Industries and sectors(Generic types of industry) || Strategic Business Management

Industries and sectors

An industry consists of suppliers who produce similar goods and services. For example, there is an aerospace industry, an automobile manufacturing industry, a construction industry, a travel industry, a leisure industry, an insurance industry, and so on. 

Within an industry, there may be different segments. An industry segment is a separately-identifiable part of a larger industry. For example, the automobile industry can be divided into segments for the construction of automobiles and the manufacture of parts. Similarly, the insurance industry has several sectors, including general insurance, life assurance, and pensions. 

Companies need to make strategic decisions about:

• the industry and industrial segment (or segments) they intend to operate in, and 
• the market or markets in which they will sell their goods or services. 

A distinction should be made between products and markets. 

• Companies in different industries might sell their goods or services to the same market. For example, small building companies compete with retailers of do-it-yourself tools and other products. Laundry services compete with manufacturers of domestic washing machines. 
• Companies in the same industry might not compete because they operate in different markets. For example, a ferry company operating passenger services between the UK and France is in the same industry as a ferry company operating passenger services between the Greek islands, but they are in the same industry. 

In their analysis of strategic position, management needs to recognize which industries and segments they operate in, and also which markets they are selling to. They also need to recognize changing conditions in industries, segments, and markets, in order to decide what their product-market strategies should be in the future.

Generic types of industry

Porter suggested that there are five generic types of industry. The strategic position of a company depends to some extent on the type of industry it is operating in. The five industry types are as follows: 

Fragmented industries. In a fragmented industry, firms are small and sell to a small portion of the total market. Examples are dry cleaning services, hairdressing services, and shoe repairs. 

Emerging industries. These are industries that have only just started to develop and are likely to become much bigger and much more significant in the future. An example is the space travel industry. 

Mature industries. These are industries where products have reached the mature phase of their life cycle. (The product life cycle is described later.) Examples are automobile manufacture and soft drinks manufacturing. 

Declining industries. These are industries that are going into decline: total sales are falling and the number of competitors in the market is also falling. An example is coal mining in Europe. 

Global industries. Some industries operate on a global scale, such as the microprocessor industry and the professional football industry.