1. INDUSTRY ANALYSIS
• A firm operates in an industry
• You need to compare your company’s operations with
others especially your best-in-class rivals
• Look at the current level of competition, technologies
employed, the influences/forces from other industrial
stakeholders, and Key Success Factors of your chosen
industry among other key issues.

2. • Look at the key sectors in the industry in
relation to;
– Customers
– Suppliers
– Competitors
 Industrial trends in line with your industry’s life cycle
from introduction to decline stage should be looked at
in line your goals and objectives, your strategy, and
your competitors stage in this cycle.

3. Customers:
• Who are they in terms of characteristics
and behaviours?
• How manageable are their needs, wants
,expectations, tastes and preferences?
• Why do they buy/what they value most?
• When/how do they buy?
 Where do they buy?, etc
Do all these trends/factors/developments
favor/benefit us (opportunities) or really
scare/are against us (threats)?

4. Suppliers;
• Do we have alternative sources of
suppliers?
• Can we rely on these suppliers to
provide our needed inputs in the
right quantities ,quality, at the right
time and place?
• If the answer is yes , those are
opportunities. While no shows a
threat (s)

5. • What are their costs?
• What are their terms of delivery and/or
payment?
• How powerful are they?
• What is their rate of entry and exit?
• Which supplier is the best?
Which supplier (s) will give us competitive
advantages (opportunities) or not/scare
us( threat)?

6. Competitors;
• How many competitors of our size
and competence are we facing? Few-
opportunity, many-threat
• What market share do they
hold/how strong are they?
Smaller/weaker-opportunity,
Big/strong- threat
• Cost of the available substitutes?
Find out

7. • What are their competitive behavior?
Friendly/cooperative- Opportunity, Un
friendly-Threat
• What are the entry and exit barriers for
these competitors? Easy for new rivals to
join but difficult for the current ones to
leave the industry-threat, Difficult to enter
but easy to exit-favorable/opportunity

8. • Before joining an industry, a firm
should consider;
Industry size, structure,
profitability, long term
attractiveness, life cycle
Competitive situation analysis

9. Level of technology in the
industry
Competitive position of the
firm
Ease of entry in the industry

10. Michael Porter’s model
• Michael E. Porter of the Harvard Business
School developed this framework which helps
managers with the task of analyzing the
competitive forces in an industry in order to
identify the opportunities and threats
confronting their company (ies).
• To him the stronger the 5 competitive forces, the
more serious the threat and vise versa because you
can not increase prices anyhow meaning the profits
are being depressed
• However through strategic change you can alter the
strengths of such forces

11. Cont-
• Need to understand the forces in the
industry, their impact/seriousness,
how and when they benefit or be
against you, and their sources.
• Confirm which forces favour your
business success (opportunities) or
scare your business success (threats)

12. • Suggests five competitive forces;
–Rivalry within the industry
–Threat of new entrants
–Threat of substitute products
–Bargaining power of buyers
–Bargaining power of suppliers

14. Relevancy and Limitations
 Limitations
• Limited availability of the required information i.e high
level of secrecy in government bodies and some
business associations
• The available information may not be up-to-date, or be
irrelevant or even inaccurate
• The model ignores other trends like changes in demand,
technology used in production, and the market
growth/attractiveness

15. Points to note
• External environmental analysis is aimed at
identifying/anticipating opportunities and threats
• Opportunities/external friends are favourable
factors( trends/developments/unruly forces) in the external
environment
• Threats/external enemies are unfavourable trends/factors
in the external environment
• You not only end at external environmental analysis
because in order to competitively face such challenges,
you should know your strengths and weaknesses through
organizational/internal analysis

16. 3)Portfolio Analysis (PA)
• A biz portfolio may be any a
brand/branch/budget/product division/income
generating asset
• PA is usually applied to firms with multiple SBUs (more
than one product/services, customer categories,
markets , divisions)
• Helps managers to in taking decisions regarding which
SBUs to allocate more or less resources to at a given
strategic time
• A firm should always strive to not only to
diversify/retrench but to also have a balanced portfolio
(minimize risk and maximize return) of all portfolios

17. Portfolio Analysis Models:
• The B.C.G model (Growth/Share matrix)
• The G.E Multi-factoral model (competitive
strengths/Attractiveness matrix)
• Contribution Margin Analysis (how much profit
margin does that biz portfolio contribute?)

18. Question
marks
Cash cows Dogs
Industry/
market
growth rate
Relative market share
High
Low
The BCG(Boston Consulting Group) model
High Low
Stars

19. Industry/
market
attractivene
ss
Competitive Strengths
High
Low
The GE model
Strong Average
Medium
Weak

20. Determinants of industry
attractiveness
• Market growth
and size
• Industry
profitability
• Seasonality
• Porter's five forces
• Technology &
Capital
requirements
• Economies of scale
• Emerging
opportunities and
weakness
• etc

21. Determinants of competitive
strengths
• Relative
market share
• Production
capacity
• Company
Image
• Profit margins
• Technological
capabilities
• R & D strengths
• Market and
customer
knowledge
• Employee
committment
• Etc.