This model is used to analyze the structure of a given industry or industry. We do this to get an insight into the value creation between the parties and how the total value creation is distributed. This distribution says something about the distribution of power in the industry and your place in it. In addition, the distribution provides a clue to opportunities and threats in the industry, a knowledge that e.g. can be valuable in connection with a strategy development process.
The industrial structure is assessed based on six parameters, which are divided into two main groups:
MAIN GROUP | PARAMETER |
| PREDICTION How predictable is the industry? | The degree of local importance in the industry How local/international is the industry? The more international, the more unpredictable. Considered in relation to competitors, customers, products and suppliers. |
| The degree of consolidation in the industry To what extent will the market consist of fewer or more companies in the future? Low degree of consolidation = low predictability | |
| The degree of concentration in the industry How much of the market is held by a given proportion of competitors? For example, high concentration means that three companies have 90 % of the industry's market shares. High concentration = high predictability. | |
| REPLACEMENT How easy or difficult is it for your company to be replaced by another? | The rate of growth in the industry What does growth in the industry look like in the future? High growth = high degree of substitutability. |
| The rate of earnings in the industry The typical earnings in the industry. Negative or increasing? Increasing earnings = high replaceability. | |
| The degree of entry barriers in the industry How easy or difficult is it to get into or out of the industry? Examine regulatory, technological, financial, competency, structural, scale barriers. |
Source: Lars Bo Hansen, Strategy that works (2013)
Insert the results of the various parameters in the tables below in relation to high/low predictability and high/low substitutability, where 1 = lowest, and 5 = highest.
Source: Lars Bo Hansen, Strategy that works (2013)
Source: Lars Bo Hansen, Strategy that works (2013)
Apply the analysis dynamically by looking at how the situation will look and what you expect will change in relation to the current state.
To create an overview, you can insert the result of the above into the following matrix:
Source: Lars Bo Hansen, Strategy that works (2013)
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