Impact of change in Industry conditions on Strategy

Driving Forces
Core concept:
Industry condition changes because important forces
are driving industry participants (competitors,
customers, suppliers) to alter their actions.
Driving forces are the major industry fundamental
causes of changing industry and competitive conditions
they have the biggest influence on how the industry
surroundings will be altered.
some driving forces originate in the macro
environment but most originate in the companys most
immediate industry and competitive environment.
Common Types Driving Forces of
any industry
Emerging new Internet capabilities and applications:
growing acceptance of Internet shopping
Increasing globalization of industry: companies begin
to shift their focus regional or national level to global or
international level
Changes in long-term industry growth rate: shifts in
industry growth up or down. Affects the balance of
demand or supply, entry or exit, nature of competition
Changes in who buys the product and how they use it:
shifts in buyer demographic & new way of using the product
can alter the state of competition. Exm. Downloading Music
from internet outclass traditional music stores.
Product innovation: Rivals always race to be first introducer of
new product. Most important for Specially industries like Digital
Camera, Video Games, and Toys
Technological change/Manufacturing process innovation:
VOIP Technology has generate low-cost, internet based phone
network that are stealing large numbers of customers away from
traditional telephone. Flat-screen technology for PC monitors
killing demand for CRT monitors.
Marketing innovation: when firms are successful in
introducing new ways to market their products, they
spark buyers interest, widen industry demand, increase
product differentiation and lower unit cost can change
industrys scenario. Exm. Online marketing in electronic
supplies and music albums
Entry or exit of major firms : entry or exit of major
foreign firm into domestic market once dominated by
local players will change scene in that industry.
Diffusion of technical knowledge across more companies
& more countries: rapid technology transfer across national
boundaries has been a prime factor in causing industry to
become more globally competitive specially in Automobile,
consumer electronics, computers.

Changes in cost and efficiency: difference in cost
among key competitors changes state of competition.
Exm Low cost Fax & Email has put huge pressure on
US Postal service which was inefficient & high cost of
operations
Consumer preferences shift from standardized to
differentiated products (or vice versa): Exm. Beer,
Milk, Bikes, budget-priced product. Online brokers
put competitive pressure on full service brokers.

Changes in degree of uncertainty and risk: Emerging
industry have to many problems to contain with like
market size, distribution channels, Techno problems,
buyer segment. So only risk-taking company will enter at
earlier stage. As time pass by, industry will have
knowledge regarding the way to success.
Regulatory policies / government legislation
changes: deregulation in various industry have changed
complete picture of industries like airline, banking,
telecommunications. In international market many times,
host government can drive competitive changes by
opening their domestic markets to foreign companies.


Changing societal concerns, attitudes, and lifestyles:

all of the above can be powerful troublemaker for industry.
Exm. In India Growing antismoking sentiments has emerged as a
major driver of change in Tobacco Industry
Exm. Concern about Terrorism has made a big impact on
Tourism industry.
Exm. Consumer concerns about salt, sugar, cholesterol, fitness
and nutritional
Exm. Safety concerns have driven changes in product design in


Driving Forces Analysis
It has three steps:
(1) Identifying what the driving forces are
(2) to check whether drivers are changed or not, if yes
then will it make industry more attractive or less
attractive
(3) determining what strategy changes are needed to
counter the impact of driving forces