Industry Structure

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Name

Industry Structure

Description

Some industries are more profitable than others, and industry profitability can change over time.The comeptition and concentration of the industry will affect the creation of software. The industry structure consists of many types of suppliers and customers, including products and services, software and hardware, applications and infrastructure. The industry is trending away from large vertically integrated suppliers to a fragmented structure with many more specialized suppliers coordinating themselves through open interface standards, consortia, technology alliances, etc. Both the computer and communications industries are evolving away from stovepipe products based on a single application to integrated layers that service all applications.

Enablers

• Concentration

Industrial concentration occurs when a small number of companies sell a large percentage of an industry's product. The number firms creating software would drive the competition in the software industry. This is important factor since this can drive the prices of the product in industry.

• Company Size

Company size can affect the industry in two ways: Presence of one large company can lead to monopoly. A monopoly is an enterprise that is the only seller of a good or service.
Similarly if there can be large number of small firms in industry then there will be high price competition, but these companies would not be able to provide complete solutions to customers, driving down the service quality.

• Technological expertise

Specifically for software industry the technological expertise to create and maintain software is clear driving the strenght of the software industry.

• Brand Name/Image

Consumers are some vary of accepting software that is not branded due to support and service related issues. This leds to software companies investing heavly in brand equity. Brand image is also driven by company size, thus it in turn affects the industry structure.

Inhibitors

• Barriers to Entry

The factors which cause this include: Economies of scale; Proprietary product differences; Brand identity; Switching costs; Access to suppliers; Capital requirements; Expected retaliation; Government policy.

• Internal Competition or rivalry

Different industries experience different levels of competitive rivalry. The factors which cause this include: Industry growth; Product differences; Concentration and balance; Diversity of competition; Fixed costs; Exit barriers.

• Concetration

Concentration can have varying effect on the industry structure, as explained above.

• Intellectual property rights

These are basically driven by governmental policies. Based on the IP rights offered in a nation can have effect on the way industry is structured in that country.

Paradigms

Nil

Timing

Generally constant. Yet can be modified by government from time to time

Web Resources

http://www.econlib.org/library/Enc/IndustrialConcentration.html http://www.e-competitors.com/Industry/industry_structure.htm http://www.intellectual-property.gov.uk/faq/question8.htm