Define the term ‘industry’. List the types of industries. How do you conduct an industry analysis?

Define the term ‘industry’. List the types of industries. How do you conduct an industry analysis?

Answer:

Define the term ‘industry’. 

An industry can be broadly defined as ‘the group of firms producing products that are close substitutes for each other’.

 
In broad terms industry can be classified into five categories according to Porter:

 
1. Fragmented industry
· A fragmented industry is characterized by

the existence of a large number of small and medium units, and, no single company has any significant market share, and, none of these units can individually affect the market or industry outcome.

2. Emerging industry
· An emerging industry is a developing or newly formed industry in which market for products initially exists in latent form, and, becomes visible later. An emerging industry may be created by technological innovations, new consumers or industrial needs for economic or sociological changes which create the environment or potential market for a new product or service.
3. Mature industry
· A mature industry is one which has passed through transition from period of fast growth to more modest or stable growth.
4. Declining industry
· A declining industry is one with negative growth, that is, an industry which has registered absolute decline in sales over a sustained period of time.
5. Global industry
· In global industry, the strategic positions of companies in different countries or national markets are governed by their overall global positions.

 
Understanding industry structure and formulating competitive strategies imply industry analysis, which in itself is a big task. 

How do you conduct an industry analysis?

To conduct such an analysis, the industry analyst has to find answers to many important questions:
• What should be the starting point?
• Which types of data one looks for?
• Should one look for only published or secondary data?
• Or, should one also generate primary data from industry observers (participants)?
• What are the analytical techniques to be used for data processing and analysis?

 
Porter (1980) has suggested some detailed guidelines for conducting industry analysis. These are contained in ‘How to Conduct an Industry Analysis’ (Appendix B) in Competitive Strategy (1980).

 
The steps to conduct an industry analysis are:
Step 1: Determine or specify the objective or objectives so that there is no lack of focus.

Step 2: Collect and scan through available published or secondary data.

Step 3: Identify data or information gaps for generation of primary data.

Step 4: Generate primary data (through survey, interviews, meetings, etc.) to fill the data information gap.

Step 5: Process/tabulate various data as mentioned in Box 11.1

Step 6: Prepare a general overview of the industry using the processed/tabulated data/information.

Step 7: Prepare specific sectoral analysis—technology, product, marketing pattern, competition analysis.

Step 8: Draw inferences or conclusions to complete the analysis.