1. Discuss the strategic relevance of identifying the industry's dominant economic features. Give four examples of relevant factors and discuss what makes them strategically important facts.

Answer with Explanation:

Identifying industry’s dominant economic features helps in understanding what key factors ensures its survival and success. The understanding of business environment also helps in making informed decisions that generates value for the company. Some of the important industry's dominant economic features are as under:

Market Size and Growth Rate: This helps in understanding how large is the market. If the market size very large then it means we have running customers which means we rarely have repetitive customer. Hence the chances of survival are more in a relative large market as apposed to small market. Similarly the market growth rate is also an attractive factor because greater the market growth rate the greater would be chances of success because new customer entrants are continuously growing with great numbers. This great pace will generate great sales in the future as well.

Scope of Rivalry: The number of competitors operating in the market and their size is often termed as scope of rivalry. Furthermore, the greater are the number of competitors in the market the lower is the bargaining power of the competitors and vice versa. This means that the profit earning will be affected with the population of competitors in the market as every competitor will try to attract the customers by discounting their product prices. The survival of new entrant in such a market is very difficult.

Level of Product Differentiation: If are considering a car market of a developing country like Indonesia, Pakistan, Mongolia, Uzbekistan, etc which have higher population and the level of purchasing power of people very low than developed countries like US and UK. This means that the level of product differentiation will be very low. Hence the survival of highly differentiated product in such market is very difficult. So the level of product differentiation may alter your decision making process.

Technology Adoption Cost: If the technology adoption cost is very low then it more risky market as the product may get obsolete very early and the life-cycle of the product will be very shorter. This means that the revenue generated from the product would be lower as the demand of new technology takes all the sales away.

Profitability of the Market Segment: The profit margin of the product of a particular market segment is higher and the level of risk is also within a acceptable range then it will be strategically important because the amount invested will be recovered earlier because higher profit margins. We can also increase the sale of the product by reducing the price in market which prizes its customer at a high, this will increase the demand and profits of the company. Hence it is a successful and survival ensuring market.

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