example of industry analysis in a business plan

How to Conduct an Industry Analysis? Steps, Template, Examples

Appinio Research · 16.11.2023 · 39min read

Are you ready to unlock the secrets of Industry Analysis, equipping yourself with the knowledge to navigate markets and make informed strategic decisions? Dive into this guide, where we unravel the significance, objectives, and methods of Industry Analysis.

Whether you're an entrepreneur seeking growth opportunities or a seasoned executive navigating industry shifts, this guide will be your compass in understanding the ever-evolving business terrain.

What is Industry Analysis?

Industry analysis is the process of examining and evaluating the dynamics, trends, and competitive forces within a specific industry or market sector. It involves a comprehensive assessment of the factors that impact the performance and prospects of businesses operating within that industry. Industry analysis serves as a vital tool for businesses and decision-makers to gain a deep understanding of the environment in which they operate.

Key components of industry analysis include:

• Market Size and Growth: Determining the overall size of the market, including factors such as revenue, sales volume, and customer base. Analyzing historical and projected growth rates provides insights into market trends and opportunities.
• Competitive Landscape: Identifying and analyzing competitors within the industry. This includes assessing their market share , strengths, weaknesses, and strategies. Understanding the competitive landscape helps businesses position themselves effectively.
• Customer Behavior and Preferences: Examining consumer behavior , preferences, and purchasing patterns within the industry. This information aids in tailoring products or services to meet customer needs.
• Regulatory and Legal Environment: Assessing the impact of government regulations, policies, and legal requirements on industry operations. Compliance and adaptation to these factors are crucial for business success.
• Technological Trends: Exploring technological advancements and innovations that affect the industry. Staying up-to-date with technology trends can be essential for competitiveness and growth.
• Economic Factors: Considering economic conditions, such as inflation rates, interest rates, and economic cycles, that influence the industry's performance.
• Social and Cultural Trends: Examining societal and cultural shifts, including changing consumer values and lifestyle trends that can impact demand and preferences.
• Environmental and Sustainability Factors: Evaluating environmental concerns and sustainability issues that affect the industry. Industries are increasingly required to address environmental responsibility.
• Supplier and Distribution Networks: Analyzing the availability of suppliers, distribution channels, and supply chain complexities within the industry.
• Risk Factors: Identifying potential risks and uncertainties that could affect industry stability and profitability.

Objectives of Industry Analysis

Industry analysis serves several critical objectives for businesses and decision-makers:

• Understanding Market Dynamics: The primary objective is to gain a comprehensive understanding of the industry's dynamics, including its size, growth prospects, and competitive landscape. This knowledge forms the basis for strategic planning.
• Identifying Growth Opportunities: Industry analysis helps identify growth opportunities within the market. This includes recognizing emerging trends, niche markets, and underserved customer segments.
• Assessing Competitor Strategies: By examining competitors' strengths, weaknesses, and strategies, businesses can formulate effective competitive strategies. This involves positioning the company to capitalize on its strengths and exploit competitors' weaknesses.
• Risk Assessment and Mitigation: Identifying potential risks and vulnerabilities specific to the industry allows businesses to develop risk mitigation strategies and contingency plans. This proactive approach minimizes the impact of adverse events.
• Strategic Decision-Making: Industry analysis provides the data and insights necessary for informed strategic decision-making. It guides decisions related to market entry, product development, pricing strategies, and resource allocation.
• Resource Allocation: By understanding industry dynamics, businesses can allocate resources efficiently. This includes optimizing marketing budgets, supply chain investments, and talent recruitment efforts.
• Innovation and Adaptation: Staying updated on technological trends and shifts in customer preferences enables businesses to innovate and adapt their offerings effectively.

Importance of Industry Analysis in Business

Industry analysis holds immense importance in the business world for several reasons:

• Strategic Planning: It forms the foundation for strategic planning by providing a comprehensive view of the industry's landscape. Businesses can align their goals, objectives, and strategies with industry trends and opportunities.
• Risk Management: Identifying and assessing industry-specific risks allows businesses to manage and mitigate potential threats proactively. This reduces the likelihood of unexpected disruptions.
• Competitive Advantage: In-depth industry analysis helps businesses identify opportunities for gaining a competitive advantage. This could involve product differentiation, cost leadership, or niche market targeting .
• Resource Optimization: Efficient allocation of resources, both financial and human, is possible when businesses have a clear understanding of industry dynamics. It prevents wastage and enhances resource utilization.
• Informed Investment: Industry analysis assists investors in making informed decisions about allocating capital. It provides insights into the growth potential and risk profiles of specific industry sectors.
• Adaptation to Change: As industries evolve, businesses must adapt to changing market conditions. Industry analysis facilitates timely adaptation to new technologies, market shifts, and consumer preferences .
• Market Entry and Expansion: For businesses looking to enter new markets or expand existing operations, industry analysis guides decision-making by evaluating the feasibility and opportunities in target markets.
• Regulatory Compliance: Understanding the regulatory environment is critical for compliance and risk avoidance. Industry analysis helps businesses stay compliant with relevant laws and regulations.

In summary, industry analysis is a fundamental process that empowers businesses to make informed decisions, stay competitive, and navigate the complexities of their respective markets. It is an invaluable tool for strategic planning and long-term success.

How to Prepare for Industry Analysis?

Let's start by going through the crucial preparatory steps for conducting a comprehensive industry analysis.

1. Data Collection and Research

• Primary Research: When embarking on an industry analysis, consider conducting primary research . This involves gathering data directly from industry sources, stakeholders, and potential customers. Methods may include surveys , interviews, focus groups , and observations. Primary research provides firsthand insights and can help validate secondary research findings.
• Secondary Research: Secondary research involves analyzing existing literature, reports, and publications related to your industry. Sources may include academic journals, industry-specific magazines, government publications, and market research reports. Secondary research provides a foundation of knowledge and can help identify gaps in information that require further investigation.
• Data Sources: Explore various data sources to collect valuable industry information. These sources may include industry-specific associations, government agencies, trade publications, and reputable market research firms. Make sure to cross-reference data from multiple sources to ensure accuracy and reliability.

2. Identifying Relevant Industry Metrics

Understanding and identifying the right industry metrics is essential for meaningful analysis. Here, we'll discuss key metrics that can provide valuable insights:

• Market Size: Determining the market's size, whether in terms of revenue, units sold, or customer base, is a fundamental metric. It offers a snapshot of the industry's scale and potential.
• Market Growth Rate: Assessing historical and projected growth rates is crucial for identifying trends and opportunities. Understanding how the market has evolved over time can guide strategic decisions.
• Market Share Analysis: Analyzing market share among industry players can help you identify dominant competitors and their respective positions. This metric also assists in gauging your own company's market presence.
• Market Segmentation : Segmenting the market based on demographics, geography, behavior, or other criteria can provide deeper insights. Understanding the specific needs and preferences of various market segments can inform targeted strategies.

3. Gathering Competitive Intelligence

Competitive intelligence is the cornerstone of effective industry analysis. To gather and utilize information about your competitors:

• Competitor Identification: Begin by creating a comprehensive list of your primary and potential competitors. Consider businesses that offer similar products or services within your target market. It's essential to cast a wide net to capture all relevant competitors.
• SWOT Analysis : Conduct a thorough SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis for each competitor. This analysis helps you identify their internal strengths and weaknesses, as well as external opportunities and threats they face.
• Market Share Analysis: Determine the market share held by each competitor and how it has evolved over time. Analyzing changes in market share can reveal shifts in competitive dynamics.
• Product and Pricing Analysis: Evaluate your competitors' product offerings and pricing strategies . Identify any unique features or innovations they offer and consider how your own products or services compare.
• Marketing and Branding Strategies: Examine the marketing and branding strategies employed by competitors. This includes their messaging, advertising channels, and customer engagement tactics. Assess how your marketing efforts stack up.

Industry Analysis Frameworks and Models

Now, let's explore essential frameworks and models commonly used in industry analysis, providing you with practical insights and examples to help you effectively apply these tools.

Porter's Five Forces Model

Porter's Five Forces is a powerful framework developed by Michael Porter to assess the competitive forces within an industry. This model helps you understand the industry's attractiveness and competitive dynamics.

It consists of five key forces:

• Threat of New Entrants: This force evaluates how easy or difficult it is for new companies to enter the industry. Factors that increase barriers to entry include high capital requirements, strong brand loyalty among existing players, and complex regulatory hurdles. For example, the airline industry has significant barriers to entry due to the need for large capital investments in aircraft, airport facilities, and regulatory approvals.
• Bargaining Power of Suppliers: This force examines the influence suppliers have on the industry's profitability. Powerful suppliers can demand higher prices or impose unfavorable terms. For instance, in the automotive industry, suppliers of critical components like microchips can wield significant bargaining power if they are few in number or if their products are highly specialized.
• Bargaining Power of Buyers: The bargaining power of buyers assesses how much influence customers have in negotiating prices and terms. In industries where buyers have many alternatives, such as the smartphone market, they can demand lower prices and better features, putting pressure on manufacturers to innovate and compete.
• Threat of Substitutes: This force considers the availability of substitute products or services that could potentially replace what the industry offers. For example, the rise of electric vehicles represents a significant threat to the traditional gasoline-powered automotive industry as consumers seek eco-friendly alternatives.
• Competitive Rivalry: Competitive rivalry assesses the intensity of competition among existing firms in the industry. A highly competitive industry, such as the smartphone market, often leads to price wars and aggressive marketing strategies as companies vie for market share.

