Background and Current Status of the Industry
- Carefully define the industry. Are you describing an industry or a segment in that
industry. or are you defining just a stage in the industry.
- Describe the size of the industry in dollars of sales per year. What has been the
trend in the size of the industry in recent years?
- What is the growth forecast for the industry?
- Describe the historic profitability of the industry. and of the industry segments (such as production, processing, manufacturing).
- Describe the stage of the product life cycle of the industry’s product(s) (rapid
growth, mature, etc.).
- For processing and manufacturing industries, list the total processing capacity
and the amount of processing capacity being used. Show this for the current
period and previous years.
- List and describe inventory (unsold product) levels in the industry. Do this for
the current period and previous years.
- Describe any developments or problems the industry is experiencing.
- Is the industry dominated by supply chains or open markets?
- Which parts of the supply chain are commodities and which are differentiated products?
- Describe the supply chain relationships that may exist in this industry and describe
the role of the business within the supply chain.
- How do participants create or extract value at different points in the supply chain?
- Describe how distribution works in the industry (for example direct sales to customers
or sales force, retail, wholesale)?
- If targeting a niche market, identify the relevant industry segments and
how they are defined.
- Describe the product(s) being produced by the industry.
- What are the overall consumption trends of the product(s)?
- Describe the per capita (per person) consumption trends.
- Describe usage by specific markets (for example polyester resin usage in the automotive
- Provide data on the current price levels in the industry and price levels over previous
years. This includes prices for final products, intermediate products in the supply
chain and raw materials.
- Provide data on the profit margins for the various segments of the industry segments.
- Industry concentration – This is a measure of the number
of firms in an industry and the size of the predominant firms in the industry. It
indicates the nature of the competition.
- Identify the most important players in the industry.
- What percent of the market is controlled by the largest companies (for example, the four largest
- What is the market share of each major firm?
- What is the number of firms over a certain size?
- Is there a dominant industry leader? Who is it?
- Competition from other products – The more similar a competitive
product is to a product, the more competitive it will be. Branding is an effort
to differentiate one product from competitive products in the eyes of the consumer.
- Barriers to entry/ease of entry – Is the industry easy or difficult to enter? If entry is easy, competitors enter the market during periods of high profitability and expand production capacity. This drives down prices and profit margins. Barriers to entry make it more difficult for competitors to enter so profit margins remain favorable. Barriers to entry include the following:
- Limited access to markets – If the market is dominated by well established
branded products, a new entrant will need to spend the time, money and effort to
establish a successful branded product.
- Large-scale production – If large scale production requires substantial financial
investment, the financial requirements will be to limit entry.
- Limited access to technology or production processes – Patented technology
and other intellectual property will limit entry.
- Concentration within the supply chain – When many firms buy
from or sell to a few firms, the segment with the highest concentration (fewest
firms) usually has an advantage. What is the relative concentration of input suppliers,
producers, processors, etc.? Industry rivalry – Describe the intensity of
the rivalry among industry participants.