In this piece, we will take a look at the ten most competitive industries in the world. If you want to skip our analysis of industry competitiveness and how it extends to other areas as well, head on over to 5 Most Competitive Industries in the World.
While capitalism is the heart of the economy, competition is the root of capitalism. The business world is a cut throat environment where you are either on the top of your game or are relegated to the bottom of the table if not explicitly kicked out of. the game.
The economy itself is full of countless different industries, each with its own dynamics. Some industries, such as aircraft manufacturing, have only a handful of players worldwide while others such as software have thousands of different players. At the same time, each industry is different in its set of requirements for success. For instance, while cardboard box manufacturing can only innovate so much and rely on high technology for progress to a certain extent, semiconductor fabrication often sees new products remain in the pipeline for years before the factory lines are prime for mass production.
These industries are also segmented both by the size of their revenue pie and by the cents that a firm can actually earn on a dollar. In accounting terms, the former is called revenue and the latter is called profitability. And both, are important for stock market performance. For instance, one of the world’s biggest ridesharing platforms, Uber Technologies, Inc. (NYSE:UBER), is yet to turn a profit and continuously posts net losses as it invests in research and development along with other endeavors. In terms of money making though, the biggest industries are the traditional giants such as real estate. In fact, data from the Bureau of Economic Analysis (BEA) shows that the biggest money making industry in the U.S. is real estate and rental and leasing, with an output of $48 trillion as of the fourth quarter of last year. In the second place, despite the crisis in U.S. operations that has seen firms shift overseas, is manufacturing with a combined output of $7.3 trillion during the same time period.
Competitiveness is not limited to industries either. It also exists in the labor market, where some roles see more demand from candidates than others and as a result have a higher number of applicants applying. And one industry that has been competitive for quite a while when attracting talent is the information technology industry. This sector has seen considerable interest over the past two decades, especially due to the growth in personal computing, the Internet, and the technology industry in general. However, the question to ask is, are IT jobs still competitive? Well, that might not be the case if we consider data from the keyword search platform Semrush. It shows that when the fastest growing company job pages globally are analyzed between January 2021 and March 2023, only one information technology firm makes the list of the top ten. Based on this data, we can also wager a guess at the most competitive careers, with some top ones being insurance, industrial machines and equipment, service, and energy jobs being competitive when user interest is considered. Narrowing our focus down to specific roles, some competitive careers that are picking up interest are farm ranch managers and aircraft structure assemblers.
Shifting our focus back to the corporate world, a great tool to analyze competitive industries is Porter’s Five Forces model. This model lays out five determinants of competition. These are the number of firms in an industry, the number of substitutes available to the customer, the number of suppliers, the barriers to entry, and the number of customers that a firm has. Together, we can use them to see which industries are competitive and which are not. For instance, the finance industry has a lot of firms, a lot of customers, nearly similar products available at competitors, and relatively low barriers of entry in terms of capital expenditure. So, it’s safe to say that finance is a highly competitive industry.
On the flip side, let’s take a look at the industry for high end chip manufacturing equipment. There is only one company in this industry, namely ASML Holding N.V. (NASDAQ:ASML). Therefore, the number of substitutes is zero, the barriers to entry are high in terms of expenditure and technological prowess, the number of customers is a lot more than the competitors, and there are no competitors. In fact, only suppliers have some bargaining power since they are also not numerous. Naturally, it’s safe to assume that when compared to finance, semiconductor manufacturing equipment is relatively less competitive.
So how is business going for ASML? Well, here’s what the firm’s management had to say during its latest earnings conference:
Logic customers are also moderating wafer output for some market segments, while demand continues to be strong in other markets, especially in markets requiring more mature nodes. Despite this, both logic and memory customers are still following their technology roadmaps and continue making strategic technology investments.As a result of this market dynamic, we do see customers making adjustments to demand timing relative to last quarter. However, we also see other customers more than willing to absorb this demand change [EMPHASIS OURS], particularly in Deep UV. For example, Chinese domestic customers focusing on mid-critical and mature applications, which make up over 20% of our backlog at the end of Q1, are now expected to grow to a similar allocation of our system revenue this year.After taking these demand adjustments over the quarter into account, our system demand still exceeds our capacity for this year, albeit by a smaller margin than in the last quarter and as a reference, during 2022, the demand for Deep UV was 50% higher than our build capacity, while this gradually reduced from 30% at the end of Q4 2022 to 20% at the end of Q1 2023.As Roger mentioned, we saw orders moderate in Q1 after several quarters of very strong bookings.
With these details in mind, let’s take a look at some of the most competitive industries in the world, with some examples being software and electronics.
Pixabay/Public Domain
Our Methodology
To compile our list of the most competitive industries in the world, we borrowed from Porter’s Five Forces model and selected industries that have the most number of firms operating in them. The logic is that the higher the number of companies, the harder it is for them to attract and retain customers and both suppliers’ power and the threat of entrants are high. The number of firms in an industry comes courtesy of data from Professor Aswath Damodaran of the New York University’s Stern School of Business.
10 Most Competitive Industries in the World
10. Apparel
Estimated Number of Firms: 1,146
The apparel industry is notorious for being highly competitive. Companies, particularly those in the fast fashion industry have to contend with rapidly changing trends and have to manage a global supply chain to adapt it to a change in demand and customer tastes at what is a moment’s notice when it comes to logistics flexibility. At the same time, the ease of sourcing from numerous suppliers also saturates the market with a large number of players – driving down margins and increasing customer power.
9. Biotechnology
Estimated Number of Firms: 1,267
The biotechnology industry is one of the most technology intensive industries in the world. It involves using biological raw materials to create pharmaceuticals, medicines, and vaccines – a no easy feat that often requires researchers toiling away in labs for months before a breakthrough is possible. The industry also requires hefty capital investment and long wait times before a product can be commercialized to earn money and recuperate the investment.
8. Engineering/Construction
Estimated Number of Firms: 1,269
The engineering and construction industry is the bedrock of modern day civilization. Whether it’s skyscrapers, roads, airports, or even a simple house, humans are able to achieve a lot more due to their progress. At the same time, the mechanics of the industry, such as structural engineering and architectural design remain mostly the same, providing firms with fewer opportunities to differentiate themselves from competitors. This also provides customers with plenty of options to choose from.
7. Pharmaceuticals
Estimated Number of Firms: 1,352
On the opposite side of biotechnology is pharmaceutical industry. While biotechnology often sees customized drugs that only a few can make, pharmaceuticals as a whole are full of generics that are easy to make and are virtually the same even if a different brand name is slapped on them. This provides ample opportunities for a lot of firms to enter the market and also reduces profit margins. Additionally, while treatments for diseases such as thalassemia are rare, generics provide customers with plenty of substitutes.
6. Food Processing
Estimated Number of Firms: 1,397
The food processing industry sits at the heart of human well being. It involves transforming raw materials, such as corn or wheat crops into edible products such as flour or biscuits. Like generic drugs, this provides little room for differentiation and a lot of substitutes due to easily available and generic products.
Click to continue reading and see 5 Most Competitive Industries in the World.
Suggested Articles:
- 13 High Growth Pharma Stocks that are Profitable
- Top 10 Drug Companies in USA
- 10 Best Industrial Machinery Stocks to Buy
Disclosure: None. 10 Most Competitive Industries in the World is originally published on Insider Monkey.
