COM 2023

TECHNOLOGY AND BUSINESS

CHAPTER 2

OBJECTIVES

Students should be able to understand :- The basic definitions of industry.

Industry analysis and Competition

Technology impact on industrial structure and evolution

DEFINITION OF INDUSTRY

Any type of Economic Activity producing GOODs or

SERVICES

Its is part of a chain- from raw materials to finished

product, finished product to service sector and

service sector to R&D.

Example : Proton,Perodua,Honda, Toyota,Nissan

and etc.

Industry analysis and Competition

Its complexities are the result of long-term social

trends and economic forces. But its effects on you

as a business manager are immediate because it

determines the competitive rules and strategies you

are likely to use.

Learning about that structure will provide essential

insight for your business strategy

Political/L

egal

Economic

Technological

Global

DemographicSociocultural

Competitive

Environment

Industry

Environment

Components of the General

Environment

SWOT ANALYSIS

Strengths

Weaknesses

Opportunities

Threats

THE PURPOSE OF SWOT

ANALYSIS It is an easy-to-use tool for developing an overview of

a company’s strategic situation

It forms a basis for matching your company’s strategy to its

situation

SWOT IS THE STARTING POINT

It provides an overview of the strategic situation.

It provides the “raw material” to do more extensive

internal and external analysis.

OPPORTUNITIES

An OPPORTUNITY is a chance for firm growth or progress due to a favorable juncture of circumstances in the business environment.

Possible Opportunities:

Emerging customer needs

Quality Improvements

Expanding global markets

THREATS

A THREAT is a factor in your company’s external environment that poses a danger to its well-being.

Possible Threats:

New entry by competitors

Changing demographics/shifting demand

Emergence of cheaper technologies

OPPORTUNITIES AND THREATS

FORM A BASIS FOR EXTERNAL

ANALYSIS

By examining opportunities, you can discover untapped markets, and new products or technologies, or identify potential avenues for diversification.

By examining threats, you can identify unfavorable market shifts or changes in technology, and create a defensive posture aimed at preserving your competitive position.

INDUSTRY COMPETITON ANALYSIS

MICHAEL PORTER …

By using a framework rather than a formal statistical model, Porter identified the relevant variables and the questions that the user must answer in order to develop conclusions tailored to a particular industry and company.

CONTI....

Michael Porter has identified five forces that are

widely used to assess the structure of any industry.

Porter’s five forces are the:

• Bargaining power of suppliers,

• Bargaining power of buyers,

• Threat of new entrants,

• Threat of substitutes

• Rivalry among competitor

THE PURPOSE OF

FIVE-FORCES ANALYSIS

The five forces are environmental forces that impact

on a company’s ability to compete in a given market.

The purpose of five-forces analysis is to diagnose the

principal competitive pressures in a market and

assess how strong and important each one is.

Threat of

New

Entrants

Threat of New

Entrants

Porter’s Five Forces

Model of Competition

Threat of New Entrants

Barriers to

Entry

Economies of Scale

Product Differentiation

Capital Requirements

Switching Costs

Bargaining

Power of

Suppliers

Threat of

New

Entrants

Threat of New

Entrants

Porter’s Five Forces

Model of Competition

Bargaining Power of Suppliers

Suppliers exert

power in the

industry by:

* Threatening to raise

prices or to reduce

qualityPowerful suppliers

can squeeze

industry

profitability if firms

are unable to

recover cost

increases

Suppliers are likely to be powerful if:

Supplier industry is dominated by a few firms

Suppliers’ products have few substitutes

Suppliers’ products are differentiated

Bargaining

Power of

Buyers

Threat of

New

Entrants

Threat of New

Entrants

Bargaining

Power of

Suppliers

Porter’s Five Forces

Model of Competition

Bargaining Power of Buyers

Buyers compete with

the supplying industry

by:

* Bargaining down prices

* Forcing higher quality

* Playing firms off

ofeach

other

Buyer groups are likely to be powerful if:

Products are differentiated

Buyers face few switching costs

Product important to quality

Buyer has full information

Threat of

Substitute

Products

Threat of

New

Entrants

Threat of New

Entrants

Bargaining

Power of

Buyers

Bargaining

Power of

Suppliers

Porter’s Five Forces

Model of Competition

Threat of Substitute Products

Products with

similar function

limit the prices

firms can

charge

Keys to evaluate substitute products:

Products with improving

price/performance tradeoffs relative

to present industry products

Threat of

Substitute

Products

Threat of

New

Entrants

Threat of New

Entrants

Rivalry Among

Competing Firms in

Industry

Bargaining

Power of

Buyers

Bargaining

Power of

Suppliers

Porter’s Five Forces

Model of Competition

Rivalry Among Existing Competitors

Intense rivalry often plays out in the following

ways:

• Using price competition

• Making new product introductions

• Increasing consumer warranties or service

TECHNOLOGY IMPACT

Industrial Structure

Industry Evolution

TECHNOLOGY IMPACT ON INDUSTRIAL

STRUCTURE

Technological change can indeed affect the division

of the firm overall activity.

Technological change can blur the limits between

business which previously were different from one

another, eventually leading to a new business. Technology and De-Segmentation

Technology and Re-Segmentation

Technology and Globalization

Technology and Globalization

It appears that changes of this kind are occurring in

business such as computers, telecommunications and

office automation.

Technology and De-Segmentation

Growing importance of technology in many industries encourage globalization of markets.

Computers, automobiles and semiconductors are example of industries where advances in technology are so costly that sales are necessary.

TECHNOLOGY AND INDUSTRY EVOLUTION

Technological evolution can have a decisive impact

on industry maturity and growth.

Technological evolution can produce industry

substitution phenomena by making exiting

industries obsolete. The Emergence of New Industries

Industry Dematurity

Technology and Substitution

Technology and Industry Decline

INDUSTRY DEMATURITY

It can improve the product performance and it can

reduce cost.

TECHNOLOGY AND SUBSTITUTION

Existing products are replaced by new products based upon new technologies.

For example, French railways had lost a great deal of business to air transport, after develop very fast train, company gain profit.

Technology and Industry Decline

Even if technological change does not lead to the

substitution of one industry for another, it can result

in partial substitution and decline in the initial

industry.

Example, France opening fast train but did not stop

air services.

Summary

Definitions Industry

SWOT Analysis

Porter’s Five Forces

Competitor Analysis