/watch?v=LiLUe2mIO1I
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Conducting an industry analysis
3. Apply the Models: Description
Eod sept 28
Industry Sales
Industry Life Cycle
Introduction
Growth
Maturity
Decline
Time
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Industry life cycle model can help us to anticipate industry
evolution—but dangerous to assume any common, predetermined pattern of industry development.
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Life cycle of industry
Mail order,
catalogue
retailing
e.g. Sears
Roebuck
1880s
Warehouse
Internet
Clubs
Retailers
e.g. Price Club
e.g. Amazon;
Sam’s Club
Expedia
Discount
“Category
Stores
Killers”
e.g. K-Mart
e.g. Toys-R-Us,
Wal-Mart
Home Depot
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Chain
Stores
1920s
1960s
2000
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Consider early stage industries??
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Conducting an industry analysis
3. Apply the Models: PESTLE
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business analysis technique which takes into account six groups of
external factors that can affect businesses.
 Political, Economic, Social, Technological factors that are relevant
to the industry.
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Other versions
PESTEL’ analysis (which is exactly the same), ‘
STEEP’ analysis (which forgoes legal factors),
‘STEEPLE’ analysis (which further includes ethical factors)
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Conducting an industry analysis
3. Apply the Models: PESTLE
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You will find that one category has more entries than another, or if
some factors don’t entirely fit into any category. This can happen
depending on the industry that you are analyzing.
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Conducting an industry analysis
3. Apply the Models: PESTLE
Political Factors - local and global politics that influence businesses and
government intervention in society and the economy to create growth
 A country’s political system
 International relationships
 Government sanctions
 Subsidies, Quotas, Supply Management
 Taxes
Economic Factors - connected with the general state of the economy, goods,
services and money.
 Supply and demand for a certain product
 Taxes
 Interest rates
 Inflation
 Economic Growth & Recession Potential
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Conducting an industry analysis
3. Apply the Models: PESTLE
Social Factors connected with the general public and their behavior (in other
words, society and its culture).
 Consumer lifestyles & attitudes
 Demographics & Aging
 Social classes
 Immigration and emigration
 Family size
Technology Factors – digital, mechanical and other physical technologies.
 Robotics
 Quality assurance & food safety testing
 Internet & web
 New processing, delivery, transport, production technology - drones, GPS,
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Conducting an industry analysis
3. Apply the Models: PESTLE
Legal Factors - government intervention in society and the economy to
maintain fairness and wellbeing that influence business operation and
customer behavior.
 Consumer & Labelling law
 Employment & Competition
 Import/Export law
Environmental factors
 Climate change
 Carbon Tax
 Pollution
 Degradation & Development
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Linking
PESTLE &
Market
Planning
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Conducting an industry analysis
3. Apply the Models: PESTLE
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Note the following re: PESTLE
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Conducting an industry analysis
4 Write up the Industry Analysis
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Summarize each model
 Description
 PESTLE
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Use headings
Provide highlights of most important – least important
Bring discussion from general industry to your business idea
 What does this information mean to your business
 Good things- bad things
 Barriers, Opportunities
 Profit potential now and future
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Questions
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What is the role of market research in industry analysis?
Describe the objective and process of applying the two industry
analysis models
What are the similarities and differences between the two industry
analysis models ?
What would you consider the biggest challenge to the development
of an industry analysis?
How does the industry analysis inform the rest of the plan?
Why is industry definition a challenge?
What is the content required for an industry analysis?
What are the limits of the models? Industry analysis?
Describe the content required for an industry analysis
Define the key challenges of industry analysis
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End of slides
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