Identification Of Industry’s Dominant Economic Features i1b5u

Industry’s Dominant Economic Characteristics Market Size: Annual sales revenue and total volume. Scope of Competitive Rivalry: Local, regional, international, global Market Growth Rate: 2-3 percent annually Stage in Life Cycle: Early development? Rapid growth? Mature. Number of Companies in Industry: Lots of small companies or few dominant ones. EX: 110 plant locations and capacity of 4.5 million tons. Market shares range from a low of 3 percent to a high of 21 percent. Customers: How many buyers are there? Do they need large/small orders? Degree of Vertical Integration: How prevalent is backward (suppliers) and forward integration (distributors, retailers). Ease of Entry/Exit: Barriers to enter/leave the industry. EX: Moderate entry barriers exist in the form of capital requirements to construct a new plant of minimum efficient size (cost equals $10 million) and ability to build a customer base inside a 250-mile radius of plant Technology/Innovation: What is the pace of technological change in both productions, process innovation and new products introductions? Product Characteristics: Goods/services highly differentiated, weakly differentiated or essentially identical? Buyers perceive little real difference from seller to seller? Scale Economies: What impact does large volume have on – purchasing, mfg, transportation, and marketing? Experience Curve What is the impact of learning and experience in this industry? Capacity Utilization: Do you only achieve low cost production efficiency with high levels of capacity? EX: Manufacturing efficiency is highest between 90-100 percent of rated capacity; below 90 percent utilization unit costs run significantly higher Industry Profitability: Is it above or below the norm? Do profits track the strength of demand for the industry’s products? Impact on prices?

2nd answer

Identification of industry’s dominant economic features Identification of industry’s dominant economic features is very important for analyzing a company’s industry’s and competitive environment. It also provides an overview of the over all landscape of industry. So basically it helps the organization to know the different kind of strategic moves that industry are likely to employ. Some of the important industry’s dominant economic features are given below.

Market size and growth rate

Market size refers to the total number of firms operating in the industry. It is also important to know whether the industry is growing, static or declining. It depends upon the position of industry in the business life cycle i.e. early development, rapid growth, early maturity, maturity, stagnation, decline.

Number of rivals

Organizations should also know whether the industry contains too many small rivals or is it dominated by a few large firms. Similarly they should also know about the various development in the industry such as mergers and acquisitions etc.

Scope of competitive rivalry

Scope of competitive rivalry is an important factor for the organizations to know about the level of competition. Industry must know about the nature of future competition. For example if a company realizes that its future success depends upon diversification, product development and market expansion, then it must start planning from the very first day.

Buyer needs and requirements

Industry must take into consideration the need and taste of final buyers as well as the middlemen. So, basically organizations have to do a lot of periodic research in order to

know the major shifts in buyers needs and requirements. They should also know the about the various factors factors affecting consumer behavior.

Degree of product differentiation

Product differentiation is another important factor for analyzing the overall industry situation. If all the products of industry are not fully differentiated then it will increase competition among the of industry. In such case prices of the products will be low and the new entrants will find it difficult to compete with the existing firms.

Product innovation

Product innovation can be used as a measure to know the dominant industry features. If the industry is characterized by rapid product innovation and short product life cycle then the research and development is very important for the success of an organization. In such cases, of the industry must come up with new products to compete effectively.

Pace of technological change

If the industry is characterized by rapid pace of technological change then the art of the state technology is imperative for the success of organizations. For example Industry of mobile phones requires rapid changes in the technology in order to meet the changing consumer demands.

Vertical integration

It is important to know whether the competitors in the industry are partially or fully integrated. Similarly the competitive advantages and disadvantages of fully, partially and non integrated firms should be taken into consideration. Vertical integration can cause potential cost of production differences.

Economies of scale

Organizations must also know about the different economies of scale in purchasing, manufacturing, and other activities. They should analyze whether the companies with high scale operations has any cost advantage or not. Any reduction in the cost of production leads to higher competitiveness which ultimately results higher profits.