Lesson 11 of 12 · All lessons in this module
  1. Why analyse an industry, and the five steps
  2. Defining an industry and grouping companies
  3. Industry size and the character of its growth
  4. Top-down and bottom-up: sizing an industry, shares and HHI sensitivity
  5. Integrated case: concentration, competitive intensity and market-share trends
  6. Industry profitability: margins, ROIC and value creation
  7. Industry structure: Porter's Five ForcesVideo lesson
  8. Economic moats and lasting barriers to entry
  9. Supplier and customer power, vertical integration and rating the forces
  10. External influences: PESTLE analysis
  11. The innovation matrix and other PESTLE themes
  12. Integrated case: from an industry survey to a forecast

This lesson is part of the 2027 curriculum. You are following the 2026 curriculum, where it is not taught in this form. Switch if you are sitting the exam under the 2027 curriculum.

Lesson 11 of 12 · 14 min

The innovation matrix and other PESTLE themes

Technological change is classified with an innovation matrix (basic research, breakthrough, sustaining, disruptive), and the other PESTLE lenses add themes such as state ownership and subsidies, development stage and exchange rates, rising incomes, legal regimes and the energy transition.

In short

  • The innovation matrix sorts innovations by whether the problem they address and the domain they apply to are distinct or indistinct.
  • Basic research (both indistinct): fundamental science, no immediate commercial use. Breakthrough (distinct problem): new products or business models with effects across industries. Sustaining and disruptive (distinct domain) have the most immediate financial impact.
  • Political: state-owned participants (commodities, utilities), taxes, subsidies, reimbursement. Economic: growth and inflation, stage of development, offshoring and business process outsourcing, exchange rates.
  • A weaker home currency raises imported input costs (lower margins unless costs can be passed on) and makes exports cheaper abroad.
  • Social: rising income per head shifts demand from cheap necessities to branded goods, durables and leisure; firms that adapt to local tastes grow fastest.
  • Legal: different regimes move activity between jurisdictions, and new technologies may outrun the law. Environmental: the energy transition affects both energy producers and heavy energy users.

Unlock this lesson free for 7 days

Create a free account to get 7 days free: every lesson, video and flashcard, and the question bank. No card needed.

Start your 7-day free trialLog in