Industry analysis is an element in a proper business plan that provides statistics about the market potential of your business, products, and services. Include specific information and statistics about growth patterns related to the economy and income estimates related to the industry.
Industry analysis is a business action performed by the business owner and other people to evaluate the current business environment. This analysis helps to understand the various economic pieces of the business market and how these different pieces can be used to gain a competitive advantage.
An industry profile is a report or collection of business-centric data that outlines and describes key elements of that area. Profiles often provide industry overviews and can predict future trends.
Industry analysis in a business plan –
There are some decisions that require a lot of thought. You cannot simply resort to “rocks, scissors, and paper” to decide in this national case.
There is a lot of thought, analysis, debate behind this nationally important decision. The same situation was the situation with Luke and his wife, Daisy. They made this big decision to buy a new home.
They analyzed different zones and bungalows and buildings and flats. Eventually, they shortlisted a small house and the papers went to work. Luke analyzes all the positives in the area and the opportunities around it.
Daisy, on the other hand, is having a hard time. Since this is his biggest decision since his marriage, he is going nuts. She has nightmares for everything possible that could go wrong with a home and a new place.
But nothing wrong with them and they are living happily in their new home. Luke, being a wise man, made some accurate analysis and predictions.
He calculated the probability and future potential of that area and came up with a positive outlook. Impressive right? But do you want to know a little secret?
Luke has some amazing analytical skills. Then the question is, where did he get such a national skill? Is it hereditary? Or has he evolved over time?
The answer is Luke Warren is a big fan of Buffett. He has been investing in the stock market for a long time and is doing quite well as well.
How do you think he was able to buy a new home so beautiful? Before investing in any company, he did some good analysis of that sector and industry.
He came up with his own industry analysis report and then decided whether to invest in that sector or company.
So let’s use Luke’s analytical skills and gain insight into what industry analysis is and how to perform it in a business plan. So let’s learn the basics of industry analysis.
What is industry analysis in a business plan?
Before starting with the true meaning of industry analysis in a business plan, first, let’s understand what an industry is.
The industry is that competitors produce a similar product or provide similar service to their customers a
So the next question is, why are we studying that industry?
To ensure that it is the best industry or the worst industry to enter or invest in.
Industry analysis of a business plan is a tool that enables a company to understand its position in producing similar products or services relative to its position relative to other companies.
When implementing the strategic planning process, an organization must understand the forces operating in the overall industry.
So the process of industry analysis in a business plan enables the business to identify their threats and opportunities.
It helps them focus their resources on developing unique competencies that can help them gain competitive advantage.
Understanding the industry and forecasting trends and directions for future industry analysis inform companies that they need to respond and control their part in the industry.
Key elements of industry analysis in a business plan
1. Understand the underlying forces in the workplace
- Competition is intensifying
- Changing customer needs and tastes
- Technological innovation
- Access to the main competitors
- Sudden control or control of the control
2. Understanding the attractiveness of art
Whether it is possible to enter or invest in that industry.
3. Understanding the causes of critical industry analysis that determines success within the industry.
The importance of industry analysis in a business plan
- This is an important component of any investment.
- To achieve success in a particular industry, it is important for business owners to analyze that industry.
- The niche is important for the firm’s position in the market
- Helps companies identify potential opportunities.
- Assists in threat analysis
- It helps to analyze the fit between internal management choices and business environment.
- It helps reduce the risk of entering a highly competitive business.
The way to analyze the industry in a business plan
One way of performing industry analysis in business planning is to analyze and compare ratios. Ratios are calculated by dividing one business variable by another.
By comparing the ratio of the company to the industry, a business owner will understand where his business stands with the industry average.
Another important model for industrial analysis, Michael E. Porter created his classic book Competitive Strategy: Strategies for Industry AnalysisAnd Competitors (1980). His model shows that competition among firms in the industry depends on the following five forces:
Industry Analysis: The threat of new entry
The threat of new entrants implies the threat posed by new competitors to existing market players in the industry.
Naturally, a lucrative industry will attract more competitors who are looking to make a profit.
If the barrier to entry into the industry is low, it could be a major threat to companies already competing in that market.
The ability to negotiate supplier prices
Supply power refers to the pressure that suppliers can apply to the business by raising prices or lowering standards or reducing the availability of products.
Strong suppliers can pressure consumers by increasing product prices or lowering product quality or reducing product availability. All these things cost directly to the buyer.
Buyer’s ability to negotiate a bid
This refers to the pressure that buyers can place on higher quality products, better customer service and lower prices. Powerful buyers can make the industry more competitive, thus reducing profit for the seller.
This reduces profits to the extent that competitive firms within an industry can create pressure on each other. Intense competition can steal profits and market share among competitors
Threat to replace
This is the availability of an alternative product that buyers can find instead of the original sales product.
Industry analysis in the business plan in 3 steps
Industry analysis of a business plan
1. Collecting data
Determine the industry on which you want to perform industry analysis research activities. It could be a broad industry or niche industry.
Research your industry
Information sources that will help you conduct your industry analysis in business planning are different for each business. For example, you may need local information that you can get from your local Chamber of Commerce.
Or you may be able to find your website analysis information on the official website. You can also find official statistics or other commercial statistics. You may need to run some Internet searches to track information.
If the information on a particular site is difficult to obtain, you need to externalize the information from different sources to get the information you are looking for.
Start looking for data from the official website or any other website where the appropriate data is available. See Academic Databases for any published information in your area of interest.
Compile relevant data using the above sources.
Start making annual earnings notes, statistics on the number of companies involved and the workforce of the desired industry. Find statistics on customer base size and buying trends.
Note: Become an Industry and Sector Analyst
Master financial analysis techniques. Financial Forecasting Analyze Industry Data Effectively. Perform market research to evaluate market trends.
