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Business Fundamentals was developed by the Global Text Project, which is working to create open-content electronictextbooks that are freely available on the website http://globaltext.terry.uga.edu. Distribution is also possible viapaper, CD, DVD, and via this collaboration, through Connexions. The goal is to make textbooks available to the manywho cannot afford them. For more information on getting involved with the Global Text Project or Connexions email us atdrexel@uga.edu and dcwill@cnx.org.

Editor: James W Bronson (The University of Wisconsin, USA)

Contributors: Kellie Goldfien, Ryan Wolford

Reviewer: William A Drago, (University of Wisconsin, USA)

What is an industry?

The term industry loosely refers to any group of businesses that share a particular type of commercial enterprise. This grouping of firms is also likely to generate profits in a similar manner, or at least share related activities. In the business world, it is common to hear managers discuss particular industries as a whole, for example, ‘the automobile industry’ or ‘the magazine industry’.

In a more formal sense, the North American Industry Classification System (NAICS, (External Link) ) defines hundreds of different industries. The NAICS is a commonly used system to group businesses. The NAICS typically identifies an industry with a six digit code, with each additional digit narrowing the definition of the industry. Similar classification systems include the International Standard Industrial Classification (ISIC, (External Link) ) from the United Nations and the General Industrial Classification of Economic Activities with the European Communities (NACE, (External Link) ). Data is gathered and reported for the industry based on the six digit code. Data typically reported includes demographic measures for the industry including employment, number of business, and total sales. Data is not reported for individual firms. Many different agencies and businesses use these categories for statistical studies, business comparisons, and benchmarks. Locating the industry for a business through the NAICS or similar classification scheme can be a useful exercise in gathering competitive intelligence. For example, the average number of employees and sales of firms in the industry can be found and from this information critical benchmarks like sales per employee may be calculated.

Industry structural characteristics

Industries have specific structures and the entrepreneur needs to learn and understand the significance of the structure for his/her industry. Industry structure includes size measures, e.g. industry sales, number of firms, and number of employees. Rate of growth and the industry growth curve are an important element of industry structure as is the extent to which an industry is unionized. There may be many more elements of industry structure. Industry structure is one determinant of competition. For example, competition in an industry comprised solely of union employers will be quite different than in an industry comprised of both union and non-union firms. Competition is also affected by the extent to which the government is a large buyer, or perhaps the only buyer, as in the defense industry.

Concept of strategic groups

Strategic groups exist within most industries. A strategic group is a set of firms within an industry that employ similar practices in order to achieve comparable goals. An example of a strategic group within the food service industry would be fast-food chains. The fast-food chains differentiate themselves from other restaurants by offering quick-service, popular foods, and relatively low prices. Within the same industry we can find a number of other strategic groups such as family restaurants, vegetarian restaurants, and coffee houses. Although fast-food chains and vegetarian restaurants both accomplish the same purpose, i.e. providing a prepared meal, their target audience, their methods of marketing, and other methods of doing business are decidedly different. Competition between firms within a strategic group is more direct than competition between firms located in different strategic groups.

Competitive rivalry amongst firms in the same strategic group can be very intense, especially since they are usually competing for the same customers. Consider Pepsi and Coca-Cola versus fruit juice. Pepsi and Coca-Cola are competing for cola drinkers, and they market their products competitively against each other. Although the customer could just as easily have a glass of fruit juice, Pepsi and Coca-Cola are not aggressively marketing against the juice industry. The fruit juice customer has different wants and needs than the cola customer, so the two strategic groups do not compete directly for the same clientele.

