THE IDEA OF INDUSTRY STRUCTURE

1. CONCEPTS:

INDUSTRY STRUCTURE: "Is an explanation of the functions form, and interrelations among :

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  Suppliers of inputs
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  Buyers of outputs
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  Substitute products
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  Potential new entrants
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  Privalry among competing sellers ". (Daniels, 2004, P. 378).      

GLOBAL INDUSTRY: "is one in which a firm's competitive position in one country is significantly affected by its position in other countries."  (Daniels, 2004, P. 379).    

2. WHY IS IMPORTANT TO ANALYSE INDUSTRY STRUCTURE?

To understand why is very important to analyse the industry structure, firstly we should analyse the Porter’s Five Forces Model.

SUBSTITUTES: "The competition form substitutes is affected by the ease with which buyers can change over to a substitute. A key consideration is usually the buyers switching costs--the one-time costs facing the buyer in switching from use of X over to a substitute for X."   

When a company is entrying in the market, or when a company is introducing a new product in the market, it should analyse the cuantity and quality of substitute goods that could going to affect the product. And I say affects because in many cases costumers feel that they get more adevantages with the substitute goods than with products of company. So whit this kind of tools managers can make strategic decisions. for example if a company of cofee doesn't analyse the own industry, could appear other company selling tea for example and maybe company could be behind in variables like technology or positionin.

THE ECONOMIC POWER OF SUPPLIERS:  here we are going to analyse two situations:

1. "When the supplier industry is dominated by a few large producers who enjoy reasonably secure market positions and who are not beleaguered by intensely competitive conditions." (Devinney, 2003)

In this case the company adquire competitive advantage, because suppliers also add value to the products, and if costumers also know the positioning of suppliers is more easy for the company to be in the mind of clients.

2. "When suppliers’ respective products are differentiated to such an extent that it is difficult or costly for buyers to switch from one supplier to another." (Devinney, 2003)

In this case, not only suppliers has the advantage but also the company who buy the inputs. This is because when the inputs are different from the competitors, company could add value through the process, thus it is more difficult to competition to gain the game.

THE BUYERS: Costumers are one of the most important aspect to analyse in the industry structure, because they will contribute to know how satisfy them. All company in its performance has to know their own clients, but they also has to know how consumers behavie within the industry and with the competitors. consumers bahavie in a different way depending on each economic sector.

for example is not the same to go to a supermarket that to go to the pharmacy.

THE COMPETITIVE FORCE OF RIVALRLY: One of the most important aspect to analyse is the competitors who are in the same industry. With a good analysis of them, companies couls create effective strategies to be different and therefore to be more attractive fpr the costumers.

"Rivalry is usually stronger when demand for the product is growing slowly." (Devinney, 2003). This is because when demand is low, rivals are more able to increase extents and strategies to improve their products which makes that companies also be stretegic making decisions.

THE NEW ENTRANTS: Companies might analyse the new entrants because in some cases, they entry to the markets with strong and agressive strategies that it can damage the stablished strategies a company had. This analysis should be sequentially, because there are increasingly new companies entrying in industries.

3. POINT OF VIEW

I think No matter if a company has a great market position, all companies in any industry should analyse the relation between the previous factors, because if they don't do it, they could dissapear. Companies require of a constant work. when companies are confident that it could be for a long time they are lying, because companies are systems and systems require a feedback. for example technology and other variables change, as James M. Utterback says:  "At least for the case of manufacturing firms, there may be more profound causes than competitive turmoil that explain a firm's survival chances. These have to do with the evolution of technology in an industry." (Utterback, 2002).

CYBERGRAPHY

Utterback, J. (2002). Innovation, competition, and industry structure. [online]: http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V77-45GSHF2-1F&_user=10&_coverDate=02%2F28%2F1993&_rdoc=1&_fmt=high&_orig=search&_origin=search&_sort=d&_docanchor=&view=c&_searchStrId=1444365567&_rerunOrigin=scholar.google&_acct=C000050221&_version=1&_urlVersion=0&_userid=10&md5=5e2105a70d252746bb4fee7ae838f319&searchtype=a

A member of the Japanese performance gro .getty image.(online)Available at:
http://www.gettyimages.com/detail/86221426/AFP

Image of Manual worker inspecting equipment in factory . getty image.(online)Available at: http://www.gettyimages.com/detail/84588340/Photodisc

Chinese shoppers buy vegetables at a sup. getty image.(online) Available at: http://www.gettyimages.com/detail/103717796/AFP

Devinney, T. (2003). External Analysis: Analyzing Industry Structure and Rivalry. [online]: http://www2.agsm.edu.au/agsm/web.nsf/AttachmentsByTitle/Strategy+External+Analysis/$FILE/Strategy+External+Analysis.pdf