A five-forces industry analysis provides an overview of the potential profitability of the average firm in an industry, at least in the short run. In the form of a brief (typed) report (10-15 pages, not including appendices), perform a five-forces industry analysis of the industry in which you are currently working.
1. Identify the industry. Clearly define where the industry "starts" and "stops", the products and services provided by the industry, as well as the geographic boundaries/scope of the industry (regional, national, international). Include a list of companies (or categories of companies) in the industry. Verify that these companies match the definition of your industry. If they do not, revise your industry definition.
2. Examine the extent of internal rivalry, entry, substitutes, buyer power, and supplier power within your industry, indicating whether each of these forces represents a high, medium, or low threat to profits. In particular, for each force:
- Designate which contributing factors most directly impact your industry
- Identify potential metrics to serve as an indicator or predictor of each contributing factor.
- Assign 100 points across all of the contributing factors chosen within each force to designate relative importance.
- Indicate whether the overall force currently represents a high, medium, or low threat to profit. Explain.
3. The result of your analysis should be your assessment of the potential profitability of the average firm in the industry. Clearly state what this profit potential is (i.e. high, medium, or low). Next, compare the profitability of your current employer to the perceived potential profitability of the average firm in your industry. In terms of the five forces, explain why your current employer is performing better or worse than the average firm in your industry.
4. Develop and document 3-5 strategies for your current employer to address issues/concerns highlighted in your five-forces analysis. For each strategy, include:
- Rationale for the strategy (in terms of one or more of the five forces)
- High-level capital expenditure discussion (How much? For what? Why?)
- High-level human capital needs (How much? For what? Why?)
If there is a specific force for which you do not think it is necessary to develop a strategy, indicate why not. Run each strategy by employees working in the affected area to determine if this is something that is currently being done within the organization. Why or why not? If not, what would have to change in order for the strategy to be adopted? Based on this discussion, determine whether or not your current employer is pursuing a long-run competitive strategy. Explain. Remember that a long-run competitive advantage must be based on actions or strategies that are not easily imitated by competitors.