Industry Analysis

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In this article we describe the Industry Analysis, often used in order to map out the external environment of a business.

In this article you can expect:

Summary of Industry Analysis

Industry Analysis is used in order to map out the external environment of a business. It is a component of Situational Analysis, CICD Analysis and External Analysis. The output from the Industry Analysis serves as input for SWOT Analysis. Conducting an Industry Analysis enables a business to respond to opportunities and threats that the industry entails.

What is Industry Analysis?

Industry Analysis is a component of Situational Analysis and is used in order to map out the external environment of a business. What kind of influence does the market play on the business? The opportunities and threats that emerge from this serve as input for the SWOT Analysis on which the ultimate choice of strategy is based.

Why Industry Analysis?

Conducting Industry Analysis gives insight into the attractiveness of the market where the organisation is active. It also offers the possibility to identify opportunities and threats from the industry.

What does the Industry Analysis consist of?

Industry Analysis follows a clear structure.

  1. Macro-environment factors - DESTEP
  2. General market factors
  3. Competition in the market

1. Macro-environment factors

Utilise the DESTEP Analysis to map out the macro environment. Which macro-environment factors influence the market wherein the organisation is active and determine the market’s attractiveness? What kind of influence do these factors have and are these opportunities or threats for the organisation? This component should provide answers to these. For each factor the past and the present situation must be described and following this a future expectation must be given. Describe only factors that have influence over the organisation. It is not necessary to write down the entire macro-environment analysis. That takes too much time and deals with many opportunities and threats that would have no influence over the business. Finish off with a number of opportunities and threats. Read more on DESTEP here.

2. General market factors

Here variables need to be described that render the attractiveness of the market. Think of market size, cost structure, growth, lifecycle, trends, cyclicality and seasonality. Formulate a number of opportunities and threats according to the description of these factors .

3. Competition in the market

It is important to understand the distinction between competition and competitors analysis. In a marketing plan both must be analysed. A part of this is analysed in the Industry Analysis, namely, the degree of competition in the market where the organisation is active. The other part: the competitors’ behaviour should be analysed in the separate component of competitors analysis.

Porter’s Five Forces Model provides a good indication of the degree of competition in the market where the organisation is active. Furthermore, a number of seperate factors need to be included such as, e.g. the profitability, degree of concentration of suppliers, the degree of product differentiation and the likes. These factors should result in a number of opportunities and threats.

Read more on Porter’s Five Forces Model here.

Conducting the Industry Analysis

Work only with factors relevant in DESTEP. Follow a clear structure, tis recommendable to divide the Industry Analysis into:

  1. Macro-environment factors - DESTEP
  2. General market factors
  3. Competition in the market - inter alia Porter’s Five Forces Model

Marketing Implications

Industry Analysis is a marketing tool with which research can be easily done on the way a business can effectively respond to its environment. It is up to the marketer to put a good adjustment to work. Findings from the Industry Analysis are often used as input for a SWOT Analysis and are a component of the Situation Analysis and the marketing plan. Example of Industry Analysis An Industry Analysis can appear as follows:

Section X - Industry Analysis 

  • 3.1 MACRO-ENVIRONMENT FACTORS
  • 3.1.1 Demographic factors
  • 3.1.2 Economic factors
  • 3.1.3 Social-cultural factors
  • 3.1.4 Technological factors
  • 3.1.5 Ecological factors
  • 3.1.6 Political-judicial factors
  • 3.2 GENERAL MARKET FACTORS
  • 3.2.1 Market size
  • 3.2.2 Market growth
  • 3.2.3 Product lifecycle
  • 3.2.4 Cyclicality and seasonality
  • 3.3 COMPETITION FACTORS
  • 3.3.1 Profitability
  • 3.3.2 Porter’s Five Forces Model

 

About the author

Edwin Muilwijk

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