"Market" and "industry" are not interchangeable terms. A "market" is
a mechanism for buyers and sellers to exchange goods and services,
while an "industry" is a collection of companies that compete with one
another.
AmosWeb Economic Class Portal, "Topic: The Industry"
http://www.amosweb.com/cgi-bin/cls_dsp.pl?crs=micro&lsn=13&pge=5
"An industry is one or more business firms that produce similar
products."
AmosWeb Economic Class Portal, "Market"
http://www.amosweb.com/cgi-bin/gls_dsp.pl?term=market
"The organized exchange of commodities (goods, services, or resources)
between buyers and sellers within a specific geographic area and
during a given period of time. Markets are the exchange between buyers
who want a good--the demand-side of the market--and the sellers who
have it--the supply--side of the market. In essence, a buyer gives up
money and gets a good, while a seller gives up a good and gets money."
1)Industry segmentation vs. market segmentation: These terms are not
interchangable.
An industry might be segmented by type of supplier or type of
distribution (or some other distinguishing characteristic). For
example, let's examine publishing. You might have newspaper
publishers, magazine publishers, and book publishers. They all sell
printed words on paper, putting them in the same "publishing"
industry. However, each segment would have unique production and
distribution requirements. Some of these might be small and focused
with a handful of publications, others might be large media
conglomerates for whom publishing is one of many businesses.
Market segments might describe different types of customers. Each of
these segments could have unique 'needs' or might be attracted to
varying advertising methods. For example, if you sold computers, you
might have a "Video Gamer" segment, a "Home Office" segment, a "Small
Business" segment, a "Corporate IT" segment, a "Fortune 500" segment,
a "Government" segment, and "Education" segment. Each of these
customers would respond to different types of purchasing incentives,
each has a unique process for the buying decision, and each would
potentially buy differeing quantities of computers at time of
purchase. In addition, your competitors might effectively compete
with you in some segments, but not others.
2) Porter's 5 Forces pertain to analysis of the competitiveness of an
industry. An industry analysis using Porter's 5 Forces would help you
to determine whether or not your company could expect long-term
profitability in a given industry. One would not use Porter's 5
Forces to examine a market. However, information about your market
would be used as data points in your Porter analysis, particularly
when analyzing "Buyer Power". A market analysis, in contrast to a
Porter analysis, is usually concerned with changes in supply and
demand and the impact those changes have on price.
3) Market structure is not interchangeable with industry structure.
Typically, one would use the term "market structure" and I have never
heard the term "industry structure" used. A market structure is
generally defined by the competitors in the industry, and so I can
understand why one might think of it as an industry structure.
However, my suggestion would be to use "market structure" as your
choice.
4) Someone could, if speaking in business slang, say they are
targeting an industry as their market. However, this would not be
correct in the textbook sense of the word since, as you have
discoverd, these words have very different meanings. Businesses often
refer to their customers as their market. However, strictly speaking,
customers only represent the "demand" force of a given market.
Additional Links and Definitions:
A presentation of a Porter Analysis: "Grainger, Industrial Supply
Industry", by David Castro, Ruben Valdez, Mike Garcia, Rene Riojas
Jr., and Martin Pena Jr. (February 28, 2001):
http://www.coba.panam.edu/faculty/hkaynak/kaynak_grainger/grainger.htm
AmosWeb Economic Class Portal, "Market Structure":
http://www.amosweb.com/cgi-bin/gls_dsp.pl?term=market+structure
"The manner in which a market is organized, based largely on the
number of firms in the industry. The four basic market structure
models are: perfect competition, monopoly, monopolistic competition,
and oligopoly. The primary difference between each is the number of
firms on the supply side of a market. Both perfect competition and
monopolistic competition have a large number of relatively small firms
selling output. Oligopoly has a small number of relatively large
firms. And monopoly has a single firm."
AmosWeb Economic Class Portal, "Market Analysis":
http://www.amosweb.com/cgi-bin/gls_dsp.pl?term=market+analysis
"The use of the market model to examine economic phenomenon involving
demand, supply, prices, and exchanges. The simplest market analysis
involves identifying equilibrium price and quantity, which is the
point of intersection between the demand and supply curves. Some of
the more useful market analysis, however, involves comparative static
analysis of shifts in either the demand or supply curves, or both
curves simultaneously. Other market analysis examines the consequences
of price ceilings, price floors, and taxes."
Search Terms: economic dictionary
://www.google.com/search?q=economic+dictionary
Search Terms: Porter 5 forces competitiveness
://www.google.com/search?q=Porter+5+forces+competitiveness
I hope you find the information helpful and easy to understand.
However, if you have trouble with the concepts, please do not hesitate
to ask for a clarification. |
Clarification of Answer by
snapanswer-ga
on
08 Aug 2002 00:57 PDT
I would be happy to try make this as easy to understand as possible.
If you would send me the link to where on the AmosWeb Economic Class
Portal you found it indicating that "industry" and "market" are
interchangeable terms, I would be happy to try to explain the
reference.
If, on the other hand, you believe that the information contained in
my original answer leads you to conclude that the terms are
interchangeable, then let me see if I can make the explanation
clearer. (Perhaps it is the explanation from AmosWeb of "market
structure" that is leading to this confusion. Hopefully, the
explanation contained here will help).
A market consists of buyers and sellers. Buyers represent the
"demand" in a market and are often referred to as customers. Sellers
represent the "supply" in a market and are often referred to as
industry. We can see, then, that a market has two parts: buyers and
sellers. Industry only represents one of those parts.
