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05 What is industry analysis?

by Aishwarya

Have you ever wondered how your company compares with other retailers or manufacturers in your industry? How do you stack up against the likes of Apple, Costco and Amazon? One thing that all successful businesses share is an intense understanding of the industry in which they operate.

What is industry analysis?

Industry analysis is a systematized method of research to investigate an industry. It focuses on some relevant aspects that companies face in their operational environment. The result of the industry analysis helps business owners in terms of planning and strategic decisions making. Industry analyses can provide valuable insight into how a company’s customers, competitors, and broader economic environment relate to one another. It is a thorough look at how a company is positioned to react and prosper in its market. Industry analysis is extremely important since it will help you determine how to compete with the largest corporations in your industry.  Industry analysis is necessary when you are planning a new product or launching a new company.

How industrial analysis can be extremely helpful for your business?

Businesses of all sizes and fields from retail to manufacturing use industry analysis to collect information about their markets or other factors that will affect the success or failure of a business. It is either conducted as independent research or as a component of the main business plan. Although industry analyses cannot guarantee success because they can be subjective, they can help you to make informed business and market decisions.

What all things are calculated for a complete industrial analysis?

In a typical industry analysis, the following types of assessments are made:

  • Check for ways your company can adapt to the current and historical trends of the industry.
  • Projections of supply and demand
  • Analyse the potential financial returns of businesses to see if they are worth investing in.
  • Assess the competitiveness of an industry
  • You will need to research the current state of the industry to understand its direction. Observe the market to see if it is growing or getting oversaturated.
  • Discover a need for new products or services and start looking for creative ways to meet the demand. This step will help you find new opportunities and niche markets.
  • You may want to know how the company is doing financially. Hence, get a better idea of the economic health of a company.
  • Prepare a report to show the stakeholders the profits and benefits they could make with an investment.
  • Give suggestions and corrective measures to be incorporated for plans. This could include something as small as discussing the delivery challan format in excel to something as big as revisiting the company’s business plans.
  • Assess the latest announcements by GST council members and how it impacts your industry and company. Click here to stay updated.

What are the different types of industry analysis?

There are several approaches to industry analysis that you can use, based on the goals of your analysis and the focus questions you have in mind. Some types of industry analysis are quantitative and use mathematical analysis of data. Others can be qualitative and use experience and individual analysis of data. The most popular types of industry analysis include:

  1. Competitive forces model: This method relies on Porter’s five forces to analyse the factors that often influence a market. The five factors include
  1. Threat of substitution
  2. Bargaining power of buyer
  3. Bargaining power of supplier
  4. The threat of new competition
  5. Rival analysis
  6. Broad factor analysis: This includes an analysis of important political, economic, social and technological aspects.
  7. SWOT analysis: This includes an analysis of the four important factors for any industry namely, strengths, weaknesses, opportunities and threats.

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