Industry Analysis

What is an Industry Analysis?

An industry analysis is a process that provides statistics about the market potential of business

products and services. This section of the plan needs to have specific information about the

current state of the industry, and its target markets. An industry analysis may contain reference

materials such as spreadsheets, pie charts, and bar graphs in order to represent the data.

STEP 1:  Identify the Industry and provide a brief overview. Explore the industry from a

variety of geographical considerations: locally, regionally, provincially, nationally, globally, etc.

Be sure to define relevant industry codes. Provide statistics and historical data about the nature of

the industry and growth potential for the business, based on economic factors and conditions. Eg.

of industries are Oil and Gas, Metal, Information Technology, Automobile, Financial Services,

Infrastructure, Pharmaceuticals and Consumer durables. An industry has sub-parts. For example,

the chemical industry will have sub-industries like Fertilizers, Pesticides, Paints, Varnishes and

Organic chemicals. Therefore, it is important to focus on the relevant industry. Without this, it

will be impossible to draw an accurate industry analysis report. So, take up an industry and find

out the sub-industries. Select the one which suits the requirements

STEP 2:  Summarize the nature of the industry. Include specific information and statistics about

growth patterns, fluctuations related to the economy, and income projections made about the

industry. Be sure to document recent developments, news, and innovations. Also, discuss the

marketing strategies, and the operational and management trends that are prevalent within the

industry.

STEP 3: Provide a forecast for your industry. Compile economic data and industry predictions

at different time intervals (5, 10, 20 years). Be sure to cite all the sources of information. The

industry analysis should be specific to a particular industry and thus, it is important to focus and

understand the industry dynamics. The industry analysis should be in-depth and to-the-point. For

example, if the analysis is about aluminum industry, know the per capita consumption in the

country. In India, the per capita consumption of aluminum is 1 Kg, in USA, it is 25 to 30 Kgs, in

Japan, it is 15 Kgs and in Taiwan, it is 10 Kgs. Apart from the consumption, also know the

production of aluminum worldwide.

STEP 4: Identify government regulations that affect the industry. Include any recent laws

pertaining to the industry, and any licenses or authorizations needed to conduct business in the

target market. This section may include information about fees and costs involved.

STEP 5: Explain the unique position within the industry. After conducting the Competitive

Analysis, list the leading companies in the industry, and compile an overview of data of direct

and indirect competition. This will help in communicating unique value proposition. This is the

most important step of any industry analysis. In this, it is required to study the competitive

scenario using Porter’s Five Forces Model.

The model acts as the framework of industry analysis. Michael Porter, a famous strategist and

author, first came up with this model. In this model, five parameters are analyzed to see the

competitive landscape.

They are:

1. Barriers to Entry

2. Supplier Power

3. Threat of Substitutes

4. Buyer Power

5. Degree of Rivalry

STEP 6: List potential limitations and risks. Write about factors that might negatively impact

the business and what is foreseen in the short-term and long-term future. The analyst needs to

incorporate influencing factors at the macro-level. These macro-level factors include recent

industrial developments, innovation in the industry analysis report, sector valuations and global

comparative valuation

Content of Industry Analysis:

Overview of the industry

Industry Size and Growth Trends

Maturity of the Industry

External Economic Factors and their Effect on the Industry

Seasonality

Technological Factors

Regulatory, Political, and Legal Concerns

Competitive Environment and Changes in the Competitive Environment

Key Challenges facing the Industry

How to address the challenges

References