Industry Environment Analysis

Play an AI-generated podcast conversation about this lesson

What is the primary focus of analysis in the industry environment?

The factors and conditions influencing an industry's profitability potential

Who developed the Five Forces Model in 1979 to explain the dynamics of the industry environment?

Michael Porter, a Harvard Business School academic

What are the five forces that shape industry competition, according to Michael Porter's model?

Threat of new entrants, Power of suppliers, Power of buyers, Threat of product substitutes, and Intensity of rivalry amongst competitors

How does the industry environment compare to the general environment in terms of its effect on a firm's strategic competitiveness?

The industry environment has a more direct effect on a firm's strategic competitiveness and ability to earn above-average returns Signup and view all the answers

What is the primary purpose of analyzing the industry environment?

To determine the competitive intensity and hence the profitability (or attractiveness) of a market Signup and view all the answers

What is the background of Michael Porter, the developer of the Five Forces Model?

Economics Signup and view all the answers

What are the key factors that increase the intensity of rivalry amongst competitors in an industry?

Numerous or equally balanced competitors, slow industry growth, high fixed costs or high storage costs, lack of differentiation or low switching costs, and high exit barriers. Signup and view all the answers

What is the primary benefit of differentiating a product in ways that customers value?

Reduces the substitute's attractiveness. Signup and view all the answers

What are the high exit barriers particularly relevant to the pharmacy industry?

Specialised assets, fixed costs of exit, strategic inter-relationships, and emotional barriers. Signup and view all the answers

What is the primary purpose of analyzing Porter's five industry forces?

To determine an industry's attractiveness in terms of potential profitability. Signup and view all the answers

What are the characteristics of an attractive industry according to Porter's five forces model?

High barriers to entry, suppliers and buyers with little bargaining power, few competitive threats from substitute products, and relatively moderate rivalry. Signup and view all the answers

What is a limitation of Porter's five forces model?

It was developed over thirty years ago and may not fully capture the changes in the business environment since then. Signup and view all the answers

What is a limitation of Porter's model, specifically in industries where firms have low influence over the five forces?

It fails to identify actions that managers can take to improve the firm's competitive advantage. Signup and view all the answers

Why is Porter's model insufficient on its own, and what additional analyses are necessary?

It only analyzes the industry environment, and additional analyses of the general environment are necessary to examine the dynamics of growth in an industry. Signup and view all the answers

What are some additional forces that should be considered when using Porter's model to develop a business plan?

Social and ecological/environmental forces, as well as actions management can take to improve profitability. Signup and view all the answers

What is the focus of the Competitor Environment Analysis?

Predicting direct competitors' actions, responses, and intentions. Signup and view all the answers

What is a criticism of Porter's model in terms of its view of industries?

It tends to view industries as discrete entities with clear boundaries, which is not reflective of today's globalized and interconnected markets. Signup and view all the answers

What is Grundy's assessment of Porter's model?

It is a valuable and workable concept, but has some practical drawbacks. Signup and view all the answers

Industry Environment Analysis

Choose a study mode

Podcast

Questions and Answers