Studying competition and market trends is essential for businesses to assess the market and form a business plan. Industry analysis reports help investors and stakeholders assess the potential of a venture and identify barriers to market entry.
This article will show you what an industry analysis is and how to write one.
What is an Industry Analysis?
Industry analysis is a method for displaying a company’s position in relation to other businesses offering comparable services and goods. Business analysts use it to examine market competition, and aid businesses in understanding opportunities, threats, and the demand-supply curve.
An industry analysis presentation helps business owners devise strategies and formulate a business plan based on the analysis. Here are some advantages of making an industry analysis for each new company:
- Aids in the analysis and reduction of business risks.
- Identify market trends and business opportunities.
- Determine any possible threats to the market.
- Demands for project financing for setting up an industry.
- Determine current product and service trends.
Types Of Industry Analysis
#1 Competitive Forces Model:
The intensity of industry rivalry is directly affected by the number of participants in the industry and their respective market shares. The threat of potential entrants is determined by the ease with which new firms can enter the market, the bargaining power of suppliers, the bargaining power of buyers, and the threat of substitute goods/services. Additionally, a lack of differentiation in products tends to add to the intensity of competition, while high exit costs such as high fixed assets, government restrictions, labor unions, etc. also make the battle a little harder.
Furthermore, the bargaining power of suppliers can influence the quality and price of the final product, while the bargaining power of buyers can influence the quality and price of the final product. Note that the threat of substitute goods/services can take two forms: products with the same function/quality but a lower price, or products of the same price but of better quality, or providing more utility.
#2 Broad Factors Analysis:
This analysis considers political, economic, social, and technological factors that impact an industry. Political factors include taxes, environmental regulation, tariffs, trade policies, labor laws, ease of doing business, and overall political stability. Economic forces include inflation, exchange rates, interest rates, GDP growth rates, and capital markets. Social factors include population growth, demographics, and trends in behavior. Lastly, technological factors include advancements and developments that change the way a business operates and people live their lives.
#3 SWOT Analysis:
SWOT analysis is a way to summarize industry forces and determine their implications for a business. Additionally, it has two important factors, which are: internal factors and external factors. Internal factors are factors that already exist and may continue to exist, while external factors are contingent events that can happen and have a potential impact. Note that the management of a business must have the intention and ability to take advantage of the opportunity or avoid the threat.
Why Is Industry Analysis Critical for Your Business?
By gaining a competitive advantage in their specialized markets, Facebook, Uber, and Google have experienced phenomenal business success. Before new and improved social media platforms rendered companies obsolete, MySpace dominated the social media industry. Therefore, businesses should conduct industrial analysis to keep up with innovation and the constantly shifting dynamics of the industry if they want to remain competitive.
Now that we’ve discussed what industry analysis is and the advantages it offers! Let’s proceed and learn how to conduct an industry analysis.
How Do You Do an Industry Analysis?
#1. Conduct background research:
To comprehend your market, do comprehensive background research on your sector and rivals. Firstly, you must decide whether you want to investigate every aspect of your industry or just one particular segment. Next, choose the queries you want your analysis to address, such as how your competitors behave, the expansion of the market, or industry standards. Lastly, make a list of your rivals and look into how to get access to research on them.
#2. Collect your data:
Gather information to help you comprehend the marketplace and your rivals. To understand recent market trends, look at the most recent industry analysis reports from your business or others that are currently available. Additionally, to find out about competitors’ profits or target market segments, you can also look at their advertisements, promotional materials, product placement in stores, and publicly available financial information. Therefore, to learn more about the sector or any other topics for which you require more information, you may additionally use reputable sources like government statistics and data, marketing reports, and journal articles.
#3. Analyze your data:
Utilize one kind of industry analysis model to examine the information you have gathered. This step allows you to compare your products or marketing initiatives to those of your rivals. Additionally, you can also assess how your advantages stack up against those of your rivals by contrasting them. When analyzing data, consider variables that could have an impact on the results, such as:
- Market effects of globalization
- Client preference
- Regulatory framework
- Effects of technological advancements
- Expected market expansion
#4. Write your analysis:
To make your research easy to read and distribute, display your analysis in a written report. To write and publish your findings, you might use a template that includes the following:
- Introduction: Start your introduction with a summary of your sector, the competition, earlier discoveries, or emerging trends.
- Aim: Clearly state the goal of your analysis and include any clarification-enhancing questions or context.
- Data: To provide context and points of reference for your analysis, showcase the data you gathered in words, charts, and graphs.
