Strategy Survival Guide

Steps
Determine what to
look for
Desk and field data
collection
Interpret data in
industry analysis
Key
Features
• Focus on major issues
• Avoid looking for
‘anything about the
industry’
• Start with overview
information
• Only get raw data once
issues identified
• Most use if done early in
study
Gather overview data first:
• Identify key industry
players
• Look for industry studies
• Consult private sector
company reports
• Consult public sector
reports
• Consult with department
and external experts
• Examine which of the
elements are unusual or
particularly influential
Other published information:
• Smart use of search
engines
• Trade associations
• Trade magazines
• Business press
• International government
sources
Forces at Work
This model presents an alternative for structuring industry assessments based on the suppliers, new
entrants, buyers, substitutes and industry competitors:
Rivalry determinants
• Mutual
dependence
• Concentration of
competitors
• Number of
competitors
• Industry growth
rate
• Cost structure
• Diversification of
competitors
• Differentiation and
switching costs
• Capacity utilisation
and expansion
pattern
• Strategic stakes
• Exit barriers
Forces
at Work
Entry
Entry barriers
• Economics of scale
• Product differentiation
• Capital requirements
• Switching costs
• Access to distribution channels
• Government policies
• Expected Retaliation
Suppliers
Rivalry
Customers
Supplier power determinants
• Concentration
• Relative importance of sale to supplier
and buyer
• Supplier’s knowledge of product’s
value to buyer
• Standardisation and differentiation
• Customisation
• Switching costs
• Suppliers have low margins
• Threat of forward integration
• Importance of quality to buyer
Substitutes
Substitution
determinants
• Relative price
performance of
substitutes
• Switching costs
• Buyer
propensity to
substitute
Customer determinants
• Intrinsic Strength • Price Sensitivity
• Concentration
• Price total
• Buyer Volume
purchasing
• Switching costs • Product
differences
• Buyer information
• Brand Identity
• Ability to backward
integrate
• Impact of quality
/ performance
• Substitute products
• Buyer’s
• Pull through
profitability
• Relative importance of
• Decision maker
sale to buyer and
incentives
supplier
The forces at work model provides a comprehensive checklist for analysing the structure of industries and
sectors. The framework should not be used just to give a snapshot in time. It is important not just to describe
the forces, but also to understand their future impact.
The five forces are not independent of each other. Pressures from one direction can trigger changes in
another. For example, potential new entrants finding themselves blocked may find new routes to market by
bypassing traditional distribution channels and selling directly to consumers.
Strategy Survival Guide – Strategy Skills
Page 137