Key success factors in an industry

Key success factors (KSF) are areas of critical performance necessary for success in a specific industry. A firm cannot expect to be competitive in its industry without an understanding of the industry’s key success factors. Key success factors are a function of both customer needs and competitive pressures. KSFs are typically identified by completing a list in response to two questions:

  1. What do customers in my industry want?
  2. How do successful firms survive the industry’s competitive pressures?
Grocery Store KSF
Customer Competition
Cleanliness Bargaining power over suppliers
Freshness Number of local competitors
Selection, including take-out Location relative to competitors
Competitive prices
Location&parking
Service&pleasant experience

The entrepreneur must be aware of the key success factors (KSF) in his/her industry. Resources should be directed to activities that increase competitiveness on KSF and not wasted on activities that are not critical to KSFs.

Since we all have decided preferences, it follows that a table of KSFs constructed by one person is likely to omit, or overstate, an industry’s KSFs. Select a common type of business-industry with which you have some familiarity, e.g. floral arrangements, coffee house, or bicycle sales.

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Construct a table of Key Success Factors by asking yourself the questions: What do customers in my business-industry want? How do successful firms survive the industry’s competitive pressures?

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Now ask the questions of two other people who have been customers of the business-industry. Are you getting agreement on your list of KSFs, or will you need to ask more people for their opinions to establish a clear list of KSFs?

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Questions & Answers

A golfer on a fairway is 70 m away from the green, which sits below the level of the fairway by 20 m. If the golfer hits the ball at an angle of 40° with an initial speed of 20 m/s, how close to the green does she come?
Aislinn Reply
cm
tijani
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John Reply
what is physics
Siyaka Reply
A mouse of mass 200 g falls 100 m down a vertical mine shaft and lands at the bottom with a speed of 8.0 m/s. During its fall, how much work is done on the mouse by air resistance
Jude Reply
Can you compute that for me. Ty
Jude
what is the dimension formula of energy?
David Reply
what is viscosity?
David
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emma Reply
what is chemistry
Youesf Reply
what is inorganic
emma
Chemistry is a branch of science that deals with the study of matter,it composition,it structure and the changes it undergoes
Adjei
please, I'm a physics student and I need help in physics
Adjanou
chemistry could also be understood like the sexual attraction/repulsion of the male and female elements. the reaction varies depending on the energy differences of each given gender. + masculine -female.
Pedro
A ball is thrown straight up.it passes a 2.0m high window 7.50 m off the ground on it path up and takes 1.30 s to go past the window.what was the ball initial velocity
Krampah Reply
2. A sled plus passenger with total mass 50 kg is pulled 20 m across the snow (0.20) at constant velocity by a force directed 25° above the horizontal. Calculate (a) the work of the applied force, (b) the work of friction, and (c) the total work.
Sahid Reply
you have been hired as an espert witness in a court case involving an automobile accident. the accident involved car A of mass 1500kg which crashed into stationary car B of mass 1100kg. the driver of car A applied his brakes 15 m before he skidded and crashed into car B. after the collision, car A s
Samuel Reply
can someone explain to me, an ignorant high school student, why the trend of the graph doesn't follow the fact that the higher frequency a sound wave is, the more power it is, hence, making me think the phons output would follow this general trend?
Joseph Reply
Nevermind i just realied that the graph is the phons output for a person with normal hearing and not just the phons output of the sound waves power, I should read the entire thing next time
Joseph
Follow up question, does anyone know where I can find a graph that accuretly depicts the actual relative "power" output of sound over its frequency instead of just humans hearing
Joseph
"Generation of electrical energy from sound energy | IEEE Conference Publication | IEEE Xplore" ***ieeexplore.ieee.org/document/7150687?reload=true
Ryan
what's motion
Maurice Reply
what are the types of wave
Maurice
answer
Magreth
progressive wave
Magreth
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fine, how about you?
Mohammed
hi
Mujahid
A string is 3.00 m long with a mass of 5.00 g. The string is held taut with a tension of 500.00 N applied to the string. A pulse is sent down the string. How long does it take the pulse to travel the 3.00 m of the string?
yasuo Reply
Who can show me the full solution in this problem?
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Source:  OpenStax, Business fundamentals. OpenStax CNX. Oct 08, 2010 Download for free at http://cnx.org/content/col11227/1.4
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