How to Conduct an Industry Analysis: PART 2

THIS IS PART 2 READ PART 1 FOR MORE INFO 4. Competitive Analysis (Porter’s Five Forces Model) Porter’s Five Forces is a framework to evaluate the competitive intensity of an industry: A. Threat of New Entrants High Entry Barriers: Good for existing players (e.g., Telecom, Oil & Gas). Low Entry Barriers: High competition risk (e.g., Food Delivery, EdTech). - Example: Starting a new telecom company is difficult due to huge investment needs, but launching a new clothing brand is easier. B. Bargaining Power of Suppliers If suppliers have pricing power, companies face higher costs. Industries relying on scarce raw materials (e.g., Semiconductor Industry) have high supplier power. C. Bargaining Power of Buyers If customers have many options, they can negotiate better prices (e.g., E-commerce). If few players control the market, companies can set higher prices (e.g., Luxury Cars). D. Threat of Substitutes High substitute risk reduces pricing power (e.g., Soft Drinks vs. Juices vs. Energy Drinks). If no good substitutes exist, companies have stronger pricing power (e.g., Pharmaceuticals). E. Industry Rivalry High competition → Lower profitability (e.g., Airlines, Telecom). Low competition → Higher profit margins (e.g., Google in Search Engine Market). 5. Regulatory & Government Policies Government policies can shape industry growth. Consider: Taxation & Tariffs: High taxes can reduce profitability. Subsidies & Incentives: Government support boosts growth (e.g., Solar & EV subsidies). Regulatory Compliance: Stricter regulations increase operational costs (e.g., Banking, Pharma). 6. Technological & Innovation Trends Industries that adapt to new technology sustain long-term growth. Consider: - Is automation reducing costs? - Is AI/Data Analytics improving efficiency? - Is the industry being disrupted by new players (e.g., Tesla in Auto)? PART 3 COMING FOR RISK FACTORS, KEY MATRICS, SUMMARY AND CONCLUSION KEEP READING AND GAINING KNOWLEDGE