Learning_Kit__10_-_W4Q4_-_Industry_Principles__Tools__and_Techniques_in

Industry Principles and Tools in Business

• Overview of industry principles, tools, and techniques used to identify business opportunities.

• Importance of analyzing various industries within the local context.

Course Objectives

• Analyze Business Principles: Understand and apply different business principles, tools, and techniques in diverse industries.

• Porter’s Five Forces: Identify and explain the five competitive forces and the impact of the Web on each.

• Value Addition: Demonstrate value creation in a company using Porter’s value chain analysis.

Key Concepts in Industry Analysis

Analysis Structure

• Each analysis should begin with an industry overview, including:

  • Historical context of industry development.

  • Factors contributing to industry growth.

  • Government regulations affecting the industry.

Competition Analysis

• Key players in the industry must be identified.

• Common frameworks for analysis:

  • Porter's Five Forces Model

  • SWOT Analysis

Porter’s Five Forces Model

• Developed by Michael Porter to understand competition within an industry.

The Five Forces:

1. Threat of New Entrants:

   • Evaluates the ease of entering the industry.

   • Low barriers encourage new businesses; high barriers protect existing firms.

     • Barriers to Entry Factors:

       • Economies of scale

       • Product differentiation

       • Capital requirements

       • Access to distribution channels

       • Government policies

       • Exclusive resources

       • Industry growth rate

2. Bargaining Power of Suppliers:

   • Determines how suppliers influence pricing and inputs:

     • Concentration of suppliers

     • Availability of substitutes for inputs

     • Differentiation among supplier products

     • Costs of switching to other suppliers

3. Bargaining Power of Buyers:

   • Consumers' influence on product pricing:

     • Number of buyers relative to suppliers

     • Degree of product differentiation

     • Switching costs for consumers

     • Potential for backward integration by buyers

4. Threat of Substitute Products:

   • Availability of different products that can replace existing offerings:

     • Price comparison of substitutes

     • Quality comparison of substitutes

     • Relative ease of switching for consumers

5. Competitive Rivalry:

   • Intensity of competition within the industry:

     • Number and size of competitors

     • Industry growth rate

     • Fixed vs. variable costs in production

     • Product differentiation and diversity among competitors

     • Exit barriers affecting competitiveness

SWOT Analysis

• Framework for evaluating strengths, weaknesses, opportunities, and threats for a company or industry.

Key Components:

1. Strengths: Internal capabilities that enhance performance (e.g., advanced technology, strategic locations).

2. Weaknesses: Internal limitations impacting performance (e.g., high liabilities, inefficient processes).

3. Opportunities: External factors that could foster industry growth (e.g., favorable regulations).

4. Threats: External challenges that may harm the business (e.g., increasing foreign competition).

Practical Application

Entrepreneurial Consideration

• Whether an entrepreneur with limited capital should invest in industry analysis.

• Importance of understanding market dynamics before decision-making.

Conclusion

• Effective use of tools and techniques in industry analysis can lead to identifying opportunities and enhancing competitive strategy.