Podcast
Questions and Answers
What differentiates an industry from a market?
What differentiates an industry from a market?
- Industries comprise firms; markets consist of customers. (correct)
- Industries focus on specific customers; markets focus on product types.
- Industries are defined by geographical boundaries; markets are not.
- Industries provide specific products; markets provide a variety of products.
Which characteristic is common across industries?
Which characteristic is common across industries?
- Industries exist in specific geographic locations.
- Industries have similar performance characteristics. (correct)
- All industries have high net profit margins.
- Industries produce identical products and services.
Which of the following industries has the highest net profit margin according to the data provided?
Which of the following industries has the highest net profit margin according to the data provided?
- Tobacco
- Oil and gas (distribution)
- Oil and gas (production)
- Banks (regional) (correct)
What does inelastic demand imply about consumers?
What does inelastic demand imply about consumers?
Which market segment is NOT explicitly mentioned in the content?
Which market segment is NOT explicitly mentioned in the content?
What is true about industries with high net profit margins?
What is true about industries with high net profit margins?
How is industry attractiveness often assessed?
How is industry attractiveness often assessed?
What was the percentage decline of the European newspaper industry from 2012 to 2022?
What was the percentage decline of the European newspaper industry from 2012 to 2022?
Which of the following factors does NOT drive ILC?
Which of the following factors does NOT drive ILC?
What is the expected worldwide newspaper advertising revenue in USD for 2029?
What is the expected worldwide newspaper advertising revenue in USD for 2029?
How much did digital banner advertising revenue increase from 2017 to the expected amount in 2029?
How much did digital banner advertising revenue increase from 2017 to the expected amount in 2029?
Which customer group dominates each stage of the ILC?
Which customer group dominates each stage of the ILC?
What leads to increased bargaining power for buyers in an industry?
What leads to increased bargaining power for buyers in an industry?
What is a common practice among similar competitors in a market?
What is a common practice among similar competitors in a market?
Why might firms with high fixed costs compete aggressively on price?
Why might firms with high fixed costs compete aggressively on price?
Which factor does NOT contribute to economies of scale?
Which factor does NOT contribute to economies of scale?
In markets with highly differentiated products, what is the primary competition based on?
In markets with highly differentiated products, what is the primary competition based on?
How does the concentration ratio impact industry rivalry?
How does the concentration ratio impact industry rivalry?
What is a contributing factor to customer loyalty for established firms?
What is a contributing factor to customer loyalty for established firms?
What is the Return on Equity for Food Consumer Products compared to Food Production?
What is the Return on Equity for Food Consumer Products compared to Food Production?
What impact does buyer's information access have on their bargaining power?
What impact does buyer's information access have on their bargaining power?
What is a primary reason for the higher Return on Equity in the Food Consumer Products industry compared to Food Production?
What is a primary reason for the higher Return on Equity in the Food Consumer Products industry compared to Food Production?
Which factor is NOT associated with the attractiveness of Food Consumer Products industry?
Which factor is NOT associated with the attractiveness of Food Consumer Products industry?
What does a high concentration ratio, such as CR3: 70.5%, indicate?
What does a high concentration ratio, such as CR3: 70.5%, indicate?
The role of complements in an industry is to:
The role of complements in an industry is to:
What is a characteristic of the buyer power versus supplier power dynamic in the Food Consumer Products industry?
What is a characteristic of the buyer power versus supplier power dynamic in the Food Consumer Products industry?
Which market concentration ratio would indicate a low concentration?
Which market concentration ratio would indicate a low concentration?
In the analysis of competitive forces, what does differentiation entail?
In the analysis of competitive forces, what does differentiation entail?
Which of the following best describes the threat of entry in the Food Consumer Products industry?
Which of the following best describes the threat of entry in the Food Consumer Products industry?
What is a key aspect of buyer power in the Food Consumer Products industry?
What is a key aspect of buyer power in the Food Consumer Products industry?
