Organizations operate within an industry. The macro factors influence the industry and the behavior of competitors in the industry.
While conducting the TOE analysis, the organization studies and analyses the industry structure (one of the determinants of industry profitability), competitor behavior, the nature of competition, and the industry life cycle. This analysis is useful to assess the current profitability and chart future direction.
Definiiton of Industry
According to Michael Porter (1980), an industry consists of several organizations offering products or services that are close substitutes for each other. The products broadly satisfy the same need of the customer.
The other organizations that offer the same product or service are the closest competitors.
Organizations like Dell, Lenovo, HP, IBM, and Apple offer products enabling consumers to browse the Internet, play games, listen to music, and load, store, and display data. (They belong to the personal computer industry).
It would be interesting to discover the respective countries these organizations belong to.
What Makes Up An Industry?
An industry consists of:
- the buyers of the products,
- the various suppliers of resources to the manufacturers/service providers,
- the competitors,
- the likely competitors who can be attracted if the profitability prospects are attractive,
- substitute products that may appeal to the consumer because of some new strength,
- complementary products that make using the main product easier.
What is a Sector in Industry?
A sector is larger than the industry and has many organizations.
For example, the aviation sector would consist of the following;
- the aircraft manufacturers (Boeing, Airbus, Bombardier)
- airlines (Air Asia, Singapore Airlines, South West Airlines, Cathay Pacific),
- airports (main international airports, feeder airports, private airlines’ airports),
- The organizations that develop and operate airports (for example, Fraport AG),
- airline catering organizations (such as Skychef),
- the different organizations that train airline cabin crew,
- ground handling staff,
- the unions and others.
Each belongs to the respective industry and cumulatively belongs to the aviation sector.
Applying industry and sector concept
The telecommunication industry is one of the prominent industries in your country. It includes the service providers, the tower companies, the handset manufacturers, and so on. Based on your understanding of the industry and sector concept, map your country’s telecommunication sector. The following questions will help you to map the sector.
- What are the different types of organizations that belong to the telecommunication sector? Write the names of these organizations.
- Which segment of the sector do they belong to?
- In the given industry, who are the dominant three players?
- How are different organizations aligned with each other?
This activity will enable you to understand the interrelatedness between sector and industry.
