As a part of the external environment, the industry environment is closer to the business people and firms and has a more direct effect on them relative to the general environment. Industry can be described as a group of companies that produce similar products which are close substitutes. These companies fight for the same customer acceptances for their similar products. The important factors in the industry environment are the customers, suppliers, competitors, substitutes and the labor market.
Customers: Customers are the potential buyers of the products that are supplied by the firms in the industry. They acquire the goods and services produced to satisfy their particular needs. Managers and business people consider the potential customers together with their particular needs. Three major groups of customers are: consumers, retailers and wholesalers, and Industrial or institutional buyers. The companies monitor the customer needs and wants and select a target market to develop a marketing mix that will eventually satisfy the customer groups.
Suppliers: Suppliers are the individuals or organizations that provide the raw materials, semi-finished and finished products that the company uses to produce its goods and services. In their operations companies also may be in need of money, credit, energy, counseling, and knowledge. The provider of such items is also considered within this segment. The quality of the outputs that a firm produces Is very much dependent on the raw materials supplied from external sources, that is, from the suppliers. Therefore the relationship between the producers and the suppliers is the key to maintaining quality, to speeding up the products in time, and to reducing the costs of producing.
Competitors: Competitors are other individuals and organizations in the same industry that produce similar goods and services for the same group of customers. The organizations producing the similar goods for the same customers make battle among themselves to make more sales in order to get a larger market share. The battle to win more customers can be made in pricing, promotion, innovation, distribution, and in all other primary and support activities of the businesses. Competitors always monitor each other and retaliate others’ moves. Despite the competitive battles, nowadays, some competing companies are finding that they can collaborate to achieve common goals.
Substitutes: Substitutes are the goods and services that may replace or can be used in place of company’s products. While monitoring the competitors’ products, activities and moves, managers should also closely study the effect and availability of substitutes existing in the Industry. Due to any environmental changes, customers may change their demand and purchasing behavior from the original products to substitutes. Therefore the substitutes can be seriously monitored and controlled like the similar products of the competitor.
Labor Market: One of the important factors of production is human resources. Companies need to hire personnel to achieve their goals. People In the environment available for hire by the business organizations best describes the labor market. To organize the appropriate and effective labor supply to the market is one of the challenging issues in the various industries. Therefore it is necessary to make continuous investments in human resources through recruitment, education and training to meet the competitive demands of the business world. Besides the blue-collar and white-collar workers and managers in all hierarchical levels In organizations, unions, employee associations, human resource recruiting companies are some of the actors to be counted in the labor market.
