Transcript Chapter 3.ppt

3-1
3
Industry Analysis
McGraw-Hill/Irwin
Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
Aggregate Category Factors
 Category size
 Category growth
 Stage in product life cycle
 Sales cyclicity
 Seasonality
 Profits
3-3
Attractiveness of Market Variables
3-4
Category Attractiveness over
the Product Life Cycle
Sales
Stage of
product
life cycle
Introduction
Growth
Maturity
Decline
Category
size
Small
Moderate
Large
Moderate
Category
growth
Low
High
Low
Negative
Category
attractiveness
Low
High
Low/high
Low
Time
3-5
Category Factors
 Threat of new entrants
 Bargaining power of buyers
 Bargaining power of suppliers
 Current category rivalry
 Pressure from substitutes
 Category capacity
3-6
Environmental Factors
 Technological
 Political
 Economic
 Regulatory
 Social
3-7
Factors in Assessing the Structure
of Industries
 Threat of new entrants
 Bargaining power of buyers
 Bargaining power of suppliers
 Amount of intracategory rivalry
 Threat of substitute products or
services
3-8
Buyer Bargaining Power is High When:
 Product bought is a large percentage of the
buyer’s cost.
 Product bought is undifferentiated.
 Buyers earn low profits.
 Buyer threatens to backward integrate.
 Buyer has full information.
 Substitutes exist for the seller’s product or
service.
3-9
Supplier Bargaining Power is High When:
 Suppliers are highly concentrated, that is,
dominated by a few firms.
 There is no substitute for the product
supplied.
 Supplier has differentiated its product or
built in switching costs.
 Supply is limited.
3-10
Major Characteristics of Categories
Exhibiting Intensive Rivalries
 Many or balanced competitors
 Slow growth
 High fixed costs
 Lack of product differentiation
 Personal rivalries
3-11
Impact of Category Factors on Attractiveness
3-12
Typology of Technical Developments
* Includes agronomic and biomedical developments.
3-13
Conceptualizing Political Risks
3-14
Projected Change in U.S. Population 1995-2005
3-15
U.S. Income Inequality
3-16
Share of Food Purchases
3-17
Energy Bars: Category Attractiveness Summary
Aggregate
Market
Category Size
Attractiveness
++
Analysis
•$504 mm energy bar category in
2001
Energy bar category
contains four primary
brands, plus their subbrands and over 100 smaller
players
3-18
Energy Bars: Attractiveness Summary (cont)
Aggregate
Market
Analysis
Category Growth •Average annual growth rate of 57%
between 1997 and 2001
Attractiveness
++
U.S. energy bar category sales
forecasted at $750 mm in 2003 for a
continued expected growth of 22%
•IIndustry reports suggest
current annual growth for the
energy bar market 25%-30%
•CCategory expanding: new competitors are
entering, existing brands are expanding with
new products and flavors, market penetration
and usage occasion is increasing
3-19
Energy Bars: Attractiveness Summary (cont)
Aggregate
Market
Product Life
Cycle
Analysis
•Both the category and Odwalla
Bars specifically are both securely
in early stages of growth phase
Attractiveness
++
3-20
Energy Bars: Attractiveness Summary (cont)
Aggregate
Market
Sales Cyclicity
Attractiveness
+
Analysis
•While energy bars are premiumpriced for their convenience and
nutrient level, the base dollar point
of $1-$3 per bar is low such that
they are not directly impacted by
GDP variations
3-21
Energy Bars: Attractiveness Summary (cont)
Aggregate
Market
Seasonality
Attractiveness
++
Analysis
•Year-round sales
•CCategory overall may experience a
slight sales increase in the spring and
summer month during “race season” and
as users are engaged in more outdoor
activities and desire quick, portable
energy.
3-22
Energy Bars: Attractiveness Summary (cont)
Aggregate
Market
Profits
Attractiveness
+
Analysis
•As most major competitors are within the
product portfolios of larger consumer
goods companies, it is difficult to
benchmark profitability within the energy
bar category specifically. Nevertheless,
the recent acquisition of the leading
competitors reflects an expectation for
strong profit potential.
Increased category competitiveness
may lead to lower pricing and profits
3-23
Energy Bars: Attractiveness Summary (cont)
Category
Threat of New
Entrants/Exits
Attractiveness
-
Analysis
•Strong potential for new competitors
given that the category is profitable,
fairly easy to enter, and increasingly
relevant to consumers.
•FFurther, with the “big three” brands
strongly in place [PowerBar, Clif (including
Luna), and Balance], it is most likely that small
competitors will enter through the natural
foods channel, creating more direct
competition with Odwalla bars.