Example: Let's consider the coffee shop industry . New entrants face relatively low barriers, as they can set up a small shop with limited capital. However, the bargaining power of suppliers, such as coffee bean producers, can vary depending on the region and the coffee's rarity. Bargaining power with buyers is moderate, as customers often have several coffee shops to choose from. Threats of substitutes may include energy drinks or homemade coffee, while competitive rivalry is high, with numerous coffee chains and independent cafes competing for customers.

SWOT Analysis

SWOT Analysis is a versatile tool used to assess an organization's internal strengths and weaknesses, as well as external opportunities and threats. By conducting a SWOT analysis, you can gain a comprehensive understanding of your industry and formulate effective strategies.

• Strengths: These are the internal attributes and capabilities that give your business a competitive advantage. For instance, if you're a tech company, having a talented and innovative team can be considered a strength.
• Weaknesses: Weaknesses are internal factors that hinder your business's performance. For example, a lack of financial resources or outdated technology can be weaknesses that need to be addressed.
• Opportunities: Opportunities are external factors that your business can capitalize on. This could be a growing market segment, emerging technologies, or changing consumer trends.
• Threats: Threats are external factors that can potentially harm your business. Examples of threats might include aggressive competition, economic downturns, or regulatory changes.

Example: Let's say you're analyzing the fast-food industry. Strengths could include a well-established brand, a wide menu variety, and efficient supply chain management. Weaknesses may involve a limited focus on healthy options and potential labor issues. Opportunities could include the growing trend toward healthier eating, while threats might encompass health-conscious consumer preferences and increased competition from delivery apps.

PESTEL Analysis

PESTEL Analysis examines the external macro-environmental factors that can impact your industry. The acronym stands for:

• Political: Political factors encompass government policies, stability, and regulations. For example, changes in tax laws or trade agreements can affect industries like international manufacturing.
• Economic: Economic factors include economic growth, inflation rates, and exchange rates. A fluctuating currency exchange rate can influence export-oriented industries like tourism.
• Social: Social factors encompass demographics, cultural trends, and social attitudes. An aging population can lead to increased demand for healthcare services and products.
• Technological: Technological factors involve advancements and innovations. Industries like telecommunications are highly influenced by technological developments, such as the rollout of 5G networks.
• Environmental: Environmental factors cover sustainability, climate change, and ecological concerns. Industries such as renewable energy are directly impacted by environmental regulations and consumer preferences.
• Legal: Legal factors encompass laws, regulations, and compliance requirements. The pharmaceutical industry, for instance, faces stringent regulatory oversight and patent protection laws.

Example: Consider the automobile manufacturing industry. Political factors may include government incentives for electric vehicles. Economic factors can involve fluctuations in fuel prices affecting consumer preferences for fuel-efficient cars. Social factors might encompass the growing interest in eco-friendly transportation options. Technological factors could relate to advancements in autonomous driving technology. Environmental factors may involve emissions regulations, while legal factors could pertain to safety standards and recalls.

Industry Life Cycle Analysis

Industry Life Cycle Analysis categorizes industries into various stages based on their growth and maturity. Understanding where your industry stands in its life cycle can help shape your strategies.

• Introduction: In the introduction stage, the industry is characterized by slow growth, limited competition, and a focus on product development. New players enter the market, and consumers become aware of the product or service. For instance, electric scooters were introduced as a new mode of transportation in recent years.
• Growth: The growth stage is marked by rapid market expansion, increased competition, and rising demand. Companies focus on gaining market share, and innovation is vital. The ride-sharing industry, exemplified by companies like Uber and Lyft, experienced significant growth in this stage.
• Maturity: In the maturity stage, the market stabilizes, and competition intensifies. Companies strive to maintain market share and differentiate themselves through branding and customer loyalty programs. The smartphone industry reached maturity with multiple established players.
• Decline: In the decline stage, the market saturates, and demand decreases. Companies must adapt or diversify to survive. The decline of traditional print media is a well-known example.

Example: Let's analyze the video streaming industry . The introduction stage saw the emergence of streaming services like Netflix. In the growth stage, more players entered the market, and the industry saw rapid expansion. The industry is currently in the maturity stage, with established platforms like Netflix, Amazon Prime, and Disney+ competing for market share. However, with continued innovation and changing consumer preferences, the decline stage may eventually follow.

Value Chain Analysis

Value Chain Analysis dissects a company's activities into primary and support activities to identify areas of competitive advantage. Primary activities directly contribute to creating and delivering a product or service, while support activities facilitate primary activities.

• Primary Activities: These activities include inbound logistics (receiving and storing materials), operations (manufacturing or service delivery), outbound logistics (distribution), marketing and sales, and customer service.
• Support Activities: Support activities include procurement (acquiring materials and resources), technology development (R&D and innovation), human resource management (recruitment and training), and infrastructure (administrative and support functions).

Example: Let's take the example of a smartphone manufacturer. Inbound logistics involve sourcing components, such as processors and displays. Operations include assembly and quality control. Outbound logistics cover shipping and distribution. Marketing and sales involve advertising and retail partnerships. Customer service handles warranty and support.

Procurement ensures a stable supply chain for components. Technology development focuses on research and development of new features. Human resource management includes hiring and training skilled engineers. Infrastructure supports the company's administrative functions.

By applying these frameworks and models effectively, you can better understand your industry, identify strategic opportunities and threats, and develop a solid foundation for informed decision-making.

Data Interpretation and Analysis

Once you have your data, it's time to start interpreting and analyzing the data you've collected during your industry analysis.

You can unlock the full potential of your data with Appinio 's comprehensive research platform. Beyond aiding in data collection, Appinio simplifies the intricate process of data interpretation and analysis. Our intuitive tools empower you to effortlessly transform raw data into actionable insights, giving you a competitive edge in understanding your industry.

Whether it's assessing market trends, evaluating the competitive landscape, or understanding customer behavior, Appinio offers a holistic solution to uncover valuable findings. With our platform, you can make informed decisions, strategize effectively, and stay ahead of industry shifts.

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1. Analyze Market Size and Growth

Analyzing the market's size and growth is essential for understanding its dynamics and potential. Here's how to conduct a robust analysis:

• Market Size Calculation: Determine the total market size in terms of revenue, units sold, or the number of customers. This figure serves as a baseline for evaluating the industry's scale.
• Historical Growth Analysis: Examine historical data to identify growth trends. This includes looking at past year-over-year growth rates and understanding the factors that influenced them.
• Projected Growth Assessment: Explore industry forecasts and projections to gain insights into the expected future growth of the market. Consider factors such as emerging technologies, changing consumer preferences, and economic conditions.
• Segmentation Analysis: If applicable, analyze market segmentation data to identify growth opportunities in specific market segments. Understand which segments are experiencing the most significant growth and why.

2. Assess Market Trends

Stay ahead of the curve by closely monitoring and assessing market trends. Here's how to effectively evaluate trends within your industry.

• Consumer Behavior Analysis: Dive into consumer behavior data to uncover shifts in preferences, buying patterns, and shopping habits. Understand how technological advancements and cultural changes influence consumer choices.
• Technological Advancements: Keep a keen eye on technological developments that impact your industry. Assess how innovations such as AI, IoT, blockchain, or automation are changing the competitive landscape.
• Regulatory Changes: Stay informed about regulatory shifts and their potential consequences for your industry. Regulations can significantly affect product development, manufacturing processes, and market entry strategies.
• Sustainability and Environmental Trends: Consider the growing importance of sustainability and environmental concerns. Evaluate how your industry is adapting to eco-friendly practices and how these trends affect consumer choices.

3. Evaluate Competitive Landscape

Understanding the competitive landscape is critical for positioning your business effectively. To perform a comprehensive evaluation:

• Competitive Positioning: Determine where your company stands in comparison to competitors. Identify your unique selling propositions and areas where you excel.
• Market Share Analysis: Continuously monitor market share among industry players. Identify trends in market share shifts and assess the strategies that lead to such changes.
• Competitive Advantages and Weaknesses: Analyze your competitors' strengths and weaknesses. Identify areas where you can capitalize on their weaknesses and where you need to fortify your own strengths.

4. Identify Key Success Factors

Recognizing and prioritizing key success factors is crucial for developing effective strategies. To identify and leverage these factors:

• Customer Satisfaction: Prioritize customer satisfaction as a critical success factor. Satisfied customers are more likely to become loyal advocates and contribute to long-term success.
• Quality and Innovation: Focus on product or service quality and continuous innovation. Meeting and exceeding customer expectations can set your business apart from competitors.
• Cost Efficiency: Strive for cost efficiency in your operations. Identifying cost-saving opportunities can lead to improved profitability.
• Marketing and Branding Excellence: Invest in effective marketing and branding strategies to create a strong market presence. Building a recognizable brand can drive customer loyalty and growth.

5. Analyze Customer Behavior and Preferences

Understanding your target audience is central to success. Here's how to analyze customer behavior and preferences:

• Market Segmentation: Use market segmentation to categorize customers based on demographics, psychographics , and behavior. This allows for more personalized marketing and product/service offerings.
• Customer Surveys and Feedback: Gather customer feedback through surveys and feedback mechanisms. Understand their pain points, preferences, and expectations to tailor your offerings.
• Consumer Journey Mapping: Map the customer journey to identify touchpoints where you can improve engagement and satisfaction. Optimize the customer experience to build brand loyalty.

By delving deep into data interpretation and analysis, you can gain valuable insights into your industry, uncover growth opportunities, and refine your strategic approach.

How to Conduct Competitor Analysis?

Competitor analysis is a critical component of industry analysis as it provides valuable insights into your rivals, helping you identify opportunities, threats, and areas for improvement.

