Course Overview- Industry Analysis -MPE16

MPE@NMIMS

Batch - 16 Trimester 03-05

Course: Industry Analysis

OVERVIEW OF COURSE

All organizations operate in a macro environment consisting broadly of the economy at

large, population demographics, societal values and lifestyles, governmental legislations and

regulation, technological factors, and the company’s immediate industry and competitive

environment. The macro environment includes all the relevant factors outside a company’s

boundaries – relevant in the sense that they are important enough to have a bearing on the

business decisions of the company. Company managements are nonetheless obliged to monitor

the macro environment, though it is beyond the company’s sphere of influence.

This necessitates managers to make a detailed diagnosis of a company’s immediate

industry and competitive environment. Without perceptive understanding of the strategic

aspects of a company’s external and internal environments, the chances are greatly increased,

that the managers will concoct a strategic game plan that doesn’t fit the situation well, that

holds little prospect for building competitive advantage , and that is unlikely to boost

company’s performance.

Managers are not prepared to decide on a long term direction or a strategy until they

have a keen understanding of the industry. The working definition of the word industry is “a

group of firms whose products have so many of the same attributes that they compete for the

same buyers”. Industries differ widely in their economic characteristics, competitive situations,

and future profit prospects.

Industry analysis is a systematic approach to understand the economic and competitive

features of an industry. Industry analysis entails a of tool kit which provides a way of thinking

strategically about any industry’s overall situation and drawing conclusions about whether the

industry represents an attractive investment for company’s funds.

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Scope of the Course

The course titled “Industry Analysis” is designed as a part of the Programme curriculum,

with an aim to provide hands on experience to the budding managers. This course begins with

first trimester of the programme and ends with third trimester. It provides ample scope for the

students to do industry analysis in three stages.

Stage One:

o Detailed Economic Profiling of the chosen industry: Capacity, production,

turnover,

o Identify the participants/stake holders and product segments in the industry

o Describe the nature of competition and extent of global integration

o Identify the drivers of competitive advantage

o Analyse the trends

o Understand the processes and technology

o Viable economic size of an undertaking

o PESTEL Analysis

o Report due by 7th May, 2016

Stage Two:

o Industry : Competitive Analysis ; Market Analysis;

Financial Analysis of Industry Aggregates

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Profitability Ratios, Leverage Ratios, Turnover Ratios, Valuation

Ratios, Liquidity Ratios, Cost Structure (Percentage and per unit

basis)

o Firm: Financial Statement Analysis (About 3 firms)

o Functional Analysis: Marketing, HR, Technology, Operations and Supply Chain

Marketing Spend, Training expenditure, Employee cost, R&D

expenditure, etc.

o Identify Key Performance Indicators (KPIs) in each functional area and analyze

the industry participants based on them.

o Operating Measures: Capacity, Capacity Utilization, Sales Realizations

o Preliminary Analysis using Porter’s Five Forces framework, SWOT, Profit Pool

Analysis, Value Chain Analysis.

Sources:

- Annual Reports of companies: Directors’ Report, Management Discussion & Analysis,

Notes to the Accounts, Auditor’s Reports in addition to the financial statements

- Red Herring Prospectus of any company in the Industry

- Databases: Capitaline, Prowess for company data and industry aggregates, Crisil for

industry data

- Government of India and Industry Association web sites

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All the financial data should be sourced from databases or from official company annual

reports, government sources and industry associations

Stage Three: Assessment of Industry Attractiveness and Profitability

o Final Analysis using Porter’s Five Forces framework, SWOT, Profit Pool Analysis,

Value Chain Analysis.

o The final report should integrate all three stages of analysis. The report should

be an integrated assessment of the attractiveness of the industry

o Bring out the unique features of the industry

Over a period of three trimesters students will build their conceptual understanding of

different functional areas of management. They can systematically link the concepts and the

tools and techniques learnt in different courses while performing industry analysis in real life

scenario.

Course Objectives:

To provide hands-on experience to do real life industry analysis

To provide a platform to relate the functional concepts of management with real life

industry scenario

Learning Outcomes

Through this course the students will

Learn to profile an industry and its structure

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Analyze the competitive forces

Identify and Evaluate the key factors for its competitive success

Assess the industry attractiveness and its profitability

Pedagogy

This course is designed to develop the ability of the participants to dissect, analyse and

interpret an industry based on the conceptual learning imparted during the program. The class

room sessions are kept at a minimum to promote self- learning. Structure, broad guidelines, an

occasional facilitation and periodical review and feedback will be provided to the students.

Students are required to follow the guidelines provided and conduct the industry analysis on

their own.

