Industry and Competitor Analysis: Bruce R. Barringer R. Duane Ireland
Industry and Competitor Analysis: Bruce R. Barringer R. Duane Ireland
Industry and Competitor Analysis: Bruce R. Barringer R. Duane Ireland
Industry and
Competitor Analysis
Bruce R. Barringer
R. Duane Ireland
• 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.
Importance
• Once it is determined that a new
venture is feasible in regard to the
Industry Analysis 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 target market it identified
during feasibility analysis is
favorable
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as Prentice 5-3
Three Key Questions
When studying an industry, an entrepreneur must answer
three questions before pursuing the idea of starting a firm.
• Environmental Trends
– Include economic trends, social trends, technological
advances, and political and regulatory changes.
– For example, industries that sell products to seniors are
benefiting by the aging of the population.
• Business Trends
– Other trends that impact an industry.
– For example, are profit margins in the industry increasing
or falling? Is innovation accelerating or waning? Are input
costs going up or down?
• 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.
Barriers to Entry
Number and The more competitors there are, the more likely it
balance of is that one or more will try to gain customers by
competitors cutting its price.
• Emerging Industries
– Industries in which standard operating procedures have yet
to be developed.
• Opportunity: First-mover advantage
• Fragmented Industries
– Industries that are characterized by a large number of firms
of approximately equal size with very less barriers to entry.
• Opportunity: Consolidation
• Mature Industries
– Industries that are experiencing slow or no increase in
demand.
• Opportunities: Process innovation and after-sale service innovation
• Declining Industries
– Industries that are experiencing a reduction in demand.
• Opportunities: Leadership, establishing a niche market, and
pursuing a cost reduction strategy
• Global Industries
– Industries that are experiencing significant international
sales.
• Opportunities: Multidomestic and global strategies