CFA L1 / Equity / M6. Industry Analysis
Module 6 · Equity

Industry and Competitive Analysis

EN: Porter's five forces, industry structure, and competitive position.
VN: Năm lực lượng cạnh tranh, cấu trúc ngành, vị thế cạnh tranh.

1. Porter's Five Forces Concept

About: Rivalry, new-entrant threat, substitutes, buyer power, supplier power. Together determine industry profitability potential. Low across the board → unattractive industry.Tóm tắt: Rivalry, mới gia nhập, thay thế, buyer, supplier. Quyết định khả năng sinh lợi ngành.

Forces

  • 1. Rivalry Existing competitors — concentration, growth, exit barriers.
  • 2. New entrants Barriers to entry — capital, brand, regulation.
  • 3. Substitutes Alternative products that meet the same need.
  • 4. Buyer power Concentration of buyers, switching costs, price sensitivity.
  • 5. Supplier power Concentration of suppliers, switching costs, importance of input.

2. Industry Lifecycle Concept

About: Five stages from embryonic (low growth, high risk) to growth (best margins) to shake-out → mature → decline. Strategy and valuation method must match stage.Tóm tắt: 5 giai đoạn. Chiến lược và phương pháp định giá phải khớp giai đoạn.

Five stages

  • Embryonic Slow growth, high prices, large investment, high risk.
  • Growth Rapid demand, falling prices, improving profitability.
  • Shake-out Slowing growth, intensifying competition, weak players exit.
  • Mature Slow growth, consolidated industry, stable margins.
  • Decline Negative growth, excess capacity, falling prices.

3. Competitive Strategies (Porter) Concept

About: Cost leadership (lowest cost), differentiation (unique product, premium pricing), focus (niche). Stuck-in-the-middle = no edge → poor returns.Tóm tắt: Cost leader, differentiation, focus. 'Stuck in middle' = không cạnh tranh được.
  • Cost leadership Lowest-cost producer.
  • Differentiation Unique product/brand, premium pricing.
  • Focus Targeting a niche segment.

Practice problem Practice

Practice problem

An industry has many small firms producing identical commodities, near-zero switching costs for buyers, and easy entry. Rate Porter's five forces for an existing player.

Show solution
Rivalry: high (many firms, undifferentiated).
New entrants: high threat (low barriers).
Buyer power: high (zero switching costs).
Substitutes: medium-high (commodities have alternatives).
Supplier power: depends on inputs.
Profitability would be very low — perfect-competition setup. Existing players have minimal pricing power.