Industry vs. Market and the Industry Environment
Who's a cinema's real rival? If you said 'another cinema' — that's only half the answer. Streaming, gaming, and a night on the couch all compete for the same free evening. To pick a good strategy you first need to know who's even in the arena. In this lesson we'll separate 'industry' from 'market',
An industry is the set of companies selling products that substitute for each other. Before a strategic move you scan three layers: the big world (macro), the close industry (micro), then the firm itself.
- industry
- A group of firms supplying products or services that are close substitutes for one another.
- market
- The body of customers and demand; an industry is the supply side (firms), a market the demand side (customers).
- macro environment
- Economy-wide factors affecting all industries (political, economic, social, technological, and more).
- micro environment
- The forces inside the immediate industry — rivals, suppliers, buyers, substitutes and potential entrants.
- substitutes
- Products from other industries that serve the same customer need (streaming vs. cinema) — they stretch the industry's borders.
- resources and capabilities
- What the firm holds and knows how to do (brand, know-how, assets); the inner 'firm' layer of the environment scan.
- industry attractiveness
- How profitable an industry can potentially be, driven by the strength of the forces within it — what the micro analysis weighs.
