Principles Of Marketing
17th Edition
ISBN:9780134492513
Author:Kotler, Philip, Armstrong, Gary (gary M.)
Publisher:Kotler, Philip, Armstrong, Gary (gary M.)
Chapter1: Marketing: Creating Customer Value And Engagement
Section: Chapter Questions
Problem 1.1DQ
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Transcribed Image Text:INDUSTRY TYPES AND DYNAMICS
ILLUSTRATION 3.3
Steps in an industry analysis
There are several important steps in an industry analysis before and after analysing the five forces.
Emily wants to start a coffee shop and perhaps even try 4 Assess the overall industry structure and attractiveness.
to grow the business into several outlets. She needs to
consider the following steps and questions:
• How attractive is the industry? Why?
• Which are the most important competitive
forces? Which control profitability?
• Are more profitable competitors better positioned
in relation to the five forces?
1 Define the industry clearly. Do the actors in the
industry face the same buyers, suppliers, entry bar-
riers and substitutes?
• Vertical scope: What stages of the industry value For Emily several of the forces are quite strong, but
chain/system?
• Product or service scope: What products or ser- addition, some competitors, like large coffee chains,
vices? Which ones are actually parts of other, are better positioned versus the five forces than others.
separate industries? What segments?
• Geographic scope: local, national, regional or
global competition?
some are relatively more important for profitability. In
5 Assess recent and expected future changes for each
force.
• What are the potential positive/negative changes?
How likely are they?
• Are new entrants and/or competitors changing
the industry structure in any way?
Emily should consider that many diverse businesses
serve coffee. They include not only local cafés and
coffee shop chains, but fast food chains, kiosks and
restaurants. The definition also depends on whether For example, Emily needs to consider the proliferation
Emily intends to start in an urban or rural area.
of coffee chains during the last few years and that pubs
and bakers have improved their coffee offerings lately.
2 Identify the actors of each of the five forces and, if Maybe she can also spot possible changes in consumer
relevant, define different groups within them and the trends and growth.
basis for this. Which are the ...
• competitors that face the same competitive 6 Determine how to position your business in relation
forces? (compare point 1 above)
• buyers and buyer groups (e.g. end customers vs
intermediaries, individual vs organisational)?
• suppliers and supplier groups (e.g. diverse
supplier categories)?
• potential entrants?
• substitutes?
to the five forces. Can you:
• exploit any of the weak forces?
• neutralise any of the strong forces?
• exploit industry change in any way?
• influence and change the industry structure to
your advantage?
To cope with the forces Emily could possibly identify a
Provided there is a clear industry definition the iden- concept that would attract a certain group of customers
tification of the actors for each force should be rather even if buyers have many choices in urban areas. This
straightforward for Emily, but groups within them need could neutralise threats from competition and entry some-
to be considered. On the supplier side, for example, what and perhaps provide loyalty from some customers.
they include not only inputs like coffee but also the Sources: M.E. Porter, The five competitive forces that shape
strategy', Harvard Business Review, vol. 86, no. 1 (2008), pp. 58-77;
J. Magretta, Understanding Michael Porter: The Essential Guide to Com-
location of the premises and labour supply.
3 Determine the underlying factors and total strength petition and Strategy, Harvard Business Review Press, 2012.
of each force.
• Which are the main underlying factors for each
force? Why?
• Which competitive forces are strong? Which are
weak? Why?
Questions
Not all underlying factors on the five force checklists
will be equally relevant for Emily. With respect to buy-
ers, for example, the products' degree of standardi-
sation and prices matters most, while others are less
important.
1 Help Emily and go through each step above.
Answer the questions and make a complete
analysis. What is your assessment of the
industry?
2 Based on your analysis: How should Emily
handle the different forces? What strategic
options should she consider?
75
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