Chapter 3
Industry Analysis: The Fundamentals
© 2013 Robert M. Grant
www.contemporarystrategyanalysis.com
1
Industry Analysis: The Fundamentals
OUTLINE
• The objectives of industry analysis
• From environmental analysis to industry
analysis
• Porter’s Five Forces Framework
• Applying industry analysis
• Industry and market boundaries
• Identifying Key Success Factors
© 2013 Robert M. Grant
www.contemporarystrategyanalysis.com
2
The Objectives of Industry Analysis
• To understand how industry structure drives
competition, which determines the level of industry
profitability
• To assess industry attractiveness
• To use evidence on changes in industry structure to
forecast future profitability
• To formulate strategies to change industry structure to
improve industry profitability
• To identify Key Success Factors
© 2013 Robert M. Grant
www.contemporarystrategyanalysis.com
3
From Industry Analysis to
Environmental Analysis
The national/
international
economy
Technology
Government
& politics
The natural
environment
THE INDUSTRY
ENVIRONMENT
•Suppliers
•Competitors
•Customers
Demographic
structure
Social
structure
• The Industry Environment lies at the core of the Macro
environment
• The Macro Environment impacts the firm through its effect on the
Industry Environment
© 2013 Robert M. Grant
www.contemporarystrategyanalysis.com
4
Macro-environment: PESTLE analysis
Profitability of US Industries
(selected industries only)
Median return on equity (%), 2000-2010
High profitability
Low Profitability
Tobacco
33.5
Packaging and containers
10.2
Household and personal products
27.8
Automotive retailing and services
9.8
Pharmaceuticals
20.5
Food and drugs stores
9.6
Food consumer products
20.0
Insurance
9.1
Food services
19.9
Hotels, casinos, resorts
8.5
Medical products and equipment
18.5
Metals
8.2...