The entire study of this course will be carried out as a group study. Each group will be

assigned a specific industry. The complete list of selected industries is provided in Annexure 1.

A group will consist of 4-5 students.

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Assessment and Grading

At the end of the course students are required to come out with the Industry analysis report on

their assigned industry. The same will be assessed both by the industry invitees as well the

management Faculty. The grading break up will be as below:

Criteria Trimester III Trimester IV Trimester V Total

Marks

Report

( Group wise

marks will be

allotted)

10 20 20 50

Presentation

( Students will

be evaluated

individually)

- - 25 25

Viva-voce

( Students will

be evaluated

individually)

25 25

Total 10 20 70 100

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Industry analysis tool kit:

Industry analysis uses a tool kit of concepts and techniques to get a clear fix on industry traits,

the intensity of competition, the drivers of industry change, the market positions and strategies

of rival companies, the keys to competitive success, and the industry’s profit outlook. The

following is the indicative framework of matrixes, students use while doing their industry

analysis.

Industry and Competition

Market Size and Characteristics

Describe each separate geographic market for each of the company’s (INDUSTRY) services/product groups.

Set forth any market surveys from independent institutes.

Market Trends

Describe historical, current and future patterns or trends relating to each market (together with reasons why) including:

- Changes in pricing- Changes in customer base - Changes in the types of users- Forward or backward integration trends

Market Structure

Describe the different categories of participants in each market with detailed descriptions of the major participants.

Distinguish between competition from outside the industry and from within the industry e.g Larger and financially stronger companies acquiring lines of business in the specific company’s industry.

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Describe the stability of the companies engaged in the industry.

Describe the current market share of each major participant.

Describe any historical/projected changes in the relative market share of major participants and discuss reasons for these changes.

Characteristics of competitors

Describe the factors affecting the relative success of each major competitor.

The existence of any economies of scale enjoyed by any company.

The existence of product differentiation enjoyed by the competitor

Existence of backward or forward integration enjoyed by the competitor.

Superior management, Superior facilities, Superior technological know-how, favorable access to attractive workforce.

Favorable relationship with suppliers

Favorable relationship with customer or customer groups.

Ways of competition/Behavioral traits of each major competitor

Price competition

Service competition

Trends towards (or away from) concentration or domination

Niche players? Mavericks?

Responsible/Irresponsible competitors (ethical/legal behavior etc)

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Some Metrics that would be useful to analyze the attractiveness of the Industry

1. Market – Product/Services, Size, Outlook, Geographical Scope, Business Model2. Market Share Pattern, Brand Categories of major companies 3. Economies of Scale4. Role of Technology 5. Porters 5 Force Analysis6. Profit pool Analysis7. KPIs in the particular industry

Operational, Financial, HR, IT8. Problems and Opportunities in the industry9. Fixed Asset Analysis 10. Operating Cost Structure –Fixed/Variable11. Gross and Operating Margin12. Financial Cost Structure 13. Financial Risk 14. Tax Rates15. Liquidity – Working Capital Requirements 16. Training/Development hours and Cost17. Revenue per employee18. Compensation- Average Salary Levels, Benefits as a percentage of total

compensation, Fungibility of fixed/variable salaries.19. Regulation – Environmental, Investment, Export/Import, Pricing, Tax Incentives,

Repatriation of Profits etc20. Social Responsibility Initiatives

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Annexure - 1

PESTEL Analysis

Political

- Government Type and Stability- Freedom of Press, Rule of Law, Levels of Bureaucracy and Corruption- Regulation and De-regulation trends- Social and Employment legislation- Tax policy, Trade and tariff controls- Environmental and consumer protection legislation- Likely changes in the political environment

Economic

- Stage of Business Cycle and likely changes in the economic environment- Current and Projected economic indicators: GDP growth, IIP growth, inflation and interest rates.- Labour availability and costs- Income distribution- Impact of technological changes on the economy

Social

- Demographics- Health, education, mobility- Job markets and attitudes- Social attitudes, public opinion, etc- Lifestyle choices- Socio-cultural changes.

Technological

- Impact of emerging technologies- Impact of internet, telecom- R&D Activity- Impact of technology transfer- Automation

Environmental

- Impact of the industry on the environment: Carbon footprint, pollution, bio-diversity- Waste and disposal- Water usage- Climate change

Legal

- Laws related to the industry - Consumer law, Antitrust law, Health and Safety laws, Discrimination laws, labour laws

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ANNEXURE 2

Choice List of Industries

As per separate Excel file

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Documents

Course Overview- Industry Analysis -MPE16