- Analysis: Summarize your conclusions and respond to the aim section’s questions.
- Future: Describe the analysis’s short- and long-term effects on the company and discuss any issues that might develop as a result of the conclusions.
- Summary: A three- or four-line summarization of the entire report should be included.
- Edit: Before publication and distribution, reread and edit your report.
#5. Evaluate your business:
Use your report, especially the analysis section, to determine the company’s course concerning your area of focus. For instance, if you performed an industry analysis to determine how quickly a competitor is expanding their business and discovered that they are doing so at a rate of 10% annually, you may decide to look for ways to increase growth within your own business. After finishing your analysis, if you still have unanswered questions, you can conduct a second analysis that concentrates on a different industry factor.
What Does Industry Analysis Tell You?
An entrepreneur or business can use industry analysis as a method to better understand where their company stands concerning other industry players. Furthermore, it gives them a clear understanding of the current and future state of the industry and assists them in identifying both opportunities and threats that may affect them. Therefore, understanding and utilizing the differences between yourself and your industry competitors will help you survive in this constantly shifting business environment.
What Is the Main Purpose of Industry Analysis?
It’s crucial for businesses to conduct industry analysis to understand how the market impacts their operations. Although industry analyses can offer a framework for seeking out knowledgeable market and business decisions, they may be subjective and thus do not always guarantee success. These kinds of evaluations can assist businesses in:
- Recognize the historical and current trends in your industry.
- forecast reports on supply and demand
- Identify a business’s potential financial returns.
- Showcase the industry’s level of competition.
- Determine the industry’s current state, including any growth or market saturation.
- Identify new business opportunities and niche markets.
- Show the business’s financial standing.
- Display the advantages of investment to all parties.
- Offer advice or suggestions for improving upcoming plans.
Is SWOT Analysis the Same as Industry Analysis?
Despite their similarities and potential use in tandem as part of a thorough business analysis, SWOT analysis and industry analysis are not the same thing.
Industry analysis is used to gain a comprehensive understanding of an industry’s dynamics and trends, while SWOT analysis is a strategic planning tool used to evaluate the strengths, weaknesses, opportunities, and threats of a specific business or project. It involves identifying the internal and external factors that can affect the business or project and evaluating them based on their potential impact on its performance.
Furthermore, a SWOT analysis is not the same as an industry analysis, even though it can be used as a component of one. While a SWOT analysis specifically focuses on the advantages, disadvantages, opportunities, and threats of a specific company or project, an industry analysis offers a more comprehensive view of the industry as a whole.
In conclusion, SWOT analysis and industry analysis are both crucial business tools, but they have different goals. While SWOT analysis specifically focuses on the strengths, weaknesses, potentials, and threats of a particular business or project, industry analysis offers a more comprehensive view of the industry.
Can SWOT Be Used for Industry Analysis?
SWOT analysis is a framework used to assess a company’s competitive position and to create strategic planning. It stands for strengths, weaknesses, opportunities, and threats. The SWOT analysis evaluates internal and external variables as well as present and potential future situations.
A SWOT analysis is intended to help you take a practical, fact-based, and data-driven look at the advantages and disadvantages of a company, its initiatives, or its sector. Therefore, the organization must avoid preconceived notions or gray areas and concentrate on real-life contexts to maintain the analysis’s accuracy. Note that companies should use it as a reference rather than a strict prescription.
What Is an Example of Industry Analysis in Business?
The following could serve as an illustration of industry analysis in the bakery sector:
#1. Market size and growth:
Ascertain the size and growth rate of the bakery industry as the first step in industry analysis. Data on the number of bakeries, total industry revenue, and any trends in consumer demand for bakery products may be examined in this regard.
#2. Competition:
There are many small and large participants vying for market share in the fiercely competitive bakery sector. Therefore, the competitive environment, including the market shares of major players, the kinds of products offered by various bakeries, and the pricing strategies employed by various bakeries, would need to be assessed in an industry analysis.
#3. Technological developments:
The development of online ordering systems and the use of computer-controlled baking equipment have both had an impact on the bakery industry. Therefore, the effects of these technological developments on the industry would need to be evaluated, and any new trends or technologies that could upend it in the future would need to be identified.
#4. The regulatory landscape:
Several laws, such as those governing health and safety and food labeling, apply to the bakery industry. Therefore, the effects of these regulations on the industry would need to be assessed, and any potential future changes in the regulatory environment would need to be identified.
