The Industry
The Marco Environment (PESTEL) impacts the firm through ist influence on the industry in which it operates. The objective here is to understand the industry’s structure and level of attractiveness because this has a direct impact on the overall profitability of the company (about 20% of the profitability of the company might be due to the attractiveness or not of its industry).
The framework to analyze the industry is Porter’s 5 Forces + 1:
- Threat of substitute products/services
- Barriers to the entry of new competitors
- Internal Rivalry between established competitors
- Bargaing power of suppliers
- Bargaing power of buyers
- Relevance of complement products/services
How to use this framework:
- find key drivers for each force
- define your industry’s barriers (consider segmenting your industry into ’strategic groups’ if necessary)
- rate each force according to the relevant drivers
- graph findings into ’spider’ graph to visualize results
Use of this analysis:
- to understand the industry’s structure and attractiveness
- to forecas changes and possible challenges
- to develop strategies and identify you industry’s key success factors (KSF)
Tags: industry analysis, Porter Five Forces, Porter's 5 forces
