Analyze industries systematically using Porter's Five Forces and competitive frameworks to identify winning sectors
🚪
How easy for new competitors to enter? High barriers = good for existing players.
📌 Factors: Capital requirements, regulations, brand loyalty, economies of scale
💡 Telecom: High barriers (spectrum cost, infrastructure). E-commerce: Low barriers.
📦
Can suppliers dictate terms? Few suppliers = high power = margin pressure.
📌 Factors: Number of suppliers, switching costs, supplier concentration
💡 Oil companies: High supplier power. IT services: Low supplier power.
🛒
Can customers negotiate prices? Large customers = high power = margin pressure.
📌 Factors: Customer concentration, switching costs, price sensitivity
💡 B2B (few large customers): High buyer power. B2C (many customers): Low buyer power.
🔄
Are there alternative products? High substitutes = pricing pressure.
📌 Factors: Alternative solutions, relative prices, switching ease
💡 Newspapers (high substitutes: digital media). Pharma (low substitutes: patents).
⚔️
How intense is competition? High rivalry = price wars = lower margins.
📌 Factors: Number of competitors, growth rate, exit barriers, product differentiation
💡 Aviation (intense rivalry: low margins). Specialty chemicals (low rivalry: good margins).
🌱
New industry, high uncertainty, few players, innovation focus.
💼 High risk, high reward. Focus on survival and market leadership.
📊 Example: Electric vehicles in India (2020-2023), Hydrogen energy
📈
Rapid growth, increasing players, market expansion, improving profitability.
💼 Best time to invest. Revenue growth trumps profitability.
📊 Example: E-commerce (2015-2020), Renewable energy currently
🎯
Stable growth, intense competition, market share battles, consolidation.
💼 Focus on market leaders with pricing power and efficiency.
📊 Example: IT services, FMCG, Banking, Auto (ICE vehicles)
📉
Falling demand, exits, cost-cutting, survival mode.
💼 Usually avoid. Exception: turnaround plays or value stocks.
📊 Example: Print media, Landline telephony
📊
YoY growth of total industry revenue. High growth = attractive sector.
✅ >15% = high growth, 5-15% = moderate, <5% = mature/declining
🎲
Herfindahl Index. Sum of squared market shares. Measures competition.
✅ >2500 = oligopoly (good for leaders), <1500 = fragmented (intense competition)
⚙️
Actual output / Maximum capacity. Indicates supply-demand balance.
✅ >85% = tight supply (pricing power), <70% = overcapacity (margin pressure)
🔬
R&D spend / Revenue. Shows innovation focus and competitive dynamics.
✅ Pharma/Tech: >5%, Manufacturing: 1-3%, FMCG: <1%
🔄
Days to convert inventory to cash. Industry efficiency indicator.
✅ Lower is better. Negative = very strong position (Amazon model)
⚖️
Government policies, licenses, compliance costs affecting industry.
✅ Stable regulations = predictable. Frequent changes = higher risk.
🥇
Who are top 3-5 players? Is it consolidating or fragmenting?
💡 Growing market share in growing industry = compounding returns
🏰
What defends company from competition? Brand, network effects, cost advantages?
💡 Wide moat = sustainable competitive advantage = premium valuations
💰
Can company raise prices without losing customers?
💡 Companies with pricing power maintain margins even in inflation
🎨
Is product unique or commodity? Differentiation = better margins.
💡 Avoid commoditized businesses unless lowest cost producer
📚
IBEF, industry associations, brokerage reports. Free and detailed.
👔
Read annual reports of top 3 players. They explain industry dynamics well.
📊
Cement dispatch for construction, PMI for manufacturing, etc.
⛓️
Map entire value chain. Identify where value is captured.
⚠️
Pharma (NPPA), Telecom (spectrum), Banking (RBI) - regulations impact returns.
🔄
Cyclicals (metals, auto) have boom-bust. Defensives (pharma, FMCG) stable.