Industry Analysis Term Paper

2. Defining the Industry
It is very important to define the industry precisely; otherwise, there will be a tremendous amount of unrelated data available. The U.S. Standard Industrial Classification (SIC) system has been replaced by the North American Industry Classification System (NAICS) (you can find them trough any website search engine). These codes are widely adopted for record keeping purposes and are often used to index private publication such as market guides, directories of companies, and periodical indexes. Familiarize yourself with the SIC/NAICS categories. Remember: it is important to either narrow or broaden your industry definition based on how much information you are finding.

3. Data Collection
For any strategic planning process, it is important to understand the industry in which you are or will be operating, for without an understanding of that industry, your strategy is unlikely to succeed. Every manager must determine for him/herself the information required to address the decision at hand. In an increasingly competitive and dynamic business environment, success depends on a continuous updating of information on market trends, competitors, and customers.

There are two types of data that can be collected and analyzed: (a) primary data collected from government record; (b) secondary data collected from reference materials. Prior to conducting any primary research, savvy managers know that secondary research should be the starting point in the data collection process. The government and other agencies publish a great deal of information which
can be invaluable in an industry assessment, and which is readily available if you know where to look. While you may not be able to find out everything you need to know, secondary information is an essential management tool. The sources of this information are abundant (in printed documents, via the Internet, etc.), however, they are not always easy to find. Your first challenge is to know where to look and find the most current, relevant, accurate, and reliable information, in a timely manner, when there are so many sources to choose from and investigate. Data must be current, reliable, unbiased, accurate, and relevant to the problem at hand if they are to be useful to the manager. Good managers
rely on this information to make decisions that are based on the realities of the marketplace, not their opinions or conjectures. Decisions based on information, however, are only as good as the information itself.

Description. This is to be a general introduction to the particular industry. What does the industry produce? What is SIC/NAICS code and description? (4%)
History. A brief history. How has the organization of and the nature of competition in the industry evolved from its earliest beginnings? (3%)

Organization. What parts of the chain of production/service do the firms undertake themselves and what do they buy from outside suppliers or pass on to independent distributors or retailers? (3%)
Relevant governmental or environmental factors. What role does government play in the industry? How does (will) regulation or other government (future) policy (e.g. reform, trade policy …etc.) affect the industry? (5%)

IV. Market Structure (1 page): 10%
You need to answer the following two questions precisely:
A. How can the market structure of the industry best be characterized: perfect competition, monopolistic competition, oligopoly, or monopoly?
Briefly go over the market characteristics to confirm your definition here. (5%)
If your industry is competitive, your article should address at least one of the following: large number of firms, a low market share of the firms in a market, low barriers to entry (e.g., the small size of firms that have entered), product/service that is relatively homogeneous (indistinguishable among
competitors), and the availability of many substitutes or foreign competition, marginal cost pricing (pricing at the cost of producing an extra item), lack of market power (in other words, price taking, not price making), rapid adoption of new technologies, and the responsiveness of production to increased
profitability, low long-run profits in the market, low or constantly falling prices, adequate availability of commodity, efficient utilization of a firm’s capacity (price is at minimum average cost), and efficient resource utilization (price equals marginal cost).
If your industry is oligopoly or (near) monopoly, your article should address at least one of the following: few firms in the market close to a 100 percent market share of the firms, blockaded entry or high barriers to entry, existence of economies of scale, product/service that is unique when compared with anything produced by anyone else, the lack of substitutes or foreign competition, lack of entry, the ability to set prices for the market (price making), price discrimination, reliable long-run profits in the market; excessively high or rising prices; inadequate availability of commodity and even shortages; inefficient utilization of a firm’s capacity (price far above average cost); inefficient resource utilization (price above the marginal cost of resources).
B. How many major firms (up to top four if applicable) are there in the industry and what is their market share? A table showing the market shares in the U.S. is required here. (5%)