Industry Research

Before investing in new capabilities or deciding to enter new markets, a comprehensive industry profile will provide valuable insights

A typical industry scan will provide...

• General overview: Industry description (definition), number of players (existing suppliers into this industry), typical operations, level of professionalism, recent failures and/or industry consolidation and recent new entrants.
• Kamikaze competitors: A key finding can be the existence of a 'kamikaze competitor'; an industry player who is buying every job at unsustainable rates. They can sometimes take a number of years to finally destroy themselves but in the meantime they drive industry profitability down. The effect on the market can sometimes take years to dissipate while customers' perceptions of project costings are re-educated.
• Commoditization: Products and services that have economic value but are indistinguishable in terms of attributes (uniqueness or brand) end up becoming simple commodities in the eyes of the market. As part of investigating the industry, we report on the level of market commodization and seek to identify opportunities to differentiate. A good example is the steel fabrication industry where pricing is routinely quoted on a per-tonne-of-steel basis.
• Industry trends: Report on where the industry is heading - are the larger players swallowing-up smaller operators (consolidation), are smaller niche operators setting-up to capture profitable niches? Is investment in automation (or other technologies) key to business survival? Is the industry under pressure from imports?
• Industry dimensions: Market size, growth rates, total number of firms, geographic spread, volatility.
• Industry structure: For example, is it fragmented with many hundreds of suppliers or dominated by a few large players?
• Demand drivers: What drives industry growth? (e.g. housing approvals, commodity prices, exchange rates, government spending, construction activity, electricity prices, etc.)

• Main players: Identify market leaders, market followers, significant niche operators.
• Key segments: What are the main customer types?
• Business practices: Many industries are typified by accepted business practices such as tendering, online sales, typically sold via direct sales, bundled pricing models, the need for Electronic Data Interchange, ISO certification, licensing.
• Path to market: Report on the typical distribution models (e.g. direct to customer, via distributor or sales agent, franchising etc.)
• Legislative framework: What government legislation or codes are relevant.
• Key success factors: What capabilities and resources are required to be successful.
• Customer key buying criteria: Typical customer requirements use to make buying decision.

Porter's five forces

Porter's Five Forces is a tool for analyzing an industry sector determining which of five industry 'forces' is most influencing the competitive intensity of the industry.

This model is used to determine the attractiveness (or lack of it) of an industry in terms of its profitability.

The most unattractive industry would be one approaching "pure competition", in which available profits for all firms are driven to low profit levels. This framework was first published in Harvard Business Review in 1979 and remains a very useful tool for analysing industrial markets.

At JWPM we use Porters to summarise findings and to frame strategic conclusions.

We pride ourselves on taking on difficult assignments and delivering useful results. Contact us today to discuss your project.

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