Defining the industry in which competition
actually takes place is important for good industry
analysis, not to mention for developing
strategy and setting business unit boundaries.
Many strategy errors emanate from
mistaking the relevant industry, defining it
too broadly or too narrowly. Defining the industry
too broadly obscures differences
among products, customers, or geographic
regions that are important to competition,
strategic positioning, and profitability. Defining
the industry too narrowly overlooks commonalities
and linkages across related products
or geographic markets that are crucial to
competitive advantage. Also, strategists must
be sensitive to the possibility that industry
boundaries can shift.
The boundaries of an industry consist of
two primary dimensions. First is the
scope of
products or services
. For example, is motor oil
used in cars part of the same industry as
motor
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