What is the significance of brand recognition in the Food Consumer Products industry?
What is the significance of brand recognition in the Food Consumer Products industry?
What characterizes the introduction stage of the industry life cycle?
What characterizes the introduction stage of the industry life cycle?
During which phase of the industry life cycle do technical improvements and efficiency allow access to the mass market?
During which phase of the industry life cycle do technical improvements and efficiency allow access to the mass market?
What is typically observed in the shakeout stage of the industry life cycle?
What is typically observed in the shakeout stage of the industry life cycle?
Which statement accurately describes the decline phase of the industry life cycle?
Which statement accurately describes the decline phase of the industry life cycle?
What type of customers are primarily targeted during the introduction stage?
What type of customers are primarily targeted during the introduction stage?
In which stage of the industry life cycle are companies most likely to experience losses?
In which stage of the industry life cycle are companies most likely to experience losses?
What happens to the profit margins during the maturity stage of the industry life cycle?
What happens to the profit margins during the maturity stage of the industry life cycle?
Which of the following correctly describes the shakeout phase in terms of market dynamics?
Which of the following correctly describes the shakeout phase in terms of market dynamics?
What is a defining characteristic of the growth stage?
What is a defining characteristic of the growth stage?
Which phase of the industry life cycle follows the growth phase?
Which phase of the industry life cycle follows the growth phase?
Flashcards
Industry
Industry
A group of companies producing similar products or services.
Market
Market
A group of customers for specific, similar products or services.
SIC code
SIC code
Standard Industrial Classification code, used to categorize industries.
Net Margin
Net Margin
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Inelastic Demand
Inelastic Demand
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Elastic Demand
Elastic Demand
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Industry Attractiveness
Industry Attractiveness
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Capital-Intensive Investments
Capital-Intensive Investments
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Economies of Scale
Economies of Scale
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Bargaining Power of Buyers
Bargaining Power of Buyers
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Switching Costs
Switching Costs
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Concentration Ratio
Concentration Ratio
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Collusive Pricing
Collusive Pricing
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Highly Differentiated Products
Highly Differentiated Products
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Return on Equity (ROE)
Return on Equity (ROE)
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Industry Decline
Industry Decline
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Cash Flow vs. Profits
Cash Flow vs. Profits
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Crossing the Chasm
Crossing the Chasm
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ILC (Industry Life Cycle)
ILC (Industry Life Cycle)
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Drivers of ILC Innovation
Drivers of ILC Innovation
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Food Consumer Products Industry
Food Consumer Products Industry
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Porter's Five Forces
Porter's Five Forces
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Brand Recognition
Brand Recognition
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Concentration Ratio (CR)
Concentration Ratio (CR)
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High Concentration CR
High Concentration CR
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Medium Concentration CR
Medium Concentration CR
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Complements (Business)
Complements (Business)
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Substitutes (Business)
Substitutes (Business)
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Strategic Group
Strategic Group
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Industry Life Cycle
Industry Life Cycle
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Introduction Stage
Introduction Stage
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Growth Stage
Growth Stage
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Shakeout Stage
Shakeout Stage
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Maturity Stage
Maturity Stage
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Decline Stage
Decline Stage
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Launch Phase
Launch Phase
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Break-even Point
Break-even Point
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Shake-out Phase
Shake-out Phase
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Study Notes
Lecture 3 - Industry Analysis & Evolution
- Lecture 3, Industry Analysis & Evolution, taught by Prof. Dr. Eva Niesten
- Use Edusign QR code to register attendance
Industries Defined
- Industry analysis evolves from environmental analysis
- Industry encompasses firms producing similar products/services
- Market defines customers for specific products/services
- Key criteria for industries include similar product performance characteristics, use occasions, and/or geographical markets
Industries Defined (What is an Industry?)
