Industry and Competitive AnalysisLocked: included in All Access

How analysts define an industry, survey its size, growth, profitability and market shares, judge its structure with Porter's Five Forces and its external influences with PESTLE, and then evaluate whether a company's competitive strategy can earn returns above the industry's base rate.

1. 1. Why analyse an industry, and the five stepsCompetition pulls a company's profitability toward its industry's base rate, so an analyst must understand the industry before judging, forecasting or valuing any company in it.Locked: included in All Access11 min
2. 2. Defining an industry and grouping companiesAn industry is a group of companies selling similar products from the customer's point of view; third-party schemes such as GICS are a good start, but analysts must adjust for their limitations, and other groupings (geography, cycle sensitivity, statistics, ESG) serve other purposes.Locked: included in All Access15 min
3. 3. Industry size and the character of its growthThe industry survey starts by measuring total sales and their growth, then characterises that growth: is the industry still growing into its market or mature, and is it cyclical or defensive?Locked: included in All Access13 min
4. 4. Profitability, market share trends and concentration (HHI)The rest of the survey asks how profitable the industry is and which way that is moving, who holds market share and whether they are gaining it organically, and how concentrated the industry is, measured by the Herfindahl-Hirschman Index.Video · 6 minLocked: included in All Access14 min
5. 5. Industry structure: Porter's Five ForcesPorter's Five Forces explain an industry's long-run profitability: the threat of new entrants, the threat of substitutes, customer power and supplier power all feed the rivalry among existing competitors; intense forces mean low returns, benign forces mean high ones.Video · 6 minLocked: included in All Access15 min
6. 6. External influences: PESTLE analysisFive Forces looks inside an industry to explain profitability; PESTLE looks outside it, at political, economic, social, technological, legal and environmental influences, to understand growth and shifts in market share.Locked: included in All Access13 min
7. 7. Competitive strategy and positioningA company's strategy is judged by whether it defends against the five forces, fits the external influences and can be executed with the company's resources; most successful strategies are variants of cost leadership, differentiation or focus.Locked: included in All Access15 min