Presentation Transcript
Chapter 3:Industry Analysis : Chapter 3: Industry Analysis Does the category offer sufficient financial opportunity? Low risk?
Is the category sufficiently attractive? : Is the category sufficiently attractive? Aggregate category factors
Size & growth
Stage in product life cycle
Sales cycle / seasonality
Profitability
Category factors
Threat of entrants
Buyer/seller power
Rivalry (“dumb” competitors)
Substitutes
Capacity utilization
Environmental factors
Technological
Political
Economic
Regulatory
Social
Comparative size & growth (BCG) : Comparative size & growth (BCG) Growth of industry Comparative market share dress shoes sneakers football shoes socks tennis shoes = sales
Comparative : Comparative Size of market Comparative market share = profit % Unit A Unit C Unit B Unit D Unit E Unit F Unit G
Attractiveness of Market Variables : Attractiveness of Market Variables Attractiveness
High Low
Market Size + -
Market Growth + -
Sales Cyclicity - +
Sales Seasonality - +
Profit Level + -
Profit Variability - +
Product Life Cycle : Product Life Cycle Introduction Growth Maturity Decline sales profits
Attractiveness of category factors : Attractiveness of category factors High Low
Threat of new entrants - +
Power of buyers - +
Power of suppliers - +
Competition - +
Available substitutes - +
Unused capacity - +
Barriers to Entry : Barriers to Entry Economies of Scale
Product Differentiation
Product Superiority
Brand Name
Company Reputation
Capital Requirements
Switching Costs
Distribution System
Power of Industrial Buyers : Power of Industrial Buyers Product large percent of buyer’s costs
Product is commodity
Available substitutes
Buyer’s have low profits
Buyer has information
Power of Consumer: “Buyers’ Market” : Power of Consumer: “Buyers’ Market” Excess supply
Economic strength
Easy access to alternative sources
Low switching costs
Information (Internet)
Buying groups (monopsony)
Tuangou or team buying
Power of Suppliers : Power of Suppliers Few firms
No substitutes
Differentiated product
High switching cost
Limited supply
Fierce Competition : Fierce Competition Many or balanced competitors
Slow growth
High fixed costs
No product differentiation
Personal rivalries
Attractiveness of environmental factors : Attractiveness of environmental factors Technological
Political
Economic
Regulatory
Social
Technological factors:Improve quality / lower cost : Technological factors: Improve quality / lower cost Product
Materials
Transportation
Production process
Environment
Energy source
Financing
Credit cards
Smart cards
Sophistication of consumer
Information
China has more than 2.6 million websites
China has 111 million Internet users
Political factors:Lower risk / reduce cost of business : Political factors: Lower risk / reduce cost of business Instability
Loss of property due to riots, etc.
Predictability
Difficulty in planning production
Government intervention
Confiscation
Expropriation
Loss of transfer of profits
Breaches in contracts
Economic factors:Lower costs / increase sales & profits : Economic factors: Lower costs / increase sales & profits Interest rates
Inflation
Currency exchange rates
Wage rates
Average wage increased from $.59/hr (2000) to $.92/hr (2005)
Unemployment
Discretionary income
Threat of recession / disinflation
Economic growth trend
China has grown about 9% annually since late 1970s
Economic Comparison of Countries : Economic Comparison of Countries
Regulatory factors:Protect industries / Increase costs : Regulatory factors: Protect industries / Increase costs Product content laws
Packaging and advertising laws
Environmental laws
Pharmaceutical laws
Labor laws
Social factors : Social factors Demographics
Lifestyles
Attitudes, values
Demographic trends in China : Demographic trends in China Increase in population
Increase in urban population
Increase in age of population
Increase in Population : Increase in Population 1.3 billion people
1/5 world’s population
Increase in Urban Population : Increase in Urban Population Urban Population
1950 < 13%
2005 40%
2030 60%
Increase in Age of Population : Increase in Age of Population Life expectancy at birth: 72.6
Median age: 32.7
Mexico median age: 25.3
World median age: 27.6
U. S. median age: 36.5
Japanese median age: 42.9
Youth is more educated and higher paid
Chinese Lifestyles : Chinese Lifestyles More discretionary money
Smaller % spent on food, clothing and housing
Greater % spent on education, entertainment, luxury goods
Busier lifestyle
More eating out
15% of Chinese overweight
McDonald’s offering healthier menu
Chinese Attitudes & Values : Chinese Attitudes & Values Trend to greater individualism?
Conflict between consumption and saving?
“In China, people like to show off with material things”
Yvonne Han, Partner in Shanghai restaurant chain
High savings rates
Concern for health care and retirement
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