PC

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.