Industrys Dominant Economic Characteristics

Market Size: Annual sales revenue and total volume. Scope of Competitive Rivalry: Local, regional, international, global Market Gro th Rate: 2-3 percent annually Sta!e in "ife Cycle: Early development? Rapid growth? ature.

#um$er of Companies in Industry: Lots o! small companies or !ew dominant ones. E"# $$% plant locations and capacity o! &.' million tons. ar(et shares range !rom a low o! 3 percent to a high o! 2$ percent. Customers: )ow many buyers are there? *o they need large+small orders? De!ree of %ertical Inte!ration: )ow prevalent is bac(ward ,suppliers- and !orward integration ,distributors, retailers-. Ease of Entry&E'it: .arriers to enter+leave the industry. E"# oderate entry barriers e/ist in the !orm o! capital re0uirements to construct a new plant o! minimum e!!icient si1e ,cost e0uals 2$% million- and ability to build a customer base inside a 2'%-mile radius o! plant (echnolo!y&Innovation: 3hat is the pace o! technological change in both productions, process innovation and new products introductions? )roduct Characteristics: 4oods+services highly di!!erentiated, wea(ly di!!erentiated or essentially identical? .uyers perceive little real di!!erence !rom seller to seller? Scale Economies: 3hat impact does large volume have on 5 purchasing, m!g, transportation, and mar(eting? E'perience Curve 3hat is the impact o! learning and e/perience in this industry? Capacity *tilization: *o you only achieve low cost production e!!iciency with high levels o! capacity? E"# anu!acturing e!!iciency is highest between 6%-$%% percent o! rated capacity7 below 6% percent utili1ation unit costs run signi!icantly higher Industry )rofita$ility: 8s it above or below the norm? *o pro!its trac( the strength o! demand !or the industry9s products? 8mpact on prices?

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Identification of industrys dominant economic features

Identification of industrys dominant economic features is very important for analyzing a companys industrys and competitive environment. It also provides an overview of the over all landscape of industry. So basically it helps the organization to know the different kind of strategic moves that industry members are likely to employ. Some of the important industrys dominant economic features are given below.

Market size and growth rate

Market size refers to the total number of firms operating in the industry. It is also important to know whether the industry is growing, static or declining. It depends upon the position of industry in the business life cycle i.e. early development, rapid growth, early maturity, maturity, stagnation, decline.

Number of rivals

Organizations should also know whether the industry contains too many small rivals or is it dominated by a few large firms. Similarly they should also know about the various development in the industry such as mergers and ac uisitions etc.

Scope of competitive rivalry

Scope of competitive rivalry is an important factor for the organizations to know about the level of competition. Industry members must know about the nature of future competition. !or e"ample if a company realizes that its future success depends upon diversification, product development and market e"pansion, then it must start planning from the very first day.

Buyer needs and re uirements

Industry members must take into consideration the need and taste of final buyers as well as the middlemen. So, basically organizations have to do a lot of periodic research in order to

know the ma#or shifts in buyers needs and re uirements. $hey should also know the about the various factors factors affecting consumer behavior.

!egree of product differentiation

%roduct differentiation is another important factor for analyzing the overall industry situation. If all the products of industry are not fully differentiated then it will increase competition among the members of industry. In such case prices of the products will be low and the new entrants will find it difficult to compete with the e"isting firms.

"roduct innovation

%roduct innovation can be used as a measure to know the dominant industry features. If the industry is characterized by rapid product innovation and short product life cycle then the research and development is very important for the success of an organization. In such cases, members of the industry must come up with new products to compete effectively.

"ace of technological change

If the industry is characterized by rapid pace of technological change then the art of the state technology is imperative for the success of organizations. !or e"ample Industry of mobile phones re uires rapid changes in the technology in order to meet the changing consumer demands.

#ertical integration

It is important to know whether the competitors in the industry are partially or fully integrated. Similarly the competitive advantages and disadvantages of fully, partially and non integrated firms should be taken into consideration. &ertical integration can cause potential cost of production differences.

$conomies of scale

Organizations must also know about the different economies of scale in purchasing, manufacturing, and other activities. $hey should analyze whether the companies with high scale operations has any cost advantage or not. 'ny reduction in the cost of production leads to higher competitiveness which ultimately results higher profits.