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Growth industries Expectation of high rates of expansion in the top line and bottom line / favorable economic conditions a boost. Cyclical industries Those industries that are likely to benefit from a period of economic prosperity and most likely to suffer from a period of economic recession. Defensive industries Probably counter cyclical food processing, consumer non durables, services items necessary for existence swings in economic factors do not affect these much.
Industry analysis
Process
Identify major players. Analyse past sales and earnings. Growth rate, cost structure.
Performance Related to products and technology. Attitude of government towards the specific industry group present government policies allowing foreign players.
Labour conditions labour intensive industries wage agreements. Competitive scenario in the industry
What is the nature of industry? How much is it regulated? Role of labour in the industrys growth? How critical is technological developments? Influence of interest rates, exports, imports on the industry. How important is financial and operating considerations access to capital etc..
Large number of firms in the market increases rivalry. Slow market growth fight for market share intense. (High storage cost) / (highly perishable product) rivalry intense. Low switching cost i.e. customers can shift from one product to another easily market rivalry will be more to capture the customers. Low level of product differentiation higher level of rivalry.
When firms are losing market share or potential for gaining market share is very high intense rivalry. High exit barriers i.e. technology or business assets like plant and machinery cannot be deployed to produce some other product/service all firms will try to grab decent market share to continue to be in business.
Bargaining leverage / supplier concentration. Volumes. Differentiation of inputs. Presence of substitute products. Switching cost of firms in the industry.
ENTRY BARRIERS
Government policy. Economies of scale. Capital requirements. Switching costs. Expected retaliation from present players. Special access to distribution. Patent requirements. Large investments in technology / plant and machinery not capable of alternate uses.
EXIT BARRIERS
Easy to exit if. Exit cost is low. Assets are easily saleable. Independent business.
THREAT OF SUBSTITUTES
Packaging industry aluminium foil Vs glass bottles, steel can, plastic can, tetra pack.
Personal income Consumer buyer habits Employment Business production Construction of houses Easy availability of loans at Reasonable / affordable cost