Project Report on Industry Analysis
Limitations of Porterian Models: The five forces and strategic group models provide very useful frameworks for analysing the nature of competition in an industry. These models, however, suffer from some important shortcoming mentioned below. In many industries competition is a process driven by innovation and industry structure are very significantly changed by innovation. In a later work, Porter has recognized the role of innovation in revolutionizing industry structure. Innovations, according to him, can unfreeze and reshape industry structure.
He holds that after a period of turbulence triggered by innovation, the structure of an industry once more settles down to a stable pattern. Once the industry stabilizes in its new configuration, the five forces and strategic group concepts can once more be applied. This view of the evolution of industry structure is often referred to as punctuated equilibrium. The punctuated equilibrium view holds that long periods of equilibrium, when industry’s structure is stable, are punctuated by periods of rapid changes when industry structure is revolutionized by innovation.
Thus, there is an unfreezing and refreezing process. SOWT Analysis: Identification of the threats and opportunities in the environment and the strengths and weaknesses of the firms is cornerstone of business policy formulation; it is these factors which determine the firm is the courses/courses of action to ensure the survival and/or growth of the firm. The environment might present many opportunities, but a company might not have the strengths to exploit all the opportunities. Similarly, sometimes a firm will not have the strength to meet the environment threats.
If a company, thus, finds that it will not have the competence to survive in a particular line of business, it will be prudent to give it up and concentrate on such business/ businesses for which the firm is most competent. The economic liberalization ushered in India in 1991 drastically changed the business environment. Many companies have exited several of their businesses and have been concentrating on their core businesses. For example, the Ceat exited four non-tyre businesses (glass fibre, electronics, photocopiers and nylon code) and decided to concentrate on its core business – tyre.
Funds obtained by the divestment have been used, in many cases, to consolidate or further develop the businesses they decided to focus on. Indeed, strategic management has come to assume great importance as a result of the liberalization. The liberalization, by substantially expanding the scope of private enterprise and removing the entry and growth restrictions, has gives substantial leeway to private enterprise to decide the portfolio strategy. A number of companies have changed their business portfolios (i. e. , the businesses they are in).
Many have entered new businesses (Reliance, for example) and exited some of their businesses, while many have done both (like the Tata group and RPG group). A number of companies have been growing organically as well as by acquisitions (e. g. , Gujarat Ambuja). The environmental opportunities and threats should be evaluated in the light of the strengths and weaknesses of the internal factors comprising finance, technology and skill, production facilities, personnel and marketing capabilities. The capability of a company to exploit the environmental opportunities or to meet the challengers depends on the strength of these factors.
Procter and Gamble (P & G) , Unilever’s arch rival globally, had a tough time in India because Hindustan lever sitting entrenched with its long standing familiarity of the India market and marking prowess was a formidable force in India. Japanese companies saw an opportunity in the US market segments for compact fuel efficient cars, small screen T. Vs, and low horse power tractors etc. , which were rather neglected by the American firms. As the Japanese forms were marketing these products in the home market, they were, unlike the American counterparts, counterparts, comfortable with these products.
The conjecture of the market opportunity and the strategic enabled the Japanese companies to penetrate the American market. After having consolidated their position in these segments, they moved up to other segments with the strength of the reputation they established. The general success of the Japanese in the world market is attributed to the right chaise of the products and markets, based on a proper understanding of the environment and the internal strengths. Kotler and Fahey point out that “the Japanese government and companies work hard to identify attractive global markets.