Industry Analysis of a Business Plan: Everything you Need to Know!


When writing a business plan, a business writer or business owner will need to conduct an Industry analysis of a business plan. The purpose of an industry analysis allows the business owner to understand the effects of the industry life cycle. The porter five forces and competitive advantage to employing in order to enter their target markets.

The industry analysis also allows the business owner to understand the competition of prices in the industry.

To do this, a business plan writer will focus on specific target industries to understand the business environment before conducting market research. The purpose of understanding the business environment allows the business owner to understand the business’s potential growth, competition, and the risks involved. There are different types of risks that businesses face, some risks are related to a company’s internal operations; others are external and can be very costly.

Conducting a business and industry analysis can be a challenging task. Many people feel they do not have the necessary skills to conduct successful market research. As a startup founder, you need to be aware of the skills you need. The biggest challenge is to figure out how to conduct market research for your startup idea.

The following questions will help you successfully create a market research plan for your marketing plan or business plan.

How do you write a good business plan? You can find out by asking some questions yourself. Do you have a good understanding of your business? Do you know the market? Do you know what you want to achieve in your business? Do you know what your products are? Are you aware of what your competitors are doing? You need to answer all these questions before you can make up a plan for the future of your business.

For an existing business, the industry analysis allows existing businesses to understand changes in market and industry trends.

The importance of industry analysis.

Industry Analysis

For an entrepreneur, an industry analysis allows them to gauge whether the market is undervalued or overvalued. this allows them to enter a market that is undervalued and avoid a market that is at the end of its cycle.

Before entering any market, even before conducting market research, business owners conduct Industry analysis to build a framework for the business.

Investors, on the other hand, use the industry analysis of a business plan to gauge the weight of the industry, and some invest in industry rotations and cyclical firms which are based on the current business cycle.

Investors also use industry analysis to examine the industry trends and have a measurement of the company valuation.

Industry Classification Guide.

The simplest way to classify companies in an industry is through their products and services, this is the simplest form of grouping. I always use products and services grouping, especially when writing business plans. For example, a hotel is classified under the hospitality industry.

For companies offering different products and services, the classification is done using principle products or services. By principle products and services I mean the highest sales expected or current highest sales volume for existing businesses.

Other industry classifications are done by the government bodies, I use this also due to the accessibility of data that is published by the government bodies on a yearly basis.

Where to find Industry classification data?

The government bodies providing classifications and industry data include:

  • International Standards Industrial Classifications of all Economic Activities (ISIC)
  • Statistical classification of Economic Activities in the European Community.
  • Australian and New Zealand Standards Industrial Classifications
  • North America Industry Classification Systems (NAICS)

Importance of a peer group for your market research.

After classification of an Industry, a business plan writer or market researcher will find a group of companies in the industry for comparison purposes, this group of companies is called “Peer Groups).

The market analyst or the business writer will use companies with the same business processes, and resources to form a peer group. other factors used are product demands and cost structure.

Industry Analysis Elements.

Industry Analysis

When working on the industry analysis for a marketing or business plan, start with evaluating the relationship of trends in the industry by looking at your competitors. you can also check customer trends and microeconomics of the general industry variables.

The first step in the marketing process is the analysis of your business. The most important step is to find out what your business is about. You will also need to examine your market and how your business can reach the target market. Then you will need to figure out the product or service your business offers and how to promote the product or service. These steps will help you to build a marketing plan.

Next, you need to examine the industry dynamics such as the industry growth, your forecasted growth, and the rates peer groups are leaving the industry. Research on content related to the industry released by financial analysts, and marketing analysts.

There is a high potential they have already done the heavy work of forecasting especially if they understand the market and have been in the industry for a while. The best places to find this information are in peer groups organizations by non-governmental organizations and government sources.

Next, you need to determine the industry’s possible value.

Compare the forecasts you have found in the research released by various industry participants in their markets and industry research publications. It’s good to analyze the volatility based on strategic groups which have a distinct value proposition.

Next, you need to identify the life cycle of the industry. (More information regarding the Industry life cycle is below)

After you have identified the industry cycle, you need to identify the current state of the industry through experience curves.

Consider what affects the industry such as the market trends, demographics, government effects such as taxes and other events, and technology such as the release of new products.

Lastly, you need to identify what causes the peer groups to compete.

Industry factors that can affect your Business.

Industry Analysis

There are various factors that can affect the industry. They include:

  • Macroeconomic factors.
  • Technology Factors.
  • Demographic factors.
  • Government factors.
  • Social Factors.

