Project Report on Industry Analysis

Topics: Automotive industry, Automobile industry in India, Suzuki Pages: 15 (4657 words) Published: April 26, 2012
Project Report
On Industry analysis



According to Michael Porter’s well known model of structural analysis of industries, the state of competition in an industry depends on five basic competitive forces. * Rivalry among exiting firm

* Threat of new entrants
* Threat of substitutes
* Bargaining power of suppliers
* Bargaining power of buyers.
* The five forces competition structure of industry. The diagram is a slightly modified presentation of the one provided by Porter. The arrow in the diverse direction indicates opposing forces. For example, just as the buyers and suppliers may also have bargaining power over the firm may also some bargaining power over the buyer and suppliers.

Threat of Entry:
A growing industry often threat of new entrants that can alter the competitive to be high if industry is profitable or critical, entry varies are low and expected retaliation from the existing firm is not serious. The following are some of the important entry barriers

* Government Policy: In many cases government policy and regulation are important entry barriers. For example, prior to the economic liberalization in India, government-dictated entry barriers were rampant, like reservation of industries / products for public sector and small scale sector. Industrial licensing, regulations under MRTP Act, import restrictions, restrictions on foreign capital and technology etc. * Economies of Scale: economies of scale can deter entry in two ways: it keeps out small players and discourages even potentially large because of the risk of large stakes. * Cost Disadvantages Independent of Scale: Entry barrier may also arise from the cost advantages, besides that of economies of scale, enjoyed by the established firms which cannot be replicated by new firms, such as proprietary product technology, learning or experience curve, favourable access to raw materials, favourable location, government subsides etc. * Product Differentiation: Product differentiation characterized by brand image, customer loyalty, and product attributes etc. many from an entry barrier forcing new entrants to spend heavily to overcome this barrier. * Monopoly Elements: Proprietary product / technology, monopolization / effective control over raw material supplies, distribution channels etc. are entry barriers which are insurmountable or difficult to overcome. * Capital Requirements: High capital intensive nature of the industry is an entry barrier to small firms. Further, the risk of huge investment could be a discouraging factor even for other firms. Rivalry among Existing Competitors

Rivalry among existing competitors of often the most conspicuous of the competitions. Firms in an industry are “mutually dependent” – competitive moves of a firm usually affects others and may be retaliated. Common competition actions include price changes, promotional measures, customer service, warranties, product improvements, new product introductions, channel promotion etc.

There are a number of factors, which inflation the intensity of rivalry. * Number of Firms and Relative Market Share, Strengths etc.: Rivalry is likely to be affected by the number firms, their relative maker shares, competitive strengths, etc. * State of Growth of Industry: In stagnant, declining and to some extent, slow growth industries a firm is able to increase its sales only by increasing its market share, i.e., at the expense of others. * Fixed or Storage Costs: When the fixed or storage costs are high, firms are provoked to take measures to increase sales for improving capacity utilization or reducing storage costs. * Indivisibility of Capacity Augmentation: Where there are economies...

1. Book-“Business Environment” by Francis cherunilam
2. Book-“Business Environment’’ by Justine paul
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