Business Chapter 3: Industry Analysis

Chapter 3: Industry Analysis and Environmental Scanning

• This chapter focuses on industry analysis and environmental scanning for business opportunities.
• Learning outcomes include identifying economic sectors and related industries, distinguishing products and services within a region, and understanding industry tools for opportunity recognition.

Sectors of the Economy and Related Industries

• Businesses are grouped into industries based on similarities in outputs, processes, or attributes.
• Industries are grouped into economic sectors based on production methods.
• Primary sector: Extraction of raw materials from natural resources (e.g., agriculture, fishing, mining).
• Secondary sector: Processing raw materials into finished goods (e.g., manufacturing, construction).
• Tertiary sector: Marketing and selling of raw and manufactured products (e.g., trade, transport, finance).

GDP Contributions by Sector

• Data (from 2014-2016) shows the percentage distribution of GDP across the three sectors.
  • Primary sector: ~9%
  • Secondary sector: ~33%
  • Tertiary sector: ~58%

Industry Breakdown and 2014-2016 Data

• Detailed data for particular industries is provided in a tabular format for years 2014, 2015, and 2016, separated by sector and sub-sector.
  • Agriculture, Hunting, Forestry and Fishing (including sub-divisions)
  • Mining and Quarrying
  • Manufacturing (including sub-divisions)
  • Construction
  • Electricity, Gas and Water Supply
  • Transport, Storage, and Communication
  • Trade and Repair of Motor Vehicles, Motorcycles, Personal and Household Goods
  • Financial Intermediation
  • Real Estate, Renting, and Business Activities
  • Public Administration and Defense; Compulsory Social Security -Other Services

Key Industry Components (Primary, Secondary, Tertiary)

• The primary sector includes farming, fishing and other agricultural activities.
• The secondary sector includes mining, quarrying, manufacturing and construction.
• The tertiary sector includes transport, storage, and communication, trade and repair of motor vehicles, financial intermediation and real estate, renting and business activities, public administration and public security.

Porter's Five Forces Model

• A critical framework for evaluating industry competition:
  • Threat of New Entrants: Barriers to entry (economies of scale, product differentiation, capital requirements, etc.)
  • Bargaining Power of Suppliers: Supplier concentration, availability of substitutes, product differentiation, and switching costs.
  • Bargaining Power of Buyers: Number of buyers, product differentiation, switching costs, and buyer threat of backward integration.
  • Threat of Substitutes: Relative price and quality of substitutes, switching costs for buyers
  • Rivalry of Competitors: Number of competitors, similar product characteristics, industry growth, fixed costs, competition intensity.

SWOT Analysis

• A tool for analyzing a business's internal (strengths and weaknesses) and external factors (opportunities and threats).
  • Strengths: Internal factors that give a firm an advantage.
  • Weaknesses: Internal factors that hinder a firm's performance.
  • Opportunities: External factors that can help a firm succeed.
  • Threats: External factors that can harm a firm.

Additional Considerations

• The free rider problem: The availability of public goods to everyone can lead to market failure.
• Externalities: Positive or negative effects of consuming a good on other parties
• Examples of merit and demerit goods.
• Key industry classifications. Some examples include Global Industry Classification Standard (GICS), International Standard Industrial Classification (ISIC), Standard Industrial Classification (SIC), the North American Industry Classification (NAIC), and the Philippine Standard Industrial Classification (PSIC).