1. Macroeconomic factors.

Macroeconomic factors are measured in GDP and other factors such as interests aretes, credit availability, and Inflation. You should research the macroeconomic factors of the industry that might affect your industry based on your industry location.

2. Technology Factors.

Technology has major effects n the industry, some of the technical factors that can affect the industry caused by technology include the release of new products. for example, in the gaming industry, the release of a new console causes an industry change.

3. Demographic factors.

Demographic factors also affect the industry, the factors caused by demographic factors include the age and population of the customers. the demographics affect the demands of products in the industry for example when the most age group of the population is young families, insurance industry products are high in demand.

4. Government factors.

Government factors affecting industries are either taxes, regulations, and actions such as tenders. Taxes differentiation and tax rates are some of the tax-related factors that government affects an industry.

5. Social Factors.

Social factors that affect the industry are related to demographic factors and grouped into how this demographic behavior affects the industry such as employment, spending, and living.

Industry Life Cycle.

There are five industrial life cycles: Embryonic, Growth, Shakeout, Mature, and Decline.

Industry life cycle inforgraphics

Embryonic.

The Industry life cycle starts with the Embryonic stage, at this stage, the industry is just getting started, the characteristics associated with this industry include:

The slow growth of the demand for products and customers. The pricing of products is very high, there is a large investment required to create industrial products, and finally, the risk of failure of businesses is very high.

Growth.

At the growth stage, there is an accelerated growth of the industry. The characteristics associated with this industry include rapid growth in the development of product discovery. There is a steep competition of new companies and pricing of products.

Shakeout.

At the Shakeout stage, there is a large number of firms in the industry, hence a steep competition. The characteristics associated with the shakeout stage include the slow growth of the industry due to industry saturation.
There is high competition in the industry due to so many companies competing for the same customers.

The competition causes the companies in the industry revenues to drop. Companies in the industry start reorganizing their structures and trying to find competitive edges such as brand loyalty and product improvements. Companies existing in the industry start to liquidate and fail.

Mature.

This is the stage where companies in the industry start to acquire each other and merge. some of the characteristics of a mature industry include slow industry growth due to industry saturation. The Industry falls under the Oligopoly industry.

Companies wishing to enter the market are faced with high barriers to entry. due to the restructuring of existing companies, operational processes were carried out during the shakeout stage. The prices of products in the industry are standardized. Some companies emerge as winners and their market share is way more than the average companies in the industry.

Decline.

In the decline stage, the industry growth curve shows negative growth. the characteristics of the decline industry stage are the negative growth of development of products and competition. Prices of products start to decline as there is a high price war. Companies start to acquire each other and merge.

What should an industry analysis include?

An industry analysis aims to develop a strategy for your business in the future. As you go through industry analysis, the goal is to look at the strengths and weaknesses of your industry and identify where you can make improvements. An industry analysis aims to create a comprehensive plan for your business. The plan is then used to guide you along the way as you make decisions about your business.

What is a business industry analysis?

A business industry analysis means analyzing your business and marketing strategies. It helps you understand what your competitors are doing and how you can be better. When analyzing your industry, you can figure out where the most competition lies. Based on this knowledge, you can set your goals and take advantage of the opportunities ahead. This is what a business analysis can help you with.

What are some examples of industry analysis?

One of the most common industry analysis examples is performing a SWOT analysis. A SWOT analysis is a simple yet effective way to assess a business’s strengths, weaknesses, opportunities, and threats. This type of analysis can help companies identify if they are doing a good job in a particular area and need to make changes to remain competitive.

What is industry analysis in a marketing plan?

An industry analysis evaluates the industry’s market position, industry structure, and industry environment.  It is a complete guide to the industry.

Where can I find industry analysis?

Industry analysis can be performed in various ways, such as market research, customer research, competitor analysis, SWOT analysis, etc. Market researchers use these methods to provide a detailed analysis of any given industry.

Market research is a type of research conducted to discover current trends and future opportunities in a given industry or market. On the other hand, customer research is conducted to find out the customer preferences and the behavior of the customer in a given market.

How do you analyze industry investments?

The best way to analyze industry investments is by reviewing the recent trends. The latest developments in the market impact the market’s future, so the best way is to look at the recent trends.

Analyzing industry investments is a process that compares the old and the new to determine whether the new trends are positive or negative. There are various ways in which you can do this. One way is by reading the latest news and then comparing it to the previous news. The other way is to do market research to analyze the industry’s future holds.

James Ndungu

James is a one-on-one business consultant who helps CEOs, executives, and solopreneurs build their personal and professional branding.

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