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BUSSPP 0200 Lecture 7Outline of Last Lecture I. Recap: Central Thesis II. A thorough investigation of riskIII. Sources of moneyOutline of Current Lecture I. What is an Industry? II. How do we analyze an industry?Current LectureI. What is an Industry? A. Collection of firms in a very similar kind of business1. Gut level: if it looks like/sounds like/walks like a duck… a. Food (SOME examples) – are these all in the same industry? i. Growingii. Distributioniii. Manufacturingiv. PreparationB. Industries can be nested 1. Industries can exist within industries a. Entertainment? – Sports, Music, Movies… i. Sports… (how many sports are there?!) -Industries within sports… C. Industries can be official 1. Governments have to be able to refer to them 2. SIC – Standard Industrial Classification a. Assigns a 6 digit number (first 2 being general category) i. Second 2 digits: Industry within the industry -Next 2: industry within industry within industry 3. NAICSThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.D. IN PRACTICE: These systems aren’t so good 1. Substitutability a. Supply Side i. Seller perspective ii. Looking in broader range -Who sells x? -Who could sell x in the future? iii. Sellers know more than buyers b. Demand Side i. Buyer’s perspective ii. Here and now -In market to purchase x -Who sells x? (From your perspective) **This is your industry 2. Buyers and sellers are likely to define the industry differently a. Different sellers are likely to define the industry differently b. Different buyers are likely to define the industry differently E. Takeaways 1. Sense of industry a. Gut feeling i. Nesting ii. Official code a. In practice: i. Perception of the market is idiosyncratic from your perspective and experience ii. Differs between buyers and sellers II. Analyzing an Industry A. Systems (MANY) 1. Porter 5 Forces Model a. Empirical observation i. some industries appear to be more profitable than others b. Porter: there has to be a reason why industry x makes MUCH more i. 1980: publishes a book2. Porter defines an industry by 5 forces: a. Competition among rivals b. Customer power c. Supplier power d. Threat of new entrance e. Threat of


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