3-24
Energy Bars: Attractiveness Summary (cont)
Category
Economies of
Scale
Analysis
•Competitors within the broader category
of snack bars would likely experience
economies of scale with a relatively
easy entry into the energy bar market
Attractiveness
-
3-25
Energy Bars: Attractiveness Summary (cont)
Category
Capital
Requirements
Attractiveness
Analysis
•Within the mainstream energy bars,
differentiation is largely through brand,
taste, and flavor variety. With the
exception of targeted nutrition products
like protein- or carbohydrate-specific
products, nutritional levels are largely
at parity.
-
3-26
Energy Bars: Attractiveness Summary (cont)
Category
Switching Costs
Analysis
•Switching costs are very low, opening
the door to potential competitors
Attractiveness
-
3-27
Energy Bars: Attractiveness Summary (cont)
Aggregate
Market
Distribution
Attractiveness
-
Analysis
•As there are not specialty requirements
for distribution (refrigeration, etc.), it
would be very easy for any of the
“center of the store” consumer food
companies to enter the category and
add on to their existing distribution
structure. This is particularly true for
companies that have an established
relationship with the category buyer.
Shelf life
3-28
Energy Bars: Attractiveness Summary (cont)
Aggregate
Market
Analysis
Bargaining
Power of Buyers
•Lots of competitors with relatively
similar options distinguished by brand
and taste keeps retailer power strong
Attractiveness
-
3-29
Energy Bars: Attractiveness Summary (cont)
Aggregate
Market
Bargaining
Power of
Suppliers
Analysis
•As the suppliers of raw inputs for
energy bars are largely agricultural, the
commodity nature of agriculture keeps
prices and supplier power low. While
still relatively low, supplier power will
be higher for nutrient supplement
suppliers
Attractiveness
+
3-30
Energy Bars: Attractiveness Summary (cont)
Aggregate
Market
Pressure from
Substitutes
Analysis
•Considerable
•FFresh fruit, cereal bars, smoothies,
candy bars, etc. are all suitable portable
substitutes for the mainstream energy
bar consumer. True athletes are most
likely to substitute with higher nutrient
level energy bars
Attractiveness
-
3-31
Energy Bars: Attractiveness Summary (cont)
Aggregate
Market
Category
Capacity
Analysis
•Appears to be high given current
scenario of more than 100
manufacturers and many more products.
But, still, it is too early to determine
true capacity
Attractiveness
+
3-32
Energy Bars: Attractiveness Summary (cont)
Aggregate
Market
Current
Category
Rivalry
Analysis
•Very high. Differentiation largely by
taste and flavor variety, and by
targeting unique market segments
Attractiveness
-
3-33
Energy Bars: Attractiveness Summary (cont)
Environmental
Technological
Analysis
•Technology could play a significant role
with respect to manufacturing
efficiencies and taste profiles
Attractiveness
+
3-34
Energy Bars: Attractiveness Summary (cont)
Environmental
Economic
Analysis
•While premium priced, energy bars have
so far seemed to fair the recession
well. Still, however, if economic
conditions persist, consumers may opt
for less expensive alternatives like
fresh fruit or non-energy snack bars
Attractiveness
+
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Energy Bars: Attractiveness Summary (cont)
Environmental
Political/
Regulatory
Analysis
•The energy bar category is regulated
by the FDA as are other food products.
There are not to our knowledge,
however, additional regulations directed
toward the energy bar category.
Attractiveness
0
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Energy Bars: Attractiveness Summary (cont)
Environmental
Social
Analysis
•As lives get busier and mealtimes
shrink, energy bars will continue to be
an acceptable meal replacement.
Attractiveness
++
3-37
PDA: Category Attractiveness Analysis
Aggregate
Market Factors
Attractiveness
Market Size
Market Growth
Product Life Cycle
•$2.3 billion
Profits
Sales Cyclicity
Good
Sales Seasonality
one
0%-40%
Growth
one
+
+
+
+/0
+
+
3-38
PDA: Category Attractiveness Analysis
Category
Factors
Attractiveness
Threat of New
Entrants
•Moderate; R&D required,
distribution
0
Bargaining
Power of Buyers
Low, high switching costs
+
Bargaining Power
of Suppliers
Moderate; PCs use similar
components
0
Category Rivalry
Pressure from
Substitutes
Intense
-
High
-
Category Capacity Not a problem for now
+
3-39
PDA: Category Attractiveness Analysis
Environmental
Factors:
Attractiveness
Technological
•Very sensitive
-
Political/
Regulatory
Telecommunications
deregulation
+
Economic
Relatively inexpensive
+
Social
More work done on
the road
+
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