INDUSTRY ANALYSIS Narender Bansal MBA 3 rd Semester Maharaja Agrasen Institute of Technology Delhi-110086
Nov 13, 2014
INDUSTRY ANALYSIS
Narender BansalMBA 3rd SemesterMaharaja Agrasen Institute of TechnologyDelhi-110086
Industry Analysis• After economic analysis, we ask
the question “which industries will benefit most from the upcoming economic environment?”
• This will lead to several industries, and our analysis will lead us to choose the one that we find to be best positioned.
What is an Industry?
INDUSTRY GROUPS
• AGRICULTURE• STEEL• HEALTH CARE• RETAIL• AUTOMOBILES• PHARMACEUTICAL• FINANCIAL SERVICES• HOTEL & TOURISM• IT
• TELECOM• UTILITIES• PAPER & PRINTING• BANKING• FMCG• INFRASTRUCTURE• TEXTILE• OIL AND GAS
EXPLORATION
SIC Code
• ECONOMIC SECTOR– Manufacturing– Distribution– Services
• PRODUCT AND SERVICES– List of what is offered by the industry
• GEOGRAPHIC SCOPE– Local ,Regional, National, International
Computer industry
• Different Market Segments– Personal Computer– Micro Computer– Mini Computer– Mainframe Computer
Furniture industry
Home Furniture Office Furniture
Wooden Hosehold
Metal Household
Industry Analysis tries to find outfollowing answer
Difference between return for alternate industries
Future performance of currently performing companyin one period
Consistent performance over time
Risk difference between different industries
Risk variability over period of time
ECONOMY AND INDUSTRIAL SECTORS
The economic performance of a country,to a large extent,determine Favourable and unfavourablable climate for its industrial participation
Reasons of industrial analysis
• Provide an awareness of market performance
• Identify investment opportunities
• Important part of company’s business plan– Financial institutions
Data Requirement
Product Line Complementry Product Product Growth Product Pattern
(Seasonal,Cyclical)
Econimies of Scales Suppliers Labour Market
Buyer and their Behaviour
Substitute Product Prices Marketing and Selling Cost Structure Logistic
Department of Economic Analysis , Business Publication
Industrial Life Cycle It is Rise and Fall in Customer Interest
Industrial Life Cycle
• Rise and Fall of Customer Interest• Depend on extent of technology and
innovation• Each phase passes from four stages– Introduction Stage– Growth Stage– Maturity Stage– Stability/Decline Stage
Feature of Industrial Life Cycle
Marketing
Manufacturing
Competion
Risk
Margin
Strategy
High AdvertisingSkimming Pricing
Under CapacityHigh Production Cost
Low
High
High but low profit
Increase Market Share
High Advertising
Under CapacityShift to High Production
Many Competitor
Groth Vs Risk
High and High ProfitHigh Prices
Change Quality &Price Image
Market SegmentationServices
Optimum Capacity
Price Competition
Low
Low due to price war
Marketing Effectiveness
Low Advertising
Overcapacity, Mass Production
Exit,Fewer
Very High Risk
Low Profit
Cost Control
Introduction Growth Maturity Decline
TOOLS FOR INDUSTRY ANALYSIS
Qualitative• Cross sectional industry
performance• Industry performnce
overtime• Difference in industry risk• SWOT analysis• Competition over industry
life cycle
Quantitative• Analysing employment data• Analysis of emolument data• Input output analysis• Earning data analysis
Cross sectional industry performance
• Aimed at finding out variability in Rate of return among various industries in given time period
• compare performance in term of – Sale– profit – market capitalisation– dividend
Example
• Stock market growth=10%
• Industrial growth rates= 5% to 8%
• Stock market growth=50%
• Industrial growth rates= 80% to - 20%
Industry performance over time
• To identify stage of product life cycle• Time duration 3 to 5 year • Difficult to forecast future performance due to compositional change
in industry technological change innovation
Differences in industry risk
• Besides focussing on return also consider risk• Specifically investigate two question– Does risk differ across industries in given time period– Are industry risk stable over time
• Measured in term of variability in return/productive value
• Risk pattern also depend on economic situation
SWOT ANALYSISStrenth & weakness
• Assess strenth and weakness
• Internal capability of industry
• Competitive advantage or defensive against weakness
Opportunity & threat
• Evaluate opportunity and threat
• Environmental trend• External situation
– Competitive forces– Technology– Government regulation
SWOT analysis
STRENTH• Capicity• Competitive advantage• Good custermor service• High quality product• Customer loyality• Financial resources
WEAKNESS• Limitation default defect• Competitor has exploitable
advantage• Example:
– Small scale industry hs poor financial resources
– Industry that cater domestic market, would have weakness of catering to global market
SWOT analysis
Opportunity• Favourable condition in
environment• May be trend or need • Growing market of industry
product• Shrinking competition• Identification of new
market
Threat• Unfavourable situation• May be barrior or constraint• Slowing domestic economy • Competition• New entrant• New technology
SWOT analysis
Confront Avoid
Exploit Search
Threat
Opprtunity
Strenth Weakness
Internal environment
External environment
Analysing Employment data
• Life cycle can be predicted by Product life cycle
• Help in identify key industries• Identify growth and decline• Evaluate importance of industry to economy• DetermineCompetitiveness among industries
Data Requrement• Industry wise total employment in current as well earlier years• Industry wise total emolument data in current as well earlier years
Employes:Who receive wge and hold clerical superwisery post
Duration of analysisShort : Changing environmentLong : Predictive purpose
Base year
• Employment share of sub industry
= Employment in sub industry *100
Total employment in industry
Employment in wools=2000Total in textile =11500% Share =2000/11500*100 ie 17.39%
• Change in employment
Current yr no. Of employes _1 *100
Base yr no. Of employes
Current employes:1500Base yr employes:1200% change : [(1500/1200)-1]*100
ie 25 %
Location quotient:Measure concentration of industry’s
concentratio in an area relative to rest of nation
• Industry location quotientIndustry share of regional employmentIndustry share of national employment
orIndustry’s regional employmentTotal national employment
Industry national employmentTotal national employment
% change in location quotient• [(Current yer LQ/Base yr LQ)1]*100
• LQ = location quotient
Employment shift analysis
Current yr total national employment - 1 Base yr total national employment
Base yr total national employment
National avarage growth rate
Industry avarage growth rate
Regional industry base year employment * national avg growth rate
Emolument Data
• Sum of wages and salaries,employer’s contribution to provident fund
• And other fund and workmen and staff welfare expenses
Emolument per employ=Industry regional emolumentIndustry regional emolument
• Change in emolument per employe by industry
Current yr emolument per employeBase yr emolument per employe -1 * 100
Input output analysis
• Total input Include value of fuel,material
consumed,expenditure,repair costtaxes,,postage,banking charges
• Total output value of product byproduct