This post is a review of this great book. This is the book for analyzing industries by different personalities. Either you are an stock analyst trying to analyse your industry of specialization or an Individual Investor trying to do your Due Diligence on a individual stock or even a CEO try to diversify your product portfolio.
As you read this book this blog can act as a refresher to all the salient aspects of the analysis. This blog is not a substitute for the book it is more like a keyword technique to instill the concepts.
PART I General Analytical Techniques
Chapter 1 The Structural Analysis of Industries
Structural Determinants of the Intensity of Competition
Forces Driving Industry Competition
- Threat Of Entry
- Barriers To Entry
- Economies Of Scale
- Product Differentiation
- Switching Costs
- Access to Distribution Channels
- Cost Disadvantages Independent of Scale
- Government Policy
- Expected Retaliation
- Entry Deterring Price
- Properties Of Entry Barriers
- Experience and Scale
- Intensity of rivalry among existing competitors
- Numerous or Equally Balanced Competitors
- Slow Industry Growth
- High Fixed or Storage costs
- Lack of Differentiation or switching costs
- Capacity augmented in large increments
- Diverse Competitors
- High Stratergic Stakes
- High Exit Barriers
- Shifting Rivalry
- Exit Barriers and Entry Barriers
- Pressure from substitute products
- Bargaing power of buyers
- It is concentrated or purchases large volumes relative to seller sales
- The product it purchases from industry represents a significant fraction of buyers's cost or purchaes.
- The product it purchases from the industry are standard or undifferentiated.
- It faces few switching costs.
- It earns low profits
- Buyers pose a credible threat of backward integration
- Industry product is unimportant to the quality of the buyer's products or services.
- The buyer has full information of demand, actual market prices and even supplier costs.
- Bargaining power of suppliers
- It is dominated by a few companies and is more concentrated than the industry it sells to.
- It is not obliged to contend with other substitute products for sale to the industry.
- The industry is not an important customer of the supplier.
- The suppliers product is an important input to buyer's business.
- The supplier's groups products are differentiated or it has built up switching costs.
- The suppliers group pose s credible threat of forward integration.
Structural Analysis and Competitive Strategy
- Influencing the balance
- Exploiting Change
Structural Analysis and Industry Definition
- Since a business can be involved in multiple industries the analysis will have to be done on industry basis and not business as a whole.
Chapter 2 Generic Competitive Strategies
Three Generic Strategies (to outperfoming other firms in the industry)
- Overall Cost Leadership: Cost cutting across the industry.
- Differentiation: Creating a unique product/service ofering.
- Focus : Focusing on a particular buyer group, segment of the product line, or geographic market.
Stuck in the Middle
- This frm lacks the market share, capital investment, and resolve to play the low cost game, the industry wide differentiation necessary to obviate the nees for a low cost position. This firm stuck in the middle is almost guaranteed low profitability.
Risks of the Generic Strategies
- Risks Overall Cost Leadership:
- Technological change that nullifies part investments
- Imitation by others
- Inability to see required product or marketing change becaus eof attention based on cosr
- Risks of Differentiation:
- Difference between specialized products and its low cost companies become less so buyer goes with low cost alternative.
- Buyers need for differentiation falls.
- Imitation narrows perceived differentiation.
- Risks of Focus :
- Cost differential between broad range competitor and the focused firms widens to eliminate the cost advantages of serving a narrow target.
- Stratergic product overtime loses its focus.
- Competitors find sub markets and further focus.
Chapter 3 A Framework for Competitor Analysis
The Components of Competitor Analysis
Putting the Four Components Together -- The Competitor
Competitor Analysis and Industry Forecasting
The Need for a Competitor Intelligence System
Chapter 4 Market Signals
Types of Market Signals
The Use of History in Identifying Signals
Can Attention to Market Signals Be a Distraction?
Chapter 5 Competitive Moves
Industry Instability: The Likelihood of Competitive Warfare
A Note on Information and Secrecy
Chapter 6 Strategy Toward Buyers and Suppliers
Chapter 7 Structural Analysis Within Industries
Dimensions of Competitive Strategy
Strategic Groups and a Firm's Profitability
Implications for Formulation of Strategy
The Strategic Group Map as an Analytical Tool
Chapter 8 Industry Evolution
Basic Concepts in Industry Evolution
Key Relationships in Industry Evolution
PART II Generic Industry Environments
Chapter 9 Competitive Strategy in Fragmented Industries
What Makes an Industry Fragmented?
Coping with Fragmentation
Potential Strategic Traps
Chapter 10 Competitive Strategy in Emerging Industries
The Structural Environment
Problems Constraining Industry Development
Early and Late Markets
Techniques for Forecasting
Which Emerging Industries to Enter
Chapter 11 The Transition to Industry Maturity
Industry Change during Transition
Some Strategic Implications of Transition
Strategic Pitfalls in Transition
Organizational Implications of Maturity
Industry Transition and the General Manager
Chapter 12 Competitive Strategy in Declining Industries
Structural Determinants of Competition in Decline
Strategic Alternatives in Decline
Choosing a Strategy for Decline
Pitfalls in Decline
Preparing for Decline
Chapter 13 Competition in Global Industries
Sources and Impediments to Global Competition
Evolution to Global Industries
Competition in Global Industries
Strategic Alternatives in Global Industries
Trends Affecting Global Competition
PART III Strategic Decisions
Chapter 14 The Strategic Analysis of Vertical Integration
Strategic Benefits and Costs of Vertical Integration
Particular Strategic Issues in Forward Integration
Particular Strategic Issues in Backward Integration
Long-Term Contracts and the Economics of Information
Illusions in Vertical Integration Decisions
Chapter 15 Capacity Expansion
Elements of the Capacity Expansion Decision
Causes of Overbuilding Capacity
Chapter 16 Entry into New Businesses
Entry through Internal Development
Entry through Acquisition
Appendix A Portfolio Techniques in Competitor Analysis
Appendix B How to Conduct an Industry AnalysisBibliography
About the Author