IV.

LESSON PROPER

Based on the preliminary activities, what did you notice about it?

CONGRATULATIONS!
You may now proceed to the lesson.

Discussion:

Industry Analysis
Industry analysis is a tool that many businesses use to assess the market. It is used by market
analysts, as well as by business owners, to figure out how the industry dynamics work for the specific
industry studied. Industry analysis helps the analyst develop strong sense of what is going on in the
industry. The importance of industry analysis is manifold. As an entrepreneur trying to find your way in the
industry of your choice, you can use industry analysis to understand what your position is, relative to the
position that other players in the industry have. You can use industry analysis to your advantage to identify
opportunities and threats within your environment, as well as to plan for the future of your business, in the
context of the future of your industry. The only way you can survive in any competitive industry is that you
will need to understand how you measure up against your competitors, and then use that information to
your fullest advantage.
Industries can be defined accordingly:

According to the functions of Through service

Through product types
the product or service: establishments

Raw material supply sources – Automobile – (transportation) • hotel

(crops or chemicals) Movie – (entertainment) • hospital
Intermediate products
processed – (flour which come
from various crops like wheat,
rice, cassava)
End products – (toys, books or
clothes)

Industry Structure
1. Tracing the industry from its most basic raw material down to its various consumer applications,
example is the coconut industry.
2. Value added chain, from one stage of production to the other given by the market price differential
between stage.
3. Focus on business earnings of each participant in the product chain
4. Gauge the relative bargaining power and competitiveness of various participants in the industry.
Porter’s 5 Forces/Competitive Forces Model
This is one of the most famous models of industry analysis that we have today. Propounded by Michael
Porter in the book Competitive Strategy: Techniques for Analyzing Industries and Competitors. It talks
about an industry’s bargaining power vis-à-vis industry supplies and buyers, and the threats of new
entrants and of substitutes. Bargaining powers, opportunities and threats would depend a lot on several
key factors:

1.1. The organization’s product or service quality

2. The relationship built, trust generated, and arrangements made by the organization over time with
its suppliers and customers

3. The market share of the organization

4. The chain

5. The market positioning chosen by the organization, specifically the market segments it is serving with
its range of products and services

Industry Analysis Checklist

i. Technology Levels and Processed Utilized – micro, small, medium and large enterprises
employing various processes at different technology levels
ii. Investments and Capital Intensity – analyst can evaluate the absolute level and growth of
investments in the industry, and how much capital is needed to enter the industry both in terms
of fixed assets and working capital.
iii. Employment – analyst also evaluate employment levels, skills needed, labor productivity,
employee turnover, labor and demand and supply, and other such statistics for the industry
and its players.
iv. Creating Costs, Profitability Indices and Efficiency Measures – the fixed and variable
costs (total, percentage, or unit costs) of an industry or firms within the industry (according to
size or performance
v. Product Quality, Attributes, Characteristics – products of an industry can be classified and
assessed according to: their ability to meet local or international standards (quality
specifications) attractiveness, taste and appearance, storage, shelf life, weight, size and shape
and other attributes sought by the market.
vi. Capital Structure and Financial Leverage – different industries exhibit different capital
structures and usage of financial leverage, depending on business and other risks involved).
vii. Industry Policy – strategic dimensions and policy implications of industry analysis depend on
the point of view taken. Government officials in charge of policy formulation may have to
balance conflicting interests of farmers, traders, processors and other industry participants.
viii. Industry Logic – there should be full appreciation of prevailing competitive forces and
forthcoming scenarios in order to position the firm (or group of firms) well. In the end, the
industry battle may not even be won by the fittest today but the strategies who anticipates,
creates and innovate for tomorrow.
Sectoral Analysis
A sector is a classification of individuals, groups or institutions with a similar set of traits and similar
needs (as client systems). As service deliveries, institutions in a sector have common client system
and common purposes.
 Client system or beneficiary sectors - youth, women, urban poor, rural poor farmers, fishermen
and others
 Institutional service delivery sectors – agriculture, education, health, industry, social services
etc.
 Public Sector – government
 Private Sector – non-government

