Industrial Economics Essay Example | Topics and Well Written Essays - 1500 words

Industrial Economics - Essay Example Kenneth J. Cook wrote, "Many small business owners and executives consider themselves at worst victims, and at best observers of what goes on in their industry. They sometimes fail to perceive that understanding your industry directly impacts your ability to succeed. Understanding your industry and anticipating its future trends and directions gives you the knowledge you need to react and control your portion of that industry. However, your analysis of this is significant only in a relative sense. Since both you and your competitors are in the same industry, the key is in finding the differing abilities between you and the competition in dealing with the industry forces that impact you. If you can identify abilities you have that are superior to competitors, you can use that ability to establish a competitive advantage." (Cook, 1995) An industry analysis consists of three most key fundamentals: the causal forces at work in the industry; the on the whole magnetism of the industry; and the critical factors that establish a company's success within the industry. In 1980, Michael E. Porter developed a leading model for analyzing the arrangement of industries. A complete industry analysis necessitates a business owner to make an objective examination of the underlying forces, attractiveness, and success factors that establish the composition of the industry. ... Collecting and evaluating information on competitors is essential for successful strategy formulation. Porter wrote, "Once the forces affecting competition in an industry and their underlying causes have been diagnosed, the firm is in a position to identify its strengths and weaknesses relative to the industry. An effective competitive strategy takes offensive or defensive action in order to create a defendable position against the five competitive forces." (Porter, 1980) The first step in carrying out an industry analysis is to evaluate the impact of Porter's five forces. "The collective strength of these forces determines the ultimate profit potential in the industry, where profit potential is measured in terms of long term return on invested capital," Porter stated. "The goal of competitive strategy for a business unit in an industry is to find a position in the industry where the company can best defend itself against these competitive forces or can influence them in its favor." (Porter, 1980) Beer Industry The beer industry has been seeing a lot of globalization lately, although consumers all around the world continue preferring local brands over the imported ones. Besides, the cost of manufacturing at one place and then shipping to other parts of the world is costlier than brewing it regionally. As the millennium came in, the international brewers began extracting positive cash from their regional acquisitions in the 80s and 90s. The beer industry stands global today. Heinkin and Anheuser Busch, the two giants in the beer industry took drastic and significant steps towards becoming global. These companies either acquire breweries in other countries or contract with them and then brew and