#5. Consumer trends:
The final step in conducting an industry analysis would be to assess consumer trends in the bakery sector. This could entail studying consumer preference data, spotting new trends in bakery goods, and figuring out how shifting consumer habits will affect the market.
Overall, a thorough understanding of the dynamics and trends of the bakery industry would be provided by industry analysis, enabling bakery businesses to make wise decisions about their operating plans, financial investments, and marketing strategies.
What Are the Important Factors of Industry Analysis?
#1. Past Sales and Earnings Performance:
The past sales and earnings performance of a firm is essential for forecasting future trends. The analyst is interested in examining the contribution of various factors in the past to evaluate their relevance under present conditions. Additionally, sales and earnings play an important role in any firm, as they will exhibit a degree of consistency when the firm has weathered a variety of economic conditions. The relationship between sales and fixed costs is also important, as the higher the fixed costs, the higher the break-even point and the higher the sales volume to be achieved.
#2. Permanence:
Permanency is the ability of a product or technology to not become obsolete in a short period of time. In this age of rapid technological developments, this factor plays a crucial role in industry analysis. Additionally, the government’s role is also an important factor affecting the permanence of the industry.
#3. The Government’s Position on Industry:
An analyst should be aware of the various government policies and regulations with regard to the industry in which they are going to invest. These policies, such as the deregulation of industry, imposing high tariffs on imports, and enacting restrictive legislation, can harm the industry’s performance. Therefore, an effective corporate trainer should be able to predict the changes likely to take place in the regulations shortly.
#4. Labor Conditions:
Analysts should consider labor laws and possible reasons for halting production, as prolonged strikes can lead to loss of customers and goodwill as well as not being able to cover fixed costs. This is important for labor-intensive firms.
#5. Absolute Cost Advantages
Finally, it is important to note that existing firms can produce and distribute products at lower costs than new entrants, resulting in wider profit margins due to exclusive patents, resources, and superior management skills.
How to Do Industry Analysis of a Company?
The Step-By-Step Checklist is a tool for businesses to identify their industry and provide a brief overview. It includes defining relevant industry codes, providing statistics and historical data, summarizing the nature of the industry, providing a forecast, identifying government regulations that affect the industry, explaining their unique position within the industry, listing potential limitations and risks, and talking to people. It can be done on a local, regional, provincial, national, and/or global level.
What are Industry Analysis Frameworks
A competitor analysis framework is a structure used by business professionals to research and evaluate their competitors. It gathers vital information such as a competitor’s business strategies, products, offerings, marketing efforts, sales, etc. into an organized visual model.
What is Industry Analysis Business Plan
The industry analysis section of a business plan should include statistics about the size of the industry, the major industry participants, and trends that may affect the industry. This information can be obtained from trade associations, industry publications, government databases, data and analysts’ opinions, industry reports, and company filings.
What is The Coffee Industry Analysis
An overview of what a study of the coffee industry might include is given below:
#1. Market size and growth:
Finding out the size and growth rate of the coffee industry would be the first step in a thorough industry analysis. Data on the number of coffee shops, the industry’s overall revenue, and any trends in customer demands for coffee-related products may be examined in this regard.
#2. Competition:
There are numerous small and large players vying for market share in the fiercely competitive coffee industry. The competitive environment, including the market shares of major players, the categories of products offered by various coffee shops, and the pricing strategies employed by various coffee shops, would need to be assessed in an industry analysis.
#3. Technological advancements:
Technological developments, such as the use of automated brewing equipment and the creation of online ordering platforms, have an impact on the coffee industry. The effects of these technological developments on the industry would need to be evaluated, and any new trends or technologies that could upend it in the future would need to be identified.
#4. The regulatory landscape:
Numerous laws, such as those governing health, safety, and food labeling, apply to the coffee industry. The effects of these regulations on the industry would need to be assessed, and any potential future changes in the regulatory environment would need to be identified.
#5. Consumer trends:
The final step in conducting an industry analysis would be to assess consumer trends in the coffee sector. This could entail studying consumer preference data, spotting new coffee product trends, and evaluating how shifting consumer habits are affecting the market.
How to Conduct Industry Analysis
The most important details in conducting an industry analysis are to define the industry, collect data, analyze the competition, evaluate market trends, identify opportunities and threats, conduct a SWOT analysis, and draw conclusions. Gathering and analyzing data from a variety of sources is essential for gaining a comprehensive understanding of the industry and identifying opportunities and threats for businesses operating within it.
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