Sectoral groups are usually formalized into institutions or associations, in contrast to industry
participants, which are formalized into enterprises, the former can engage in enterprise activities while
the latter can set up associations or institutions to further their common business objectives.
i. Sector Profiling – in undertaking sectoral analysis, first task is to do sectoral profile,
sometimes called baseline data gathering, (profiles of poor urban and rural communities are
done using relevant classification like age, gender, income etc.) Profiling should identify
clearly who are the sector beneficiaries or service deliverers-where they are, how they
behave and interact, and what made them what they are now.
ii. Sifting Sectoral Data – in analyzing data on a sector it is necessary to know where it is
coming from and where it is headed. The data sifters on critical thinking can be used. These
include magnitude, relevance, importance and urgency.

iii. The Five A’s of Sectoral Analysis – useful way of analyzing how well the sector is served

Accessbility Availability Adequacy Acceptability Affordability

• the ability of the • the actual • the sufficient • the social, moral • the ability of the
sector to presence of and efficacy of and cultural sector
physically reach goods and the goods and appropriateness beneficiaries to
service deliverers, services needed services of the goods and pay for the goods
secure information and services
and tap resources. by the sector in delivered to the services made available,
their immediate sector,meaning delivered. meaning the price
vicinity. their ability to and terms given.
satisfy fully the
needs and
wants of the
sector.

iv. Sectoral Client System – the quality of service to the client is directly proportional to the
following traits of the beneficiaries:
a. Ability to pay – the higher the disposable income of the client system, the more they can
demand quality goods and services.
 b. Organizational Cohesion and Strength – the more organized, conscientized and
cohesive the client system is, the more it can make demands on the service quality of
the sector.
c. Sophistication of Needs -the greater sophistication of the client system’s needs, the
greater the quality of service obtainable from the sector.
d. Returns to or Benefits Derived from Service Delivery – the higher the returns to or
benefits derived by the client system, the more it would be willing to demand and pay
for quality service,
e. Participation in Decision Making – the most participation and direct involvement is given
to the client system to avail of needed goods and services, the higher the quality of
service given.
f. Level of Previous Informal Services Received – the more familiar the client system is
with the sectoral services provided due to previous experiences from informal servicers,
the more it will demand quality services from the formal institutions.
g. Positive Values and Attitudes – the more positive the attitudes of the beneficiaries are
towards their sectoral service providers, the more likely there is going to be rapport
between them. There will be faster and better service.

v. Sector Structure Analysis – the facilitative factors are called the driving forces and the
impending factors are called hindering or blocking forces.
Three level forces:
1. Policy -laws, regulations, policies and rules
2. Institutional – institutional allies
3. Environmental – over all environment condition impinging on the development
institutions such as customs, mores, tradition, values, attitudes, beliefs, religion, political
preferences, economic and the like.

vi. Policy Tensions for Institutional Services Deliveries – institutions are often confronted
with policy choices. These policy choices or tensions vacillate between two equally
compelling needs:
 Tension between reaching the biggest quantity of beneficiaries and providing quality services but
to a fewer number
 Tension between low cost but less effective and high cost but more effective alternatives.
 Tension between doing many types of services versus focusing on a few critical ones.
c. Area Analysis
The macro environment assessment actually examines the context of a large area such as a
country, continent or the world. The relevant area may have a smaller geographic boundary, within
that smaller area boundary, the strategic planner can assess the social, political, economic,
ecological and technological (SPEET) factors just like in the macro environment.
The strategist can also assess the area according to its assets or resources and its liabilities or claims
on its resources.
Resources can include:
Human Capital Resources Monetary Assets (both local and foreign Receivables in the form of currency, goods,
currencies) services and other
Extractable natural resources Inventory of goods and services Physical infrastructure
Economic structures Social, religious and political structures Intangible assets
 A comparison of an area’s yearly balance sheets would reveal which resources are fast increasing
and which ones are rapidly decreasing. One could gauge whether the direction of the increases or
decreases would be beneficial or not and for whom.
Another interesting insight derivable from the balance sheet is to determine how much control one claimant
or group of claimants has over an area’s resources. This insight should capture the distribution of the
assets in the area among its claimants.
The area’s SPEET factors and balance sheet should enable the strategist to extract opportunities for and
identify threats to the organization.