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ENTREP

Industry analysis involves comprehensively examining factors that influence an industry's performance and competitiveness. It includes studying an industry's structure, trends, opportunities, threats, and key players to understand its current state and future prospects. Porter's 5 Forces model analyzes competitive rivalry, supplier power, buyer power, threat of substitution, and threat of new entry to understand an industry's competitive environment.

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7 views

ENTREP

Industry analysis involves comprehensively examining factors that influence an industry's performance and competitiveness. It includes studying an industry's structure, trends, opportunities, threats, and key players to understand its current state and future prospects. Porter's 5 Forces model analyzes competitive rivalry, supplier power, buyer power, threat of substitution, and threat of new entry to understand an industry's competitive environment.

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espinosajia77
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© © All Rights Reserved
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Download as DOCX, PDF, TXT or read online on Scribd
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WHAT IS YOUR UNDERSTANDING OF INDUSTRY ANALYSIS?

Industry analysis is a comprehensive examination of the various factors that influence a particular industry's
performance, dynamics, and competitiveness. It involves studying the structure, trends, opportunities, threats, and
key players within an industry to gain insights into its current state and future prospects.

CAN YOU ENUMERATE AND EXPLAIN PORTER’S 5 FORCES.

1. Competitive Rivalry

The first of Porter's Five Forces looks at the number and strength of your competitors. Consider how many rivals

you have, who they are, and how the quality of their product compares with yours.

In an industry where rivalry is intense, companies attract customers by cutting prices aggressively and launching

high-impact marketing campaigns. This can make it easy for suppliers and buyers to go elsewhere if they feel that

they're not getting a good deal from you.

On the other hand, where competitive rivalry is minimal, and no one else is doing what you do, then you'll likely

have tremendous competitor power, as well as healthy profits.

2. Supplier Power

Suppliers gain power if they can increase their prices easily, or reduce the quality of their product. If your suppliers

are the only ones who can supply a particular service, then they have considerable supplier power. Even if you can

switch suppliers, you need to consider how expensive it would be to do so.

The more suppliers you have to choose from, the easier it will be to switch to a cheaper alternative. But if there are

fewer suppliers, and you rely heavily on them, the stronger their position – and their ability to charge you more. This

can impact your profitability, for example, if you're forced into expensive contracts.
3. Buyer Power

If the number of buyers is low compared to the number of suppliers in an industry, then they have what's known as

"buyer power." This means they may find it easy to switch to new, cheaper competitors, which can ultimately drive

down prices.

Think about how many buyers you have (that is, people who buy products or services from you). Consider the size

of their orders, and how much it would cost them to switch to a rival.

When you deal with only a few savvy customers, they have more power. But if you have many customers and little

competition, buyer power decreases.

4. Threat of Substitution

This refers to the likelihood of your customers finding a different way of doing what you do. It could be cheaper, or

better, or both. The threat of substitution rises when customers find it easy to switch to another product, or when a

new and desirable product enters the market unexpectedly.

5. Threat of New Entry

Your position can be affected by potential rivals' ability to enter your market. If it takes little money and effort to

enter your market and compete effectively, or if you have little protection for your key technologies, then rivals can

quickly enter your market and weaken your position.

However, if you have strong and durable barriers to entry, then you can preserve a favorable position and take fair

advantage of it. These barriers can include complex distribution networks, high starting capital costs, and difficulties

in finding suppliers who are not already committed to competitors.


Existing large organizations may be able to use economies of scale to drive their costs down, and maintain

competitive advantage over newcomers.

If it costs customers too much to switch between one supplier and another, this can also be a significant barrier to

entry. So can extensive government regulation of an industry.

HOW INDUSTRY ANALYSIS IS ESSENTIAL IN ENTREPRENEURSHIP.

Industry analysis, for an entrepreneur or a company, is a method that helps to understand a company's position

relative to other participants in the industry. It helps them to identify both the opportunities and threats coming

their way and gives them a strong idea of the present and future scenario of the industry.

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