Defining And Evaluating Industries

What you will learn in this Section ? ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],© Sunil Mehrotra

Visual Model Industry Analysis New Paradigm Consulting The environment International law Governments Standards bodies Stakeholders Supplier’s suppliers Customer’s customers New entrants Customers Suppliers Competitors Substitutes Organisation

Industry Definition/ Structure Competitors Suppliers Customers © Sunil Mehrotra The Firm T he term industry is sometimes used to define a very precise business activity (eg: semiconductors) or a more generic activity (eg:consumer goods). Substitutes Industry New entrant

Industries are grouped into sectors http://www.census.gov/econ/census02/guide/INDSUMM.HTM US Census Bureau's Industry sector groupings http://www.smartmoney.com/map-of-the-market/ Interactive map of market performance by sector Sector Industry company Example: Sector: Retail Trade Industry: General Mdse Company: Walmart Some of the sectors: Agriculture Mining Construction Manufacturing Wholesale Trade Retail Trade Utillities

Industries differ greatly ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],http://money.cnn.com/magazines/fortune/fortune500/2008/performers/industries/fastgrowers/ Fortune 2008 Industry profile by growth rate, profitability, size, etc

Drilling down from Sector to Industry to company http://biz.yahoo.com/p/

Why are some industries more profitable than others? Fortune's ranking of Industries by profits

Industries grow/decline at different rates http://www.visualizingeconomics.com/2007/07/02/gross-domestic-product-by-industry-winners-losers/ VISUAL SHOWING SECTORS AS % OF GDP 1975-2005.... WINNERS AND LOSERS

Industry Analysis for start-ups ,[object Object],[object Object],[object Object],[object Object],[object Object]

Selecting the right industry for a start-up ,[object Object],[object Object],[object Object],[object Object]

What makes an industry attractive? ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Individual Assignment 1 ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Industry Evolution: Traditional View Introduction Growth Maturity Decline Revenue Operating Income Losses Few competitors Increasing sales and profits New competitors appear Saturation Declining profits Standardized features Industry shakeout Displaced by substitute products Profitability falls Only a few large scale players survive ,[object Object],[object Object],[object Object],[object Object],© Sunil Mehrotra Adapted from: http://faculty.msb.edu/homak/HomaHelpSite/WebHelp/HomaHelp.htm Most industries evolve towards

Strategies differ at different stages of the industry life-cycle Introduction Growth Maturity Decline Revenue Operating Income Losses Few competitors Increasing sales and profits New competitors appear Saturation Declining profits Standardized features Industry shakeout Displaced by substitute products Profitability falls Only a few large scale players survive © Sunil Mehrotra Adapted from: http://faculty.msb.edu/homak/HomaHelpSite/WebHelp/HomaHelp.htm ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],http://online.onetcenter.org/find/indemand

The New View: The Cycle of Industry Creative Destruction ,[object Object],[object Object],[object Object],1 2 3 Mature/Vertically Integrated Recombinant Market Leaders http://www.manyworlds.com/ Focused New Entrants

The New View: The Cycle of Industry Creative Destruction IBM DEC Sperry Univac Wang Chips Computer Operating System Application Software Sales and Distribution Superstores Retail Word Wordperfect Windows Apple IBM HP Apple INTEL Direct Others Linux Dell The “mature” Computer Industry The “recombinant” Computer Industry AMD Adapted from: Saloner, Shepard, & Podolny: Strategic Management , Wiley and Sons, 2001

Nappies 7-10? Industry Definition -Sector/Industry/Company -SIC and NAICS codes Measures of Industry Attractiveness -Government sources for Industry statistics -Visualizing Industry statistics/compare industries Industry life-cycle and creative destruction -appropriate resource focus at each stage in the cycle

Mnemonic 4 ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Individual Assignment 2 ,[object Object],[object Object],[object Object],[object Object],[object Object]

Defining And Evaluating Industries

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