Industry and sector analysis - Industry dynamics - Industry structure dynamics
3 important questions on Industry and sector analysis - Industry dynamics - Industry structure dynamics
What 2 additional approaches can be used to understanding change in industry structure?
- The industry life-cycle
- Comparative Five Forces analysis
Explain the industry life-cycle concept and the key points of interest in each stage.
It proposes that industries go through different stages:
- Development: innovation
- Rapid growth: growth ability
- Shake out (peak): managerial and financial strength
- Maturity: market share and cost
- Decline: cost and commitment
Explain the comparative industry structure analysis
- It is a radar plot that summarizes the power of each of the five forces on five axes. Power lowers as the axes go outward.
- With low forces, the area between the axes is large.
- With high forces, the area between the axes is small.
- Thus, the larger the enclosed area, the greater the profit potential.
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