In any theoretical economic model, industry is considered a subset of the overall economy. What is an industry? It’s a broad term, but it has a lot of specific meaning. In simple terms, the industry refers to anything having to do with production, distribution, processing, marketing, advertising, and the like. In other words, industry encompasses almost everything that happens in any business.
According to economists, there are five forces that determine the level of competitiveness in any given industry. These forces are technological, economic structure, business cycles, legal and political factors, and technology change. Technological change is the result of scientific discoveries and invention; it can create new products and processes, which can be designed and marketed more efficiently and effectively. Economic structure is the result of centralization and the concentration of resources into a few hands (i.e., monopoly) and it can take different forms such as labor leverage, cost accounting, investment patterning, and so on.
One of the most important concepts in industry analysis is the concept of natural monopoly. A natural monopoly is a situation where a product is produced or offered for sale in a highly competitive environment without any potential competition. As defined by economists, a monopoly is a situation in which demand and supply conditions are such that there is little or no room for potential alternative uses in the market.
The process of industry analysis deals with looking into and studying monopoly situations. Natural monopolies, of course, are not the only ones, as there could also be situations in which there is a lack of competition because a firm is the only entity with the specific trait desired by customers. For example, a plant that makes paper instead of using a machine that builds paper ships is considered a monopoly in the paper industry because it has effectively locked out other companies from the industry. It’s important, however, to realize that the paper industry isn’t the only business that could fall victim to a monopoly, and swot analysis tools can be used to identify similar situations.
The second idea behind this topic is to recognize and understand market conditions that create competitive forces. Competitive forces occur when a company faces a problem in one area of its production while being able to make a profit in another area. For an example, consider the fact that electric motors tend to cost more than oil-fired turbines and that the former is far more environmentally friendly due to its use of fewer resources. This is an example of a competitive force in industry analysis because it illustrates how a firm that has a strong monopoly in one area can fall back on its competitors if it faces a problem elsewhere. It is important, though, to recognize that this concept is more complicated than it seems at first glance because many firms face competitive forces in various sectors of their operations.
The third idea behind what is industry related is to recognize trends and behaviors that seem to be common in specific industries. One tool used in this theory is the five forces competitive forces model, which analyzes the effects of five forces on any industry. These include supply, demand, business cycle, internal economy, and technology. This theory can help managers pinpoint industries where they should invest their labor and human capital to strengthen their operations.
The last idea is the business strategy course, which examines five forces using the five forces competitive forces model and then compares and criticizes each force in turn. The theory behind this is that managers should take the time to assess each aspect of their organization in relation to its impact on their business goals and then choose the actions needed to strengthen the area of strength while discarding weaker areas. This course is usually taught during the MBA program at a community college, so students have the chance to learn this material firsthand. This is an important concept because it makes it possible for managers to strengthen not only their key areas of operation but their entire business as well.
These four topics are just some of the topics covered in competitive and strategic management theory. The other topics covered include processes, foresight, perception, strategy, and broad factors analysis. Once a manager learns about these broad factors and processes, he or she will have the tools necessary to understand each and every facet of their organization including their own company’s unique processes. A manager who takes the time to learn about each of these theories and learns to apply them effectively will be able to use the knowledge to create a stronger company.