1. Identify Competitors

Identifying your competitors is the first step in conducting a thorough competitor analysis. Competitors can be classified into several categories:

• Direct Competitors: These are companies that offer similar products or services to the same target audience. They are your most immediate competitors and often compete directly with you for market share.
• Indirect Competitors: Indirect competitors offer products or services that are related but not identical to yours. They may target a slightly different customer segment or provide an alternative solution to the same problem.
• Potential Competitors: These companies could enter your market in the future. Identifying potential competitors early allows you to anticipate and prepare for new entrants.
• Substitute Products or Services: While not traditional competitors, substitute products or services can fulfill the same customer needs or desires. Understanding these alternatives is crucial to your competitive strategy.

2. Analyze Competitor Strengths and Weaknesses

Once you've identified your competitors, you need to analyze their strengths and weaknesses. This analysis helps you understand how to position your business effectively and identify areas where you can gain a competitive edge.

• Strengths: Consider what your competitors excel at. This could include factors such as brand recognition, innovative products, a large customer base, efficient operations, or strong financial resources.
• Weaknesses: Identify areas where your competitors may be lacking. Weaknesses could involve limited product offerings, poor customer service, outdated technology, or financial instability.

3. Competitive Positioning

Competitive positioning involves defining how you want your business to be perceived relative to your competitors. It's about finding a unique position in the market that sets you apart. Consider the following strategies:

• Cost Leadership: Strive to be the low-cost provider in your industry. This positioning appeals to price-conscious consumers.
• Differentiation: Focus on offering unique features or attributes that make your products or services stand out. This can justify premium pricing.
• Niche Market: Target a specific niche or segment of the market that may be underserved by larger competitors. Tailor your offerings to meet their unique needs.
• Innovation and Technology: Emphasize innovation and technology to position your business as a leader in product or service quality.
• Customer-Centric: Prioritize exceptional customer service and customer experience to build loyalty and a positive reputation.

4. Benchmarking and Gap Analysis

Benchmarking involves comparing your business's performance and practices with those of your competitors or industry leaders. Gap analysis helps identify areas where your business falls short and where improvements are needed.

• Performance Benchmarking: Compare key performance metrics, such as revenue, profitability, market share, and customer satisfaction, with those of your competitors. Identify areas where your performance lags behind or exceeds industry standards.
• Operational Benchmarking: Analyze your operational processes, supply chain, and cost structures compared to your competitors. Look for opportunities to streamline operations and reduce costs.
• Product or Service Benchmarking: Evaluate the features, quality, and pricing of your products or services relative to competitors. Identify gaps and areas for improvement.
• Marketing and Sales Benchmarking: Assess your marketing strategies, customer acquisition costs, and sales effectiveness compared to competitors. Determine whether your marketing efforts are performing at a competitive level.

Market Entry and Expansion Strategies

Market entry and expansion strategies are crucial for businesses looking to enter new markets or expand their presence within existing ones. These strategies can help you effectively target and penetrate your chosen markets.

Market Segmentation and Targeting

• Market Segmentation: Begin by segmenting your target market into distinct groups based on demographics , psychographics, behavior, or other relevant criteria. This helps you understand the diverse needs and preferences of different customer segments.
• Targeting: Once you've segmented the market, select specific target segments that align with your business goals and capabilities. Tailor your marketing and product/service offerings to appeal to these chosen segments.

Market Entry Modes

Selecting the proper market entry mode is crucial for a successful expansion strategy. Entry modes include:

• Exporting: Sell your products or services in international markets through exporting. This is a low-risk approach, but it may limit your market reach.
• Licensing and Franchising: License your brand, technology, or intellectual property to local partners or franchisees. This allows for rapid expansion while sharing the risk and control.
• Joint Ventures and Alliances: Partner with local companies through joint ventures or strategic alliances. This approach leverages local expertise and resources.
• Direct Investment: Establish a physical presence in the target market through subsidiaries, branches, or wholly-owned operations. This offers full control but comes with higher risk and investment.

Competitive Strategy Formulation

Your competitive strategy defines how you will compete effectively in the target market.

• Cost Leadership: Strive to offer products or services at lower prices than competitors while maintaining quality. This strategy appeals to price-sensitive consumers.
• Product Differentiation: Focus on offering unique and innovative products or services that stand out in the market. This strategy justifies premium pricing.
• Market Niche: Target a specific niche or segment within the market that is underserved or has particular needs. Tailor your offerings to meet the unique demands of this niche.
• Market Expansion : Expand your product or service offerings to capture a broader share of the market. This strategy involves diversifying your offerings to appeal to a broader audience.
• Global Expansion: Consider expanding internationally to tap into new markets and diversify your customer base. This strategy involves thorough market research and adaptation to local cultures and regulations.

International Expansion Considerations

If your expansion strategy involves international markets, there are several additional considerations to keep in mind.

• Market Research: Conduct in-depth market research to understand the target country's cultural, economic, and legal differences.
• Regulatory Compliance: Ensure compliance with international trade regulations, customs, and import/export laws.
• Cultural Sensitivity: Adapt your marketing and business practices to align with the cultural norms and preferences of the target market.
• Localization: Consider adapting your products, services, and marketing materials to cater to local tastes and languages.
• Risk Assessment: Evaluate the political, economic, and legal risks associated with operating in the target country. Develop risk mitigation strategies.

By carefully analyzing your competitors and crafting effective market entry and expansion strategies, you can position your business for success in both domestic and international markets.

Risk Assessment and Mitigation

Risk assessment and mitigation are crucial aspects of industry analysis and strategic planning. Identifying potential risks, assessing vulnerabilities, and implementing effective risk management strategies are essential for business continuity and success.

1. Identify Industry Risks

• Market Risks: These risks pertain to factors such as changes in market demand, economic downturns, shifts in consumer preferences, and fluctuations in market prices. For example, the hospitality industry faced significant market risks during the COVID-19 pandemic, resulting in decreased travel and tourism .
• Regulatory and Compliance Risks: Regulatory changes, compliance requirements, and government policies can pose risks to businesses. Industries like healthcare are particularly susceptible to regulatory changes that impact operations and reimbursement.
• Technological Risks: Rapid technological advancements can disrupt industries and render existing products or services obsolete. Companies that fail to adapt to technological shifts may face obsolescence.
• Operational Risks: These risks encompass internal factors that can disrupt operations, such as supply chain disruptions, equipment failures, or cybersecurity breaches.
• Financial Risks: Financial risks include factors like liquidity issues, credit risk , and market volatility. Industries with high capital requirements, such as real estate development, are particularly vulnerable to financial risks.
• Competitive Risks: Intense competition and market saturation can pose challenges to businesses. Failing to respond to competitive threats can result in loss of market share.
• Global Risks: Industries with a worldwide presence face geopolitical risks, currency fluctuations, and international trade uncertainties. For instance, the automotive industry is susceptible to trade disputes affecting the supply chain.

2. Assess Business Vulnerabilities

• SWOT Analysis: Revisit your SWOT analysis to identify internal weaknesses and threats. Assess how these weaknesses may exacerbate industry risks.
• Financial Health: Evaluate your company's financial stability, debt levels, and cash flow. Identify vulnerabilities related to financial health that could hinder your ability to withstand industry-specific challenges.
• Operational Resilience: Assess the robustness of your operational processes and supply chain. Identify areas where disruptions could occur and develop mitigation strategies.
• Market Positioning: Analyze your competitive positioning and market share. Recognize vulnerabilities in your market position that could be exploited by competitors.
• Compliance and Regulatory Adherence: Ensure that your business complies with relevant regulations and standards. Identify vulnerabilities related to non-compliance or regulatory changes.

3. Risk Management Strategies

• Risk Avoidance: In some cases, the best strategy is to avoid high-risk ventures or markets altogether. This may involve refraining from entering certain markets or discontinuing products or services with excessive risk.
• Risk Reduction: Implement measures to reduce identified risks. For example, diversifying your product offerings or customer base can reduce dependence on a single revenue source.
• Risk Transfer: Transfer some risks through methods such as insurance or outsourcing. For instance, businesses can mitigate cybersecurity risks by purchasing cyber insurance.
• Risk Acceptance: In cases where risks cannot be entirely mitigated, it may be necessary to accept a certain level of risk and have contingency plans in place to address potential issues.
• Continuous Monitoring: Establish a system for continuous risk monitoring. Regularly assess the changing landscape and adjust risk management strategies accordingly.

4. Contingency Planning

Contingency planning involves developing strategies and action plans to respond effectively to unforeseen events or crises. It ensures that your business can maintain operations and minimize disruptions in the face of adverse circumstances. Key elements of contingency planning include:

• Risk Scenarios: Identify potential risk scenarios specific to your industry and business. These scenarios should encompass a range of possibilities, from minor disruptions to major crises.
• Response Teams: Establish response teams with clearly defined roles and responsibilities. Ensure that team members are trained and ready to act in the event of a crisis.
• Communication Plans: Develop communication plans that outline how you will communicate with employees, customers, suppliers, and other stakeholders during a crisis. Transparency and timely communication are critical.
• Resource Allocation: Determine how resources, including personnel, finances, and equipment, will be allocated in response to various scenarios.
• Testing and Simulation: Regularly conduct tests and simulations of your contingency plans to identify weaknesses and areas for improvement. Ensure your response teams are well-practiced and ready to execute the plans effectively.
• Documentation and Record Keeping: Maintain comprehensive documentation of contingency plans, response procedures, and communication protocols. This documentation should be easily accessible to relevant personnel.
• Review and Update: Continuously review and update your contingency plans to reflect changing industry dynamics and evolving risks. Regularly seek feedback from response teams to make improvements.