To help clarify your second point, please allow me to take it a
section at a time:
Can I say then that a market is in an industry?
No. You can say an industry is in a market. If a particular industry
was where your customers were, you could say "some of our major
customers are in that industry".
"Take for example, I am a rust preventive paint seller. Therefore to
say i am then in the chemical industry, right?"
Yes, this sounds OK. Chemical industry, home improvement industry,
construction industry, or which ever way you choose to identify your
industry, based upon who your competitors are.
"But I need to sell my product to the market."
I understand what you are trying to say here, but, you need to sell
your product "in" the market "to" customers. If you are having a
casual conversation with someone and you say you need to take your
product to market, they will understand what you mean, because they
will infer that you are taking the product to market in order to sell
to customers. But, in the textbook sense of the word, you sell to
customers who are part of the market.
"There are many possible industries where I can target my product at
eg,petroleum industry, marine industry, construction industry,
automobile industry etc."
These are all different industries that you have targeted to find
customers. Any of these companies that compete with you are in your
industry. Other companies that do not compete with you are in a
different industry.
"Do I then analys each of the possible industries which I can go into
and sell my product basing on Porter's 5 forces for my long term
profitability?"
No. The Porter analysis is generally not used to evaluate which
customers you should sell to. Instead, the Porter analysis is used to
determine how attratctive an industry is or the long-term
profitability of a company (for example, your company) versus the rest
of your competitors in its industry. Remember, an industry is a group
of companies that compete with one another.
"After which selecting the particular industry I could then segment
that industry to suit the demand for my product."
I'm not sure what you mean here. However, I think you are talking
about segmenting the market to suit demand for your product.
So the main point here is that a market is made up of industry on one
end and customers on the other end. These two groups come together in
the market to exchange goods and services. If this is still unclear,
feel free to ask for further clarification.
|
Clarification of Answer by
snapanswer-ga
on
08 Aug 2002 23:59 PDT
I wanted to give this clarification some time. It is important to me
that I provide you with an answer that you can be delighted with and
find useful. With that in mind, I am providing this clarification now
while I continue to check with other sources for alternative
perspectives.
As you pointed out, the AmosWeb source indicates that in many [but not
all] cases the terms "industry" and "market" can be used
interchangeably. However, in my judgement, I believed that it was
important to explain the differences between these two terms, in order
to best answer your question: "What is the difference between the
terms 'industry' and 'market'?", particularly in light of the example
provided with the question. Therefore, I did not want to complicate a
topic that might already be confusing. There are exceptions, but, I
worried that they would be a source of increased confusion rather than
understanding. At the bottom of this clarification, I will explain
the exceptions to the best of my ability. It is important to me that
you understand the difference between these two terms, exceptions not
withstanding.
Now I will address the other points in your request.
Regarding Porter analysis: Porter analysis is used to evaluate an
industry. If a company was looking to diversify, it could use a
Porter analysis to help to determine other industries to compete in
and which industries to abandon. It could be used as one piece of a
market targeting analysis, but, it primarily analyzes the supply side
of the market. Additional analysis would be required on the demand
side (i.e., analyzing the customer base) for a complete market
targeting analysis.
Regarding the use of Porter analysis to evaluate industry segments:
This means that to analyze industry segments, one must do a separate
Porter analysis for each segment. This is what is meant by "repeated
application" or to repeat the analysis over and over, once for each
segment.
How do you market your product: I think of the Porter analysis as a
tool to be used when evaluating whether or not to enter a new
industry. (I suppose it could also be used to evaluate if you should
leave an existing industry in favor of another). I do not think of it
as a way to market your product. A complete answer on marketing your
product is beyond the scope of this question. However, briefly, to
market a product (you indicate that your product already exists) here
are some things you should look at in your Marketing Plan.
Identify customers who need your product.
Determine a price for your product based upon prevailing market
forces.
Differentiate your product: How is your product better than the
alternatives.
Communicate to your customers: Publicity and advertising.
Sales and Distribution: Do you sell directly to customers, to
resellers, etc.
Production and Inventory: How much demand do you anticipate for
your product?
Those are the highlights.
Finally, when can "market" and "industry" be used interchangeably
without confusing their meaning? I think the question itself
indicates the confusion that arises when these terms are used as
synonyms. While I can think of times when I've heard people say
industry when they mean market, or the reverse, I can also find
numerous examples of times when these terms are discussed as distinct
and separate things. I have included articles here that may, in
context, help to clarify how these terms are used in various
situations.
Example of "market" being used in place of "industry":
http://thewhir.com/features/positive-results.cfm
"Three of the bigger players in Europe's Web host market released
their quarterly earnings last week, and all of them saw a largely
positive reaction from markets."
This is an example where the players in the web host market are also
the players in the web host industry. Either term could be used in
that case.
Examples of "market" and "industry" as related, but, distinct terms:
FT.com Industry and Market Research
http://askft.ft.com/askFT/industry_market.html
"askFT's industry and market research explains the trends, activities
and developments within sectors, providing you with the knowledge to
exploit business opportunities fully.
[...]
Tracking industry events and activity is an essential part of
understanding a market."
This is an example of where industry is identified as a piece of the
market, not an entire market.
I hope this has helped to clarify things. In order to avoid
confusion, I believe it is important to keep the differences between
"market" and "industry" in mind, rather than to focus on using them
interchangeably. It is important to me that I help you understand the
answer. Please let me know if I can be of additional assistance. In
addition, I will continue to search to see it their are alternative
perspectives on this that might further clarify this matter.
|
,
0 Comments
)