Industry Analysis

Bargaining Power of Suppliers
The extent to which suppliers can influence prices in this industry.
Suppliers tend to have greater bargaining power when they are few, there are no substitutes and the industry is not an important customer of the supplier group. They are also more powerful when their products are differentiated and there is a threat of forward integration.

Bargaining Power of Customers
The ability of customers to influence price and quality of products and services in this industry.
Customers tend to be powerful when they constitute a large portion of the seller’s sales or a high proportion of the customer’s costs or the supplier’s product is not important to the quality of the customer’s product. Additionally, undifferentiated products, low customer switching costs and threat of backward integration increases the customers’ bargaining power.

Threat of New Entrants
Examines the barriers to entry in this industry.
Barriers to entry include economies of scale, product differentiation, high capital requirement, high switching costs, difficulty accessing distribution channels, government policies, entry-deterring prices, lack of experience and costs disadvantages other than scale.

Threat of Substitutes
Examines the availability of substitute products or services in this industry.
Factors which can influence the threat of substitution include the substitute product price-performance trade off and the switching costs associated with changing from one supplier to the supplier of the substitute.

Competitive Rivalry
Examines the level of competition in this industry.
Rivalry is intense if there are many similar-sized competitors, slow industry growth, high fixed costs, lack of differentiation, diverse nature of competitors, high strategic stakes or high exit barriers.

Political Factors
Governmental influences affecting the economy and how this industry is operated.
These include government stability, tax policies, foreign trade regulations, and social welfare policies.

Economic Factors
Determinants of the economy's performance and their impact on this industry's operational ability, profitability and sustainability.
This looks at factors such as business cycles, GNP trends, interest rates, money supply, inflation, unemployment and disposable income.

Socio-Cultural Factors
Beliefs, attitudes and trends in society that affects this industry.
Examples of socio-cultural factors are population demographics, income distribution, social mobility, lifestyle changes, attitudes to work and leisure, consumerism and levels of education.

Technological Factors
Impact of technological innovation, increased reliance on technology and the obsolescence of technology on this industry.
Some examples of technological factors are government’s spending on research, government and industry focus on technological innovation and use, new discoveries and developments, speed of technology transfer and the rate of obsolescence.

Environmental Factors
Ecological and environmental issues that impact this industry.
This looks at, for example, environmental laws, waste disposal and energy consumption.

Legal Factors
The effect of governmental laws on the actions and policies of this industry.
Examples of legal issues that may affect industries are monopoly legislation, employment laws, health and safety laws and regulations and product safety laws and regulations.

Ethical Factors
Moral or ethical issues that can arise in this industry.
Example of ethical issues that may arise are fair trade, slavery acts, child labor, treatment of employees, diversity discrimination, affirmative action, harassment, whistle blowing, marketing and information disclosure, financial statement accuracy, privacy, human rights, bribery, and sweatshops. Corporate social responsibility (CSR), where a business contributes to local or societal goals such as volunteering or taking part in philanthropic, activist, or charitable activities also falls under ethical issues.