4. Principles of Strategic Analysis
e. describe the elements that need to be covered in a thorough industry analysis;
f. describe the principles of strategic analysis of an industry;
g. explain the effects of barriers to entry, industry concentration, industry capacity, and market share stability on pricing power and price competition;
h. describe industry life cycle models, classify an industry as to life cycle stage, and describe limitations of the life-cycle concept in forecasting industry performance;
What are Porter's five forces?
1. The threat of substitutes
2. The bargaining power of customers
3. The bargaining power of suppliers
4. The threat of new entrants
5. The intensity of rivalry
What are barriers to entry?
Industries possess characteristics that protect the high profit levels of firms in the market and inhibit additional rivals from entering the market.
How does industry capacity impact firm pricing power?
- Tight capacity -> more pricing power
- Overcapacity -> price cutting
How does market share stability impact industry competition?
- Stable market shares -> less competitive industries
- Unstable market shares -> highly competitive industries and limited pricing power