- Firms compete for customers
- Benchmarking against competitors is essential regarding cost and product quality
- Competitors share similar product performance, usage, and geographic markets
Industries Defined (Industry vs Market)
- Industry is a group of firms producing similar products/services (e.g., automobile, airline industry)
- Market is a customer group for products/services (e.g., luxury car market in Germany, family car market in the US)
- Standard Industrial Classification (SIC) code can be used to categorize industries
Industries Defined (Product)
- Motor vehicles and equipment
- Automobile industry
- Luxury cars
- Global market, Regional (EU), National market
Industries Defined (Net Margin)
- Significant differences across industries in net profit margins
- High net profit margins: Banks (e.g., 30.89%), Oil and gas (production), etc.
Industry Analysis
- Porter's Five Forces of competition framework
- Threat of new entrants
- Bargaining power of suppliers
- Rivalry among existing firms
- Bargaining power of buyers
- Threat of substitutes
Industry Analysis (Inelastic/Elastic Demand)
- Inelastic demand: Goods without close substitutes, consumers insensitive to price
- Elastic demand: Goods with close substitutes, consumers sensitive to price
- Examples: energy drinks vs. coffee; videoconferencing vs. business travel; email vs. express mail
Industry Analysis (Threat of Entry)
- Large capital-intensive investments leading to economies of scale
- Brand recognition, customer loyalty, shelf space, licenses, and environmental regulations are important factors
- Aggressive price-cutting, increased advertisement can affect competition
Industry Analysis (Buyer Power)
- Lower number of buyers and bigger purchases → more bargaining power
- Low switching costs → more bargaining power
- More buyer information leads to more bargaining power
- Buyer's capacity to produce inputs → increases bargaining power
Industry Analysis (Industry Rivalry)
- Number and size of firms competing in a market (concentration ratio)
- More similar competitors are likely to have collusive pricing practices
- Companies with high fixed costs compete aggressively on price
Industry Analysis (Industry Competitive Structures)
| Form | Features | Profit Potential |
|---|---|---|
| Perfect Competition | Many buyers and sellers, homogeneous product, low entry barriers, price takers | Low |
| Monopolistic Competition | Many firms, some pricing power, differentiated product, medium entry barriers | Medium |
| Oligopoly | Few (large) firms, some pricing power, differentiated product, high entry barriers | High |
| Monopoly | One firm, considerable pricing power, unique product, high entry barriers | High |
Industry Attractiveness
- Return on equity of food consumer products: higher than food production (e.g., 21.7% vs. 5.9%)
Industry Analysis (Data Collection)
- Available online databases (e.g., Statista, Scopus, and company databases)
Industry Life Cycle
- Different stages of industry's development (Introduction, Growth, Shakeout, Maturity, Decline)
- Market size, sales, cash, and profits change across these stages
- Understand stage of evolution to adapt to different customer segments
Innovation in ILC
- Consumer differences (education, age, income, aversion to tech, uncertainty, interest and trust) drive ILC
- Diffusion of innovation theory (Rogers 1962) looks at different attitudes towards technology across segments (innovators, early adopters, early majority, late majority, and laggards)
- Crossing the chasm: understand customer segments
- Companies must understand these different customer groups to survive
Innovation in ILC (Types of Innovation)
- Architectural innovation: combining different markets and technologies
- Radical innovation: substantial changes
- Incremental Innovation: small but continuous changes
- Disruptive Innovation: emerging technology disrupts existing markets
Innovation in ILC (The Incumbent's Curse)
- New entrants introduce innovative technologies, incumbents struggle to survive
- Incumbents' organizational structures mostly facilitate incremental innovations
What's Next?
- Case study on the automobile industry (analysis in Excel, video tutorial)
- Upload case study answers on the dedicated online platform
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Description
Explore the fundamental concepts of industry analysis in this lecture led by Prof. Dr. Eva Niesten. Understand the differences between industries and markets, and learn how firms compete and benchmark against each other. This session provides insights into defining industries and analyzing their evolution over time.
