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Industry Analysis

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Question 1: Industry Definition

An industry is a group of firms producing services or goods that meet the same needs. For example, Samsung and Apple Inc. compete to produce smartphones.

Question 2: Other participants in an industry

In an industry environment, there exist other players who could be offering complementary or supplementary products. The participants are customers and suppliers.

Question 2a: Other stakeholders included

Yes.

Question 3: What industry analysis tool is used to assess

Industry analysis is a tool used to understand the distribution of profits among the market participants. A firm’s profitability varies depending on the competition intensity rivals within the industry and on the influence of players within the environment. Therefore the tool can help assess a major change’s effect. It helps in changes such as deregulation, where the government withdraws to create competition, new technology entrance, productivity, complements, and demographic shifts.

Question 4: Industry analysis be applied to humanitarian industry

 Yes, industry analysis tool can be applied to humanitarian aid because it applies to any situation where there is competition among organizations. Benefits from donations become the profits in the case of such organizations. The structure of the company determines the distribution of the profits and is affected by the aid agencies, suppliers’ bargaining power, and customers.

Question 5: Concentration ratio

The concentration ratio is the extent to which a small group of firms dominates their industry. The study of industries economics found a relationship between industry structures and performance measures such as profits.

Question 6: Return on capital

Return of capital is used to understand a company’s profitability by understanding its investments if they are effective in maintaining or protect market shares and profits.

Question 7: Average Return on invested capital

The average return on invested capital is 14.9%.

Question 8: Industries with the highest return on capital

  • Security brokers and dealers.
  • Soft drinks.
  • Prepackaged software.
  • Pharmaceuticals.
  • Perfume, cosmetics, and toiletries

Question 9: Barriers of entry

Evaluating barriers to entry involves some factors such as:

  • Supply-side economies of scale: a situation where unit cost reduces by production volume. Economies of scale become barriers when a new company cannot take a risk and start as a scale.
  • Demand side-benefits of scale: This advantage exists when the value a buyer gets by using it increases as more people buy this product.
  • Customer switching cost: Customer’s chances of switching to a new firm they have to incur cost to switch.

Question 10: Difference between the endogenous and exogenous barrier of entry

Endogenous are barriers created by firms in the industries, while exogenous are barriers created by the industry’s economic characteristics.

Question 11: Competitors and suppliers in the airline industry

The airline industry is an oligopoly in nature, forming an imperfect competition where its rivals are the competitors. Suppliers in this industry are vendors, operators, and authorities, among many.

Question 12: Bargaining power of suppliers

The high bargaining power of a firm depends on a number of factors. The firm can supply concentration, industry switching costs, and differentiated products to maintain a bargaining power. On the other hand, maintaining a low bargaining power involves where the customer is allowed to dictate, and it involves undifferentiated products and high switching costs.

Question 13: Bargaining power of buyer power

|A customer has high bargaining power if they are concentrated and sellers are few, low customer switching cost, undifferentiated products, and credible threat of backward integration.

Question 14: Substitute

A product is a substitute for another if they serve the same purpose. Still, from outside the industry, therefore, it must satisfy the same need to a customer to check qualification. Analyzing a product’s substitutes involves considering the customer’s perspective, such as vesting a customer instead of waiting for them to come.

Question 5: Complements

Complements are products that are consumed together. Complements are analyzed as the sixth force since they can impact all other 

Question 16: Rivalry among competitors

  • Undifferentiated products.
  • Marginal costs are low while fixed costs high.
  • Products are perishable.
  • The industry has slow growth.
  • Exit barriers are high.
  • Diversified approaches.

 

 

 

 

 

 

 

 

 

 

References

Harvard Business Publishing. (2021). Industry Analysis.

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