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 Porters 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