Description of Art
Start your industry analysis report with a general description of the industry. Include one or two paragraphs about industry size, product, and geographical density.
Describe the company
Include information about the company you might want to research. Fill out all general and relevant information about the company.
Understand the competitors and if possible mention some statistical information about their income, profit, etc. Describe their product range if possible. Mention about their strategy and upcoming product.
Porters analyzed for five forces analysis and PESTLE analysis and company SWOT analysis.
GDP and inflation effects
Mention how much the sector is contributing to GDP and how it has been affected by rising inflation. Give the same future vision.
Try to understand the answers to the following industry analysis questions.
What are the most economical features of the industry?
To answer this question, you can find information about the industry from official census data, or sites like Yahoo.com or other data-intensive web sites.
What kind of competitive power are industry members facing?
Understands the interconnection between industry companies and their suppliers and buyers. Also, you can understand the ease of entry and exit from the industry.
What are the driving factors and their impact on change?
Understand the industrial analysis features of the industry as opposed to social trends, demographics, regulatory issues, etc.
What are the competitors in the market position?
Analyze who is firmly positioned and who is not? Many industry analytics websites list key competitors and information about them. This can serve as a starting point for this question.
Finally, you should get a positive one Answer the following questions.
Points to emphasize industry analysis in a business plan
1. The cause of industry attraction and industry success
The attraction of art is the presence or absence of a threat that is demonstrated by the art forces. The greater the threat posed by any of the industrial forces, the lower the attraction of the industry
Reasons for success are the factors that play a major role in determining whether a company will succeed or fail in a given industry.
Examples of some industry analyses of success factors are – market changes, product lines, fair and fair prices, product quality, sales support, a good record for supply, financial position and a management team quick.
2. Future analysis of industry or sector
One of the most important reasons for industry analysis in a business plan is the future analysis of the sector.
Anyone here can see how the industry has historically performed. Looking at historical trends, one can analyze how the industry is expected to perform in the future.
However, the future of the sector is also affected by major changes or regulations related to this industry. So it is important to analyze these factors for the same.
3. Demand and supply analysis
Demand and supply analysis also plays a major role here. The following factors of demand and supply can affect the industry-
If demand increases and supply remains unchanged, it leads to a shortage of products, thereby increasing prices.
If demand decreases and supply remains unchanged, it leads to surplus products and prices fall
Thus analyzing how supply-demand trends are an important factor in that industry
4. Impact of inflation on industry
Inflation has affected the world’s major economies in the past years. Thus, analyzing the impact of inflation in a particular sector becomes crucial in industrial analysis in a business planning process.
Savings, as well as investments, are also affected by high inflation rates. Therefore most companies are adversely affected by low demand for their products and services.
5. Other important factors that can be considered for industry analysis in a business plan
- The size of the industry
- Which of these sectors is included?
- The key players in this industry
- Markets and customers
- Estimated sales for the industry (this year? Last year? Previous year?)
- Are national/economic trends affecting the industry?
- National / economic trends that may affect it in the future
- Long-term outlook
- Rival analysis
- The competitive advantage of business
- Target market analysis
- Market growth rate
- Gain market
- Industrial spending structure
- Distribution channels
- The reason for the success
- Details of success
Consideration for industry analysis in a business plan
When conducting industry analysis in a business plan, which one should be considered as the biggest threat to the business.
Then companies can take cautious tactics to mitigate this threat.
Directors also need to consider their own preferences and internal competencies before adopting a technique developed from industry analysis.
Try to categorize industries according to their growth cycle, this can be an important part of your analysis.
Earnings in this national industry are expected to be above the average of all industries. – Growth stocks suffer less during the recession.
These national industries are least affected by recessions and economic adversities.
These national industries suffer the most from the recession and economic adversity
The benefits of industry analysis in a business plan
- The benefit of completing an industry analysis in a business plan is that company managers gain a better idea of their business in the industry.
- It allows companies to position themselves carefully in their industry.
- It helps companies respond better to any changes in the industry.
Example of industry analysis in a business plan (FMCG sector)
So after learning about the importance of industry analysis in a business plan and ways of conducting industry analysis in a business plan, let us now analyze the Indian FMCG sector.
Currently, the FMCG sector is the fourth largest sector in the Indian market with market size of $ 4 billion.
It is expected to grow to US $ 1 billion by 20 and $ 1 billion by 2020.
Major sections of the FMCG sector
The main player
Indian FMCG sector players
SWOT analysis of FMCG sector
- Low operational costs
- Distribution networks have been established in both the cities and the rural areas
- Famous brand presence in the FMCG sector
- Lower opportunities to invest in technology and achieve economies of scale, especially in the small sector
- LessExport level
- Copy products compress the range of FMCG products in rural and semi-urban markets.
- The rural market is mostly blocked
- Increasing the purchasing power of customers
- Larger domestic market – more than one billion population.
- The possibility of export
- Removal of import restrictions as a result of the replacement of domestic brands
- Taxes and governing structures.
Porters are a model of the five forces for the FMCG sector
Port Five Forces
The key challenge
Increasing fares from Tier 1 & 2 cities
Reduce carbon footprint
Opportunities in the industry
Up to 100% of foreign equity investment for NRIs and foreign corporate firms has been approved by the government.
India has approved 51% FDI in retail for many brands
Relaxation of license rules
The above industry analysis of the Indian FMCG sector is very brief, just to give a brief overview of what industry analytics should be included in a business plan. The actual industry analysis report can be a detailed description of all the important factors.
Hopefully, the above article has added some value to your learning. Share it with your friends and you can also comment on some of the things I missed including this industry analysis in a business planning article.
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