By identifying industry risks, assessing vulnerabilities, implementing risk management strategies, and developing robust contingency plans, your business can navigate the complexities of the industry landscape with greater resilience and preparedness.

Industry Analysis Template

When embarking on the journey of Industry Analysis, having a well-structured template is akin to having a reliable map for your exploration. It provides a systematic framework to ensure you cover all essential aspects of the analysis. Here's a breakdown of an industry analysis template with insights into each section.

Industry Overview

• Objective: Provide a broad perspective of the industry.
• Market Definition: Define the scope and boundaries of the industry, including its products, services, and target audience.
• Market Size and Growth: Present current market size, historical growth trends, and future projections.
• Key Players: Identify major competitors and their market share.
• Market Trends: Highlight significant trends impacting the industry.

Competitive Analysis

• Objective: Understand the competitive landscape within the industry.
• Competitor Identification: List direct and indirect competitors.
• Competitor Profiles: Provide detailed profiles of major competitors, including their strengths, weaknesses, strategies, and market positioning.
• SWOT Analysis: Conduct a SWOT analysis for each major competitor.
• Market Share Analysis: Analyze market share distribution among competitors.

Market Analysis

• Objective: Explore the characteristics and dynamics of the market.
• Customer Segmentation: Define customer segments and their demographics, behavior, and preferences.
• Demand Analysis: Examine factors driving demand and customer buying behavior.
• Supply Chain Analysis: Map out the supply chain, identifying key suppliers and distribution channels.
• Regulatory Environment: Discuss relevant regulations, policies, and compliance requirements.

Technological Analysis

• Objective: Evaluate the technological landscape impacting the industry.
• Technological Trends: Identify emerging technologies and innovations relevant to the industry.
• Digital Transformation: Assess the level of digitalization within the industry and its impact on operations and customer engagement.
• Innovation Opportunities: Explore opportunities for leveraging technology to gain a competitive edge.

Financial Analysis

• Objective: Analyze the financial health of the industry and key players.
• Revenue and Profitability: Review industry-wide revenue trends and profitability ratios.
• Financial Stability: Assess financial stability by examining debt levels and cash flow.
• Investment Patterns: Analyze capital expenditure and investment trends within the industry.

Consumer Insights

• Objective: Understand consumer behavior and preferences.
• Consumer Surveys: Conduct surveys or gather data on consumer preferences, buying habits , and satisfaction levels.
• Market Perception: Gauge consumer perception of brands and products in the industry.
• Consumer Feedback: Collect and analyze customer feedback and reviews.

SWOT Analysis for Your Business

• Objective: Assess your own business within the industry context.
• Strengths: Identify internal strengths that give your business a competitive advantage.
• Weaknesses: Recognize internal weaknesses that may hinder your performance.
• Opportunities: Explore external opportunities that your business can capitalize on.
• Threats: Recognize external threats that may impact your business.

Conclusion and Recommendations

• Objective: Summarize key findings and provide actionable recommendations.
• Summary: Recap the most critical insights from the analysis.
• Recommendations: Offer strategic recommendations for your business based on the analysis.
• Future Outlook: Discuss potential future developments in the industry.

While this template provides a structured approach, adapt it to the specific needs and objectives of your Industry Analysis. It serves as your guide, helping you navigate through the complex landscape of your chosen industry, uncovering opportunities, and mitigating risks along the way.

Remember that the depth and complexity of your industry analysis may vary depending on your specific goals and the industry you are assessing. You can adapt this template to focus on the most relevant aspects and conduct thorough research to gather accurate data and insights. Additionally, consider using industry-specific data sources, reports, and expert opinions to enhance the quality of your analysis.

Industry Analysis Examples

To grasp the practical application of industry analysis, let's delve into a few diverse examples across different sectors. These real-world scenarios demonstrate how industry analysis can guide strategic decision-making.

Tech Industry - Smartphone Segment

Scenario: Imagine you are a product manager at a tech company planning to enter the smartphone market. Industry analysis reveals that the market is highly competitive, dominated by established players like Apple and Samsung.

Use of Industry Analysis:

• Competitive Landscape: Analyze the strengths and weaknesses of competitors, identifying areas where they excel (e.g., Apple's brand loyalty ) and where they might have vulnerabilities (e.g., consumer demand for more affordable options).
• Market Trends: Identify trends like the growing demand for sustainable technology and 5G connectivity, guiding product development and marketing strategies.
• Regulatory Factors: Consider regulatory factors related to intellectual property rights, patents, and international trade agreements that can impact market entry and operations.
• Outcome: Armed with insights from industry analysis, you decide to focus on innovation, emphasizing features like eco-friendliness and affordability. This niche approach helps your company gain a foothold in the competitive market.

Healthcare Industry - Telehealth Services

Scenario: You are a healthcare entrepreneur exploring opportunities in the telehealth sector, especially in the wake of the COVID-19 pandemic. Industry analysis is critical due to rapid market changes.

• Market Size and Growth: Evaluate the growing demand for telehealth services, driven by the need for remote healthcare during the pandemic and convenience factors.
• Regulatory Environment: Understand the evolving regulatory landscape, including changes in telemedicine reimbursement policies and licensing requirements.
• Technological Trends: Explore emerging technologies such as AI-powered diagnosis and remote monitoring that can enhance service offerings.
• Outcome: Industry analysis underscores the potential for telehealth growth. You adapt your business model to align with regulatory changes, invest in cutting-edge technology, and focus on patient-centric care, positioning your telehealth service for success.

Food Industry - Plant-Based Foods

Scenario: As a food industry entrepreneur , you are considering entering the plant-based foods market, driven by increasing consumer interest in health and sustainability.

• Market Trends: Analyze the trend toward plant-based diets and sustainability, reflecting changing consumer preferences.
• Competitive Landscape: Assess the competitive landscape, understanding that established companies and startups are vying for market share.
• Consumer Behavior: Study consumer behavior, recognizing that health-conscious consumers seek plant-based alternatives.
• Outcome: Informed by industry analysis, you launch a line of plant-based products emphasizing both health benefits and sustainability. Effective marketing and product quality gain traction among health-conscious consumers, making your brand a success in the plant-based food industry.

These examples illustrate how industry analysis can guide strategic decisions, whether entering competitive tech markets, navigating dynamic healthcare regulations, or capitalizing on shifting consumer preferences in the food industry. By applying industry analysis effectively, businesses can adapt, innovate, and thrive in their respective sectors.

Conclusion for Industry Analysis

Industry Analysis is the compass that helps businesses chart their course in the vast sea of markets. By understanding the industry's dynamics, risks, and opportunities, you gain a strategic advantage that can steer your business towards success. From identifying competitors to mitigating risks and formulating competitive strategies, this guide has equipped you with the tools and knowledge needed to navigate the complexities of the business world.

Remember, Industry Analysis is not a one-time task; it's an ongoing journey. Keep monitoring market trends, adapting to changes, and staying ahead of the curve. With a solid foundation in industry analysis, you're well-prepared to tackle challenges, seize opportunities, and make well-informed decisions that drive your business toward prosperity. So, set sail with confidence and let industry analysis be your guiding star on the path to success.

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How to Conduct an Industry Analysis

8 min. read

Updated March 18, 2024

I bet you agree: You need to know the industry you want to start a business in, and the kind of business you want to start, before you can start it.

Industry analysis is part of good management. That’s not just for the business planning, but rather for business survival, beginning to end. Most of the people who successfully start their own business have already had relevant business experience before they start, most often as employees.

But in this article, I focus on how to consolidate and formalize that industry knowledge into a formal business plan .

Although all business owners need to know their industry, the documented details and explanations are mainly for when you’re writing a business plan you need to show to outsiders, like bank lenders or investors . You’ll need to do some industry analysis so you’re able to explain the general state of your industry, its growth potential, and how your business model fits into the landscape.

And if your business plan is more of an internal strategic roadmap, you should still be very sure—whether you have to prove it to others or not—that you know your market, even if you don’t do a formal industry analysis. Whether you’re a service business, manufacturer, retailer, or something else, you want to know your industry inside and out.

• What to cover in your industry analysis

Whether you write it all out in a formal business plan or not, when you’re doing your industry analysis, you’re looking at the following:

• Industry participants
• Distribution patterns
• Competition and buying patterns

Everything in your industry that happens outside of your business will affect your company. The more you know about your industry, the more advantage and protection you will have.

A complete business plan discusses:

• General industry economics
• Participants
• Factors in the competition
• And whatever else describes the nature of your business to outsiders

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A note on finding industry information

The internet has had an enormous impact on the state of business information. Finding information isn’t really the problem anymore, after the information explosion and the huge growth in the internet beginning in the 1990s and continuing in the 21st century.

Even 10 or 15 years ago, dealing with information was more a problem of sorting through it all than of finding raw data. That generality is truer every day. There are websites for business analysis, financial statistics, demographics, trade associations, and just about everything you’ll need for a complete business plan.

You should know who else sells in your market. You can’t easily describe a type of business without describing the nature of the participants. There is a huge difference, for example, between an industry like broadband television services, in which there are only a few huge companies in any one country, and one like dry cleaning, in which there are tens of thousands of smaller participants.

This can make a big difference to a business and a business plan. The restaurant industry, for example, is what we call “pulverized,” meaning that it, like the dry cleaning industry, is made up of many small participants. The fast-food business, on the other hand, is composed of a few national brands participating in thousands of branded outlets, many of them franchised .

Economists talk of consolidation in an industry as a time when many small participants tend to disappear and a few large players emerge. In accounting, for example, there are a few large international firms whose names are well-known, and tens of thousands of smaller firms. The automobile business is composed of a few national brands participating in thousands of branded dealerships, and in computer manufacturing, for example, there are a few large international firms whose names are well-known, and thousands of smaller firms.

Products and services can follow many paths between suppliers and users.

Explain how distribution works in your industry:

• Is this an industry in which retailers are supported by regional distributors, as is the case for computer products, magazines, or auto parts?
• Does your industry depend on direct sales to large industrial customers?
• Do manufacturers support their own direct sales forces, or do they work with product representatives?

Some products are almost always sold through retail stores to consumers, and sometimes these are distributed by distribution companies that buy from manufacturers. In other cases, the products are sold directly from manufacturers to stores. Some products are sold directly from the manufacturer to the final consumer through mail campaigns, national advertising, or other promotional means.

In many product categories, there are several alternatives, and distribution choices are strategic.

Amazon made direct delivery a huge competitive advantage, especially in its earlier years. Doordash and competitors chose to be intermediaries between restaurants and customers, and several businesses offer prepackaged meal ingredients delivered with instructions for finishing the preparations in the consumers’ kitchens. Now major grocery chains offer grocery delivery. Red Box made a strategy of DVDs in kiosks. An entire industry of food delivery options gives consumers choices like restaurant meals or fresh meals ingredients being delivered. Many products are distributed through direct business-to-business (B2B) sales and in long-term contracts such as the ones between car manufacturers and their suppliers of parts, materials, and components. In some industries, companies use representatives, agents, or commissioned salespeople.

Technology can change the patterns of distribution in an industry or product category. The internet, for example, changed options for software distribution, books, music, and other products. Cable communication first, and more recently streaming, changed the options for distributing video products and video games. Some kinds of specialty items sell best with late-night infomercials on television, but others end up working on the web instead of television.

Distribution patterns may not be as critical to most service companies, because distribution is normally about physical distribution of specific physical products such as a restaurant, graphic artist, professional services practice, or architect.

For a few services, the distribution may still be relevant. A phone service, cable provider, or an internet provider might describe distribution related to physical infrastructure. Some publishers may prefer to treat their business as a service, rather than a manufacturing company, and in that case distribution may also be relevant.

It is essential to understand the nature of competition in your market. This is still in the general area of describing the industry or type of business.

Explain the general nature of competition in this business, and how the customers seem to choose one provider over another:

• What are the keys to success?
• What buying factors make the most difference—is it price? Product features? Service? Support? Training? Software? Delivery dates?
• Are brand names important?

In the computer business, for example, competition might depend on reputation and trends in one part of the market, and on channels of distribution and advertising in another. In many business-to-business industries, the nature of competition depends on direct selling, because channels are impractical.

Price is vital in products competing with each other on retail shelves, but delivery and reliability might be much more important for materials used by manufacturers in volume, for which a shortage can affect an entire production line.

In the restaurant business, for example, competition might depend on reputation and trends in one part of the market, and on location and parking in another.

In many professional service practices, the nature of competition depends on word of mouth, because advertising is not completely accepted. Is there price competition between accountants, doctors, and lawyers? How powerful are the insurance decisions in medicine, like in or out of network? How do people choose travel agencies or florists for weddings? Why does someone hire one landscape architect over another? Why choose Starbucks, a national brand, over the local coffee house? All of this is the nature of competition.

The key to your specific industry analysis is a collection of decisions and educated guesses you’ll probably have to make for yourself. There are few pat answers. Maybe it’s easy parking, a great location, great reviews on Amazon or Yelp, or recommendations on social media. You can’t necessarily look this up. It’s the kind of educated guessing that makes some businesses more successful than others.

• Main competitors

Do a very complete analysis of your main competitors. Make a list, determining who your main competitors are. What are the strengths and weaknesses of each?

Consider your competitors’:

• Financial position
• Channels of distribution
• Brand awareness
• Business development
• Technology,  or other factors that you feel are important
• In what segments of the market do they operate? What seems to be their strategy? How much do they impact your products, and what threats and opportunities do they represent?

Finding competitive information

Competitive research starts with a good web search. Look up competitors’ websites and social media, then search for mentions, reviews, announcements, and even vacancies and job search information. An amazing array of competitive information is posted in plain sight, where anybody can find it.

From, there, for a good review of additional sources of information, I suggest Practical Market Research Resources for Entrepreneurs , also here on Bplans.

Competitive matrix

A lot of businesses organize competitive analysis into a competitive matrix. The standard competitive matrix shows how different competitors stack up according to significant factors.

Some people also use a SWOT analysis to think about competition in terms of opportunities and threats, the “OT” of SWOT. Opportunities and threats are generally taken as externals, which would include competition, so it’s valuable to run a SWOT analysis on your business to help figure this out.

Tim Berry is the founder and chairman of Palo Alto Software , a co-founder of Borland International, and a recognized expert in business planning. He has an MBA from Stanford and degrees with honors from the University of Oregon and the University of Notre Dame. Today, Tim dedicates most of his time to blogging, teaching and evangelizing for business planning.

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Industry Analysis – Definition, Types, Examples & How-to Guide

Studying the market trends and the competition level is important for businesses because it helps them to lay out their future strategies. Therefore, they use various tools and methods to achieve their goals. Industry analysis is the same process. Today, we’ll discuss industry analysis, its types, examples, and guide. 

Table of Contents

What is Industry Analysis?

Industry analysis is a market evaluation tool that businesses and companies use to comprehend and analyze the degree of competition in a certain industry. It helps you to understand the market position of the industry. Like the external factors impacting the industry, credit system, technological changes and how shaping the future, other competitive developing industries, competition level within the industry, and statistics of supply and demand.

Industry analysis helps an entrepreneur or a startup company to comprehend the position of a business relevant to the other competitive businesses in the industry. Most importantly, it helps you to recognize the upcoming threats and opportunities and how you can handle them with your strong points. The only way to survive in today’s business environment is to distinguish yourself from the competitors within the industry. 

Types of Industry Analysis

Businesses and companies use three main tools and methods to perform industry analysis, and they’re as follows; 

Competitive Force Model (Porter’s Five Forces)

Michael Porter introduced this model in the 1980s and it goes by the name of Porter’s 5 Forces. It analyzes the five forces impacting the industry. They are as follows; 

• The intensity of Industry Rivals. The businesses operating in the same industry and their market share makes them industry rivals. Some of the factors that make the competition intense are; increasing fixed cost, lower differentiation, and high exit cost. 
• The threat of Potential Entrants. The entrance of the new business in the industry makes the business environment competitive. If the entrance is easier, then it makes the business environment risky. If the entrance is difficult, then they could enjoy benefits for a long time. 
• Bargaining Power of Supplier. If a business depends on the supplies of suppliers, then they would have a significant influence over your businesses. It could directly impact the price and quality of your product. 
• Bargaining Power of Buyer. Here the customers have more negotiating power over the business. They would demand discounts, better quality, and economical price. It usually happens when there are more competitors in the industry. 
• Threats of Substitute Products. It’s when competitive businesses are offering similar substitute products of the other industry. A business usually has to face competitors from various industries and they impact your revenue stream. However, the substitute’s products are of two types; same product features with the higher price and same product features with lower price. 

SWOT Analysis

SWOT analysis comprises strengths, weaknesses, opportunities, and threats, and its analysis studies the impact on the business. It further consists of two parts; 

• Internal Factors. The strengths and weaknesses fall under the category of internal factors. They exist within any business and continue to play their role. 
• External Factors. The opportunities and threats are the external factors. They tell us the impact of potential happenings and how the company should react. Now it depends on the management whether it has the ability to exploit the opportunities and ignore threats. 

PESTLE Analysis

PESTLE analysis comprises six macro-environmental factors like political, economical, social, technological, legal, and environmental factors. 

• Political. Political factors mean government regulations, trade policies, tariffs, and the country’s overall stable environment. 
• Economical. Economical factors include revenue, GDP, net income, import and exports, taxation, unemployment, growth rate, interest rate, and many other factors. 
• Social. The social factor comprises fashion, trends, shopping, attitude and behavior, demography, healthy standards, and cultures. 
• Technological. Technological factors consist of research and development, latest innovation and creativity, internet, and digital tech trends. 
• Legal. Legal factors comprise labor laws, regulations, minimum wage, employment contracts, paychecks, leaves, and other issues. 
• Environmental. The environmental factor comprises environmental issues like deforestation, pollution, carbon emission, soil degradation, and others.

Reasons to Perform an Industry Analysis

Industry analysis allows you to have an insight into the competitive business environment. The weaknesses of your competitors would be your strong suits. You can integrate such information to make the marketing plan to grow your business. 

The result of industry analysis provides you an insight into the future growth of your business. If the report tells you upcoming threats, then you can take preventive measures to avoid them. 

The analysis confirms and ensures the credibility of your business, and it would help you attract investors. It means that you’re familiar with competitors and knows what your customers want. 

How to Perform Industry Analysis Effectively

Review available documented/reports.

You should take some time to find and study already published reports relevant to your industry. You would probably find a well-detailed report, and studying it would answer your questions. It doesn’t mean that you should completely rely on such published reports. 

Therefore, you should choose the most report of your industry. It’s because trends and statistics change over time. If you rely on the old report, it won’t give you conclusive results. 

Carefully Choose the Industry You Analyze

You must select the most relevant industry for your business. It’s because every industry has got many sub-categories. For instance, a chemical industry would have sub-categories of pesticides, organic, inorganic, and so on. 

Come up with the Supply and Demand of Industry

Supply and demand play a significant role in controlling the market. You should study the past trends and product and product scenarios, and the findings would help you to predict the future. 

Know Your Competitors

You should consider studying your competitors and their expectations and plans from the market. Porter’s 5 forces model would help you in this regard. 

Follow Recent Developments in the Industry

Most importantly, you should study the macro-environmental factors that could impact your industry. Like the technological development, the latest tech trends, and technology innovation would impact many businesses worldwide. 

Focus on dynamics of the Industry

The industry analysis should focus on the particular industry in question and understand the various dynamics of the industry. It should be direct, to the point, and in-depth. For instance, if your focus industry is aluminum, then you should be aware of the per capita consumption within the industry along with production and total consumption. 

Examples and Templates of Industry Analysis

If you want to study the industry analysis of other businesses relevant to the industry as an example, it’s because it helps business owners to understand the position of their business. It answers them that how they can get a competitive edge over competitors.

• Industry Analysis Example, Templates, and Reports

Advantages of Industry Analysis

• It helps you to touch the unexplored opportunities
• It helps startup companies to know the position of their business relevant to the competitors
• Its focus is to point out the opportunities and threats 
• It helps you to find out those points that could provide you the best results 
• It helps you to develop a competitive strategy that would defend you in the competition
• It helps you to evaluate the profitability of the relevant industries

Disadvantages of Industry Analysis

• Misinterpretation of the statistics and data could lead you to make the wrong decision 
• It’s a one-sided approach and it doesn’t guarantee success 
• If inflation decreases the sale and company’s revenue stream, it would badly impact the report 
• Season factors usually have a good and bad impact on the business, if the interpreter doesn’t consider these factors, it would impact the conclusions. 

About The Author

Ahsan Ali Shaw

Industry Analysis In A Business Plan

Industry Analysis In A Business Plan –

Some decisions require a lot of thinking. You cannot just adopt “Rocks, Scissors, and Paper” to decide in such cases. Many reviews, analyses, and debates are behind such vital decisions. The same is the situation of Luke and his wife, Daisy. They have made this big decision to buy a new home. They have analyzed various areas and bungalows and buildings, and flats. Finally, they have shortlisted a small house and are about to do the paperwork. Luke has analyzed all the positives of that area and nearby amenities. Daisy, on the other hand, is having a hard time. Since it is the most significant decision for her after her marriage, she has been going nuts. She is having nightmares of all the possible things that can go wrong with the house and the new place.

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But nothing went wrong in their case, and they lived happily in the new home. As an intelligent person, Luke had done some proper analysis and predictions. He made calculations of the possibilities and prospects of that area and came up with a positive outlook. Impressive right? But do you want to know a little secret?

Luke has some fantastic analytical skills . So the question is, from where did he get such skills? Is it hereditary? Or has he developed it over time?

How do you think Luke was able to buy such a magnificent new home? The answer is that Luke is a big fan of Warren Buffet. He has been investing in the stock market for a long time and doing well. Before investing in any company, Luke analyzed that sector and industry well. He came up with his industry analysis report and decided whether to invest in that sector or the company. So let’s use Luke’s analytical skills and get insights into what industry analysis is in a business plan and how to perform the same. So let’s learn the basics of Industry analysis.

What is Industry Analysis In A Business Plan?

Before starting with the actual meaning of the industry analysis in a business plan, first, let’s understand what an Industry is.

The industry is a collection of Competitors producing a similar product or offering similar services to their customers.

So the next question is, why are we studying that industry?

To ensure it is the best or worst industry to enter or invest in.

Industry analysis in a business plan is a tool that enables a company to understand its position relative to other companies that produce similar products or services like it. While considering the strategic planning process, a company must understand the overall industry’s forces. Thus, industry analysis techniques in a business plan enable businesses to identify threats and opportunities. It helps them focus their resources on developing unique capabilities to gain a competitive advantage .

Understanding the industry and forecasting its trends and directions, they need to react and control their portion in the industry.

Major elements

1. Understanding the underlying forces at work

• Competition intensifying
• Changing customers’ needs and taste
• Technological innovation
• Globalization
• Entry of major competitors
• Sudden regulation or deregulation

2. Understanding the attractiveness of the industry

• Whether it is feasible to enter or invest in that industry.

3. Understanding the critical industry analysis factors that determine success within the industry.

Importance 

• It is an important element of any investment  that one wants to make.
• To succeed, business owners need to analyze that industry.
• Important for positioning the company in the niche market
• It aids the companies in identifying potential opportunities.
• It helps in analyzing the threats.
• Assists in analyzing the fit between internal management preferences and the business environment.
• Facilitates mitigating the risk of entering an extremely competitive business.

Ways to perform

• One way to perform the industry analysis in a business plan is to do the ratio analysis and comparisons. Ratios are ascertained by dividing one business variable by another. By comparing the company ratio with that of the industry, a business owner can understand where his business stands concerning the industry average.

Michael E. Porter developed another model for analyzing the industry in his classic book Competitive Strategy: Techniques for Analyzing Industries and Competitors (1980). His model shows that rivalry among the firms in an industry depends upon the following five forces:

The Threat of New Entry

The threat of new entrants refers to the entry of new competitors in the industry. Naturally, a profitable industry will attract more competitors looking to achieve profits. If the entry barriers in the industry are low, it may pose a significant threat to the firms already competing in that market.

Bargaining power of the Supplier

Supplier power refers to the pressure suppliers can exert on businesses by raising prices, lowering quality, or reducing product availability to intimidate buyers. All of these things directly cost the buyer.

Bargaining power of the Buyer

It refers to the pressure the buyers can exert on businesses to ensure higher quality products, better customer service, and lower prices. Strong buyers can make the industry more competitive, thus decreasing the profit for the seller.

Competitive Rivalry

It is the extent to which the competitive firms within an industry can bully each other, thus decreasing profits. Fierce competition may lead to stealing profits and market share amongst competitors.

Threat of Substitution

It is the availability of a substitute product that the buyers can find instead of a core selling product.

Industry Analysis 3 Steps

# Gathering the Data

• The Scope of the Research

Define the industry where you would like to perform industry analysis research activities. It can be a broad industry or a niche industry.

• Research your industry

Information sources that will help you conduct your industry analysis in a business plan are different for every business. For example, you might need local information, which you can get from your local chamber of commerce. Or you can find your industry analysis information on government websites. You can also find out government statistics or other commercial statistics. You may have to conduct some internet searches to track down the information.

If the information is difficult to obtain at one particular site, you’ll have to extrapolate information from different sources to get the information you’re seeking. Start finding the data from the government or other websites where accurate data is available. Check academic databases for any published information on your area of interest.

• Compile relevant data using the sources above.

Make notes of annual revenues, the number of companies involved, and workforce statistics of the desired industry. Find statistics about the size of the customer base and buying trends.

• Description of the Industry

Start your industry analysis report with a general description of the industry. Include one or two paragraphs about the industry’s size, products, and geographic concentration.

• Describe the company

Include information about the company that you may want to research. Fill in all the general and relevant information about the company.

• Competitor Analysis

Understand the competitors and mention relevant statistical information about their revenues, profit, etc. Describe their product range if possible. Mention their strategies and forth-coming products.

GDP and Inflation effects

Mention how much the sector has been contributing to the GDP and how it has been affected by the rising inflation. Give an outlook on the same.

Try to understand the answers to the following industry analysis questions.

What are the industry’s foremost economic characteristics?

To answer this question, you can acquire data about the industry from governmental census data or sites such as Yahoo.com or other data-intensive web locations.

What kinds of competitive forces are industry members facing?

Understand the interrelationships among companies in the industry and their suppliers and buyers. Also, understand the ease of entry and exit from the industry.

What is the Change driving factors and their impacts?

Understand the industry analysis characteristics of the industry, unlike changing social trends, demographics, regulatory issues, etc.

What do market positions rivals occupy?

Analyze whether a firm is smartly positioned or not. Many industry analysis websites list the company’s key competitors and information about them.

Finally, you should get a positive response to the following question.

Points to Stress in Industry Analysis in a Business Plan

1.  Industry attractiveness and industry success factors

• Industry attractiveness is the presence or absence of threats exhibited by industry forces. Thus a more significant threat posed by any of the industry forces lessens the attractiveness of the industry.
• Success factors are the elements that play a significant role in determining whether a company will succeed or fail in a given industry. Some industry analysis examples of success factors are- quick response to market changes, product line, reasonable and fair prices, product quality, sales support, a good record for deliveries, financial position and a management team.

2.  Analyzing the future

• One of the crucial factors in industry analysis in a business plan is analyzing the sector’s future. Here one can see how the industry has performed historically. Explore how the sector will perform by looking at historical trends.
• However, the sector’s future is also affected by the significant changes or regulations related to that industry. Hence it is necessary 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 may affect the industry-

• If demand increases and supply remains unchanged, it leads to a shortage of goods, and the prices increase.
• If demand decreases and supply remains intact, it leads to surplus goods and a decrease in the price.

4.  Effect of Inflation on the Industry

• Inflation has affected some major economies of the world over the past years. Hence analyzing the effect of inflation on a particular sector becomes extremely important in the industry analysis of a business plan process.
• Savings, as well as investments, are affected by the high rate of inflation . Hence most companies are affected adversely due to lesser demand for their products and services.

5.  Other important factors that can be considered for Industry Analysis in a business plan are

• Size of the industry
• What sectors does it include?
• Major players in this industry
• Markets and customers
• Estimated sales for the industry (This year? Last year? The year before?)
• National/economic trends affecting the industry?
• National/economic trends that might affect it in the future
• Long-term outlook
• Competitor analysis
• The competitive advantage of the business
• Target Market analysis
• Market growth rate
• Market profitability
• Industry cost structure
• Distribution channels
• Success factors
• Success Details

Considerations for Industry Analysis in a business plan

• While carrying out an industry analysis in a business plan, one should consider which forces pose the greatest threat to the business.
• Companies may then undertake careful strategic planning to mitigate these threats.
• Managers should also consider their own preferences and internal capabilities before undertaking a strategy developed from an industry analysis.

Business Cycle Analysis

Try to classify the industries according to their growth cycle.

• Growth industries 

The earnings in such industries are significantly above the average of all sectors. Growth stocks suffer less during a recession.

• Defensive industries

Such industries are least affected by recessions and economic adversity.

• Cyclical industries

Such industries are most affected by recessions and economic adversity.

Benefits of Industry Analysis in a Business Plan

• The benefits of completing an industry analysis in a business plan help company managers to gain a better understanding of their business in the industry.
• Allows companies to position themselves carefully in their industry.
• It helps companies to respond better to any changes in the industry.

Example of Industry Analysis In A Business Plan (FMCG Sector)

So having known the importance and ways to carry out an industry analysis in a business plan, let us now analyze the Indian FMCG sector.

Industry Overview

• Currently, the FMCG sector is the fourth largest sector in India, with a market size of USD 12000 Billion.
• It is to grow to a USD 18000 Billion industry by 2031.

Major Segments in the FMCG Sector

Major Players

SWOT Analysis of the FMCG Sector

1. Low operational costs 2. Established distribution networks in both urban and rural areas 3. Presence of well-known brands in the FMCG sector

1. Lower scope of investing in technology and achieving economies of scale, especially in small sectors 2. Low exports levels 3. Copy products narrow the scope of FMCG products in the rural and semi-urban markets.

Opportunities

1. Rural market is mostly untapped 2. The increased purchasing power of consumers 3. Large domestic market- population of over one billion. 4. Export potential

1. Removal of import restrictions resulting in replacing of domestic brands 2. Tax and regulatory structure.

Porters five forces model for FMCG Sector

Key Challenges

• Consolidation
• Product innovation
• Lifestyle products
• Backward integration
• Third-party manufacturing
•  Increased hiring from Tier 1 & 2 cities
• Reducing carbon footprint
• The government approved an investment of up to 100 % foreign equity for NRI & overseas corporate bodies.
• India has allowed 51 % FDI in multi-brand retail
• Relaxation of license rules

The above industry analysis of the Indian FMCG sector is brief to give a gist of what industry analysis in a business plan should include. The actual industry analysis report may be exhaustive detailing all the essential factors.

Hope that the above article has added some value to your learning. Share this with your friends who might find this article interesting.

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How to Write the Market Analysis Section of a Business Plan

Written by Dave Lavinsky

What is the Market Analysis in a Business Plan?

The market analysis section of your business plan is where you discuss the size of the market in which you’re competing and market trends that might affect your future potential such as economic, political, social and/or technological shifts.

This helps you and readers understand if your market is big enough to support your business’ growth, and whether future conditions will help or hurt your business. For example, stating that your market size is $56 billion, has been growing by 10% for the last 10 years, and that trends are expected to further increase the market size bodes well for your company’s success.

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What Should a Market Analysis Include?

You’ll want to address these issues in your market analysis:

• Size of Industry – How big is the overall industry?
• Projected Growth Rate of Industry – Is the industry growing or shrinking? How fast?
• Target Market – Who are you targeting with this product or service?
• Competition – How many businesses are currently in the same industry?

Learn how to write the full market analysis below.

How to Write a Market Analysis

Here’s how to write the market analysis section of a business plan.

• Describe each industry that you are competing in or will be targeting.
• Identify direct competition, but don’t forget about indirect competition – this may include companies selling different products to the same potential customer segments.
• Highlight strengths and weaknesses for both direct and indirect competitors, along with how your company stacks up against them based on what makes your company uniquely positioned to succeed.
• Include specific data, statistics, graphs, or charts if possible to make the market analysis more convincing to investors or lenders.

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Industry overview.

In your industry overview, you will define the market in which you are competing (e.g., restaurant, medical devices, etc.).

You will then detail the sub-segment or niche of that market if applicable (e.g., within restaurants there are fast food restaurants, fine dining, etc.).

Next, you will describe the key characteristics of your industry. For example, discuss how big the market is in terms of units and revenues. Let the reader know if the market is growing or declining (and at what rate), and what key industry trends are facing your market.

Use third-party market research as much as possible to validate the discussion of your industry.

Here is a list of additional items you may analyze for a complete industry overview:

• An overview of the current state of the industry . How big is it, how much does it produce or sell? What are its key differentiators from competitors? What is its target customer base like – demographic information and psychographics? How has the industry performed over time (global, domestic)?
• Analyze the macro-economic factors impacting your industry . This includes items such as economic growth opportunities, inflation, exchange rates, interest rates, labor market trends, and technological improvements. You want to make sure that all of these are trending in a positive direction for you while also being realistic about them. For example, if the economy is in shambles you might want to wait before entering the particular market.
• Analyze the political factors impacting your industry . This is an often-overlooked section of any business plan, but it can be important depending on what type of company you are starting. If you’re in a highly regulated industry (such as medical devices), this is something that you’ll want to include.
• Analyze the social factors impacting your industry . This includes analyzing society’s interest in your product or service, historical trends in buying patterns in your industry, and any effects on the industry due to changes in culture. For example, if there is a growing counter-culture trend against big oil companies you might want to position yourself differently than a company in this industry.
• Analyze the technological factors impacting your industry . This includes analyzing new technologies being developed in software, hardware, or applications that can be used to improve your product or service. It also includes emerging consumer trends and will be highly dependent on your business type. In a technology-related venture, you would analyze how these changes are impacting consumers. For an educational-related venture, you would analyze how these changes are impacting students, teachers, and/or administrators.

For each of these items, you want to provide some detail about them including their current state as well as what external factors have played a role in the recent past. You can also include many other important factors if they apply to your business including demographic trends, legal issues, environmental concerns, and sustainability issues.

When you are done analyzing all of these factors, wrap it up by summing them up in a statement that includes your view on the future of the industry. This should be positive to attract investors, potential customers, and partners.

If you’re having trouble thinking about all of these factors then it might be helpful to first develop a SWOT analysis for your business.

Once you have an understanding of the market, you’ll need to think about how you will position yourself within that potential market.

Picking Your Niche

You want to think about how large your market is for this venture. You also want to consider whether you’d like to pick a niche within the overall industry or launch yourself into the mainstream.

If you have an innovative product it can be easier to enter the mainstream market – but at the same time, you might face some additional competition if there are similar products available.

You can choose to specialize in a niche market where you’ll face less competition – but might be able to sell your services at a higher price point (this could make it easier for you to get potential customers).

Of course, if your product or service is unique then there should be no competition. But, what happens if it isn’t unique? Will you be able to differentiate yourself enough to create a competitive advantage or edge?

If you are planning on entering the mainstream market, think about whether there are different sub-niches within your specific market. For example, within the technology industry, you can choose to specialize in laptops or smartphones or tablets, or other categories. While it will be more difficult to be unique in a mainstream market, you will still be able to focus on one type or category of products.

How Will You Stand Out?

Many companies are able to stand out – whether by offering a product that is unique or by marketing their products in a way that consumers notice. For example, Steve Jobs was able to take a business idea like the iPhone and make it into something that people talked about (while competitors struggled to play catch up).

You want your venture to stand out – whether with an innovative product or service or through marketing strategies. This might include a unique brand, name, or logo. It might also include packaging that stands out from competitors.

Write down how you will achieve this goal of standing out in the marketplace. If it’s a product, then what features do you have that other products don’t? If it’s a service, then what is it about this service that will make people want to use your company rather than your competition?

You also need to think about marketing. How are you going to promote yourself or sell your product or service? You’ll need a marketing plan for this – which might include writing copy, creating an advertisement, setting up a website, and several other activities. This should include a description of each of these strategies.

If you’re struggling with the details of any of these sections, it might be helpful to research what other companies in your market are doing and how they’ve been successful. You can use this business information to inform your own strategies and plans.

Relevant Market Size & Competition

In the second stage of your analysis, you must determine the size and competition in your specific market.

Target Market Section

Your company’s relevant market size is the amount of money it could make each year if it owned a complete market share.

It’s simple.

To begin, estimate how many consumers you expect to be interested in purchasing your products or services each year.

To generate a more precise estimate, enter the monetary amount these potential customers may be ready to spend on your goods or services each year.

The size of your market is the product of these two figures. Calculate this market value here so that your readers can see how big your market opportunity is (particularly if you are seeking debt or equity funding).

You’ll also want to include an analysis of your market conditions. Is this a growing or declining market? How fast is it growing (or declining)? What are the general trends in the market? How has your market shifted over time?

Include all of this information in your own business plan to give your readers a clear understanding of the market landscape you’re competing in.

The Competition

Next, you’ll need to create a comprehensive list of the competitors in your market. This competitive analysis includes:

• Direct Competitors – Companies that offer a similar product or service
• Indirect Competitors – Companies that sell products or services that are complementary to yours but not directly related

To show how large each competitor is, you can use metrics such as revenue, employees, number of locations, etc. If you have limited information about the company on hand then you may want to do some additional research or contact them directly for more information. You should also include their website so readers can learn more if they desire (along with social media profiles).

Once you complete this list, take a step back and try to determine how much market share each competitor has. You can use different methods to do this such as market research, surveys, or conduct focus groups or interviews with target customers.

You should also take into account the barriers to entry that exist in your market. What would it take for a new company to enter the market and start competing with you? This could be anything from capital requirements to licensing and permits.

When you have all of this information, you’ll want to create a table like the one below:

Once you have this data, you can start developing strategies to compete with the other companies which will be used again later to help you develop your marketing strategy and plan. 

Writing a Market Analysis Tips

• Include an explanation of how you determined the size of the market and how much share competitors have.
• Include tables like the one above that show competitor size, barriers to entry, etc.
• Decide where you’re going to place this section in your business plan – before or after your SWOT analysis. You can use other sections as well such as your company summary or product/service description. Make sure you consider which information should come first for the reader to make the most sense.
• Brainstorm how you’re going to stand out in this competitive market.

Formatting the Market Analysis Section of Your Business Plan

Now that you understand the different components of the market analysis, let’s take a look at how you should structure this section in your business plan.

Your market analysis should be divided into two sections: the industry overview and market size & competition.

Each section should include detailed information about the topic and supporting evidence to back up your claims.

You’ll also want to make sure that all of your data is up-to-date. Be sure to include the date of the analysis in your business plan so readers know when it was conducted and if there have been any major changes since then.

In addition, you should also provide a short summary of what this section covers at the beginning of each paragraph or page. You can do this by using a title such as “Industry Overview” or another descriptive phrase that is easy to follow.

As with all sections in a business plan, make sure your market analysis is concise and includes only the most relevant information to keep your audience engaged until they reach your conclusion.

A strong market analysis can give your company a competitive edge over other businesses in its industry, which is why it’s essential to include this section in your business plan. By providing detailed information about the market you’re competing in, you can show your readers that you understand the industry and know how to capitalize on current and future trends.

Business Plan Market Analysis Examples

The following are examples of how to write the market analysis section of a business plan:

Business Plan Market Analysis Example #1 – Hosmer Sunglasses, a sunglasses manufacturer based in California

According to the Sunglass Association of America, the retail sales volume of Plano (non-prescription) sunglasses, clip-on sunglasses, and children’s sunglasses (hereinafter collectively referred to as “Sunwear”) totaled $2.9 billion last year. Premium-priced sunglasses are driving the Plano Sunwear market. Plano sunglasses priced at $100 or more accounted for more than 49% of all Sunwear sales among independent retail locations last year. 

The Sunglass Association of America has projected that the dollar volume for retail sales of Plano Sunwear will grow 1.7% next year. Plano sunglass vendors are also bullish about sales in this year and beyond as a result of the growth of technology, particularly the growth of laser surgery and e-commerce.

Business Plan Market Analysis Example #2 – Nailed It!, a family-owned restaurant in Omaha, NE

According to the Nebraska Restaurant Association, last year total restaurant sales in Nebraska grew by 4.3%, reaching a record high of $2.8 billion. Sales at full-service restaurants were particularly strong, growing 7% over 2012 figures. This steady increase is being driven by population growth throughout the state. The Average Annual Growth Rate (AGR) since 2009 is 2.89%.

This fast growth has also encouraged the opening of new restaurants, with 3,035 operating statewide as of this year. The restaurant industry employs more than 41,000 workers in Nebraska and contributes nearly $3 billion to the state economy every year.

Nebraska’s population continues to increase – reaching 1.9 million in 2012, a 1.5% growth rate. In addition to population, the state has experienced record low unemployment every year since 2009 – with an average of 4.7% in 2013 and 2014.

Business Plan Market Analysis Example #3 – American Insurance Company (AIC), a chain of insurance agencies in Maine

American Insurance Company (AIC) offers high-quality insurance at low prices through its chain of retail outlets in the state of Maine. Since its inception, AIC has created an extensive network of agents and brokers across the country with expanding online, call center and retail business operations.

AIC is entering a market that will more than double in size over the next 50 years according to some industry forecasts. The insurance industry is enjoying low inflation rates, steady income growth, and improving standards of living for most Americans during what has been a difficult period for much of American business. This makes this a good time to enter the insurance industry as it enjoys higher margins because customers are purchasing more coverage due to increased costs from medical care and higher liability claims.

American Insurance Company provides affordable homeowners, auto, and business insurance through high-quality fulfillment centers across America that have earned a reputation for top-notch customer service.

AIC will face significant competition from both direct and indirect competitors. The indirect competition will come from a variety of businesses, including banks, other insurance companies, and online retailers. The direct competition will come from other well-funded start-ups as well as incumbents in the industry. AIC’s competitive advantages include its low prices, high quality, and excellent customer service.

AIC plans to grow at a rate that is above average for the industry as a whole. The company has identified a market that is expected to grow by more than 100% in the next decade. This growth is due to several factors: the increase in the number of two-income households, the aging population, and the impending retirement of many baby boomers will lead to an increase in the number of people who are purchasing insurance.

AIC projects revenues of $20M in year one, which is equivalent to 100% growth over the previous year. AIC forecasts revenue growth of 40%-60% each year on average for 10 years. After that, revenue growth is expected to slow down significantly due to market saturation.

The following table illustrates these projections:

Competitive Landscape

Direct Competition: P&C Insurance Market Leaders

Indirect Competition: Banks, Other Insurance Companies, Retailers

Market Analysis Conclusion

When writing the market analysis section, it is important to provide specific data and forecasts about the industry that your company operates in. This information can help make your business plan more convincing to potential investors.

If it’s helpful, you should also discuss how your company stacks up against its competitors based on what makes it unique. In addition, you can identify any strengths or weaknesses that your company has compared to its competitors.

Based on this data, provide projections for how much revenue your company expects to generate over the next few years. Providing this information early on in the business plan will help convince investors that you know what you are talking about and your company is well-positioned to succeed.  

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Other Resources for Writing Your Business Plan

How to Write a Great Business Plan Executive Summary How to Expertly Write the Company Description in Your Business Plan The Customer Analysis Section of Your Business Plan Completing the Competitive Analysis Section of Your Business Plan The Management Team Section of Your Business Plan Financial Assumptions and Your Business Plan How to Create Financial Projections for Your Business Plan Everything You Need to Know about the Business Plan Appendix Best Business Plan Software Business Plan Conclusion: Summary & Recap  

Other Helpful Business Planning Articles & Templates

How to Conduct an Industry Analysis

• March 21, 2024
• Business Plan , How to Write

An industry analysis is a fundamental component of any business plan, offering insights into the market dynamics, competitive landscape , and future market trends . This analysis helps businesses understand their industry’s environment, make informed strategic decisions, and identify potential opportunities and threats.

This guide will walk you through the steps of conducting a thorough industry analysis, using examples to illustrate key points.

Identify Your Industry

Before diving into the analysis, it’s crucial to clearly identify and define your industry. This involves outlining the scope in terms of products, services, and geographic reach.

Understanding the industry’s value chain and how your business fits within this ecosystem is essential. Consider the broader market forces at play, the typical customer base, and the regulatory landscape that shapes your industry’s boundaries.

• Example for a Hair Salon : If you’re opening a hair salon, your industry encompasses beauty and personal care services focused on hair treatment and styling.

Gather Information

The foundation of a solid industry analysis is robust data collection.

Utilize a variety of sources to gather information about your industry, including industry reports online, government publications, academic journals, and news articles. Attend industry conferences or trade shows and engage with other professionals on social media or industry forums to gain firsthand insights.

• Example for a Hair Salon : For a hair salon, look into beauty industry trends, salon service pricing strategies , and consumer spending habits in personal care services.

Analyze Market Trends

Identifying and understanding current market trends that affect your industry is vital.

Look for patterns in technological advancements, consumer behavior changes, regulatory developments, and economic factors. Projecting these trends into the future can help predict shifts in the industry landscape, allowing your business to adapt and innovate proactively.

• Example for a Hair Salon : An increasing preference for organic and eco-friendly hair care products is a significant trend in the hair salon industry.

Assess the Competitive Landscape

Analyze who your direct and indirect competitors are, what strategies they employ, their strengths and weaknesses, and their market positioning.

Tools like SWOT analyses analysis can help assess the competitive intensity and the profitability potential within the industry. This analysis also identifies potential barriers to entry and the threat of substitute products or services.

• Example for a Hair Salon : Examine other salons in your area, noting services offered, pricing levels, customer reviews, and marketing tactics.

Determine Market Entry Barriers

Barriers to entry can vary significantly across industries and affect your strategy for market entry and growth.

[link to Market Entry Barriers]

High capital requirements, strict regulatory standards, established brand loyalty, and access to distribution channels are common barriers. Identifying these early on helps in formulating strategies to overcome them, whether through innovation, strategic partnerships, or niche targeting.

• Example for a Hair Salon : For a hair salon, barriers might include the cost of acquiring a prime location, compliance with health and safety regulations, and establishing a brand in a competitive market.

Predict Future Industry Changes

Leveraging the information gathered, anticipate potential changes in the industry. This could involve innovations that disrupt traditional business models, regulatory changes, or shifts in consumer preferences. Understanding these potential changes allows businesses to be agile and adapt their strategies accordingly.

• Example for a Hair Salon : Anticipate how the growing use of online booking platforms and social media marketing could transform customer engagement strategies in the hair salon industry.

Identify Opportunities and Threats

Synthesize your findings to pinpoint opportunities for your business to exploit and threats you may need to mitigate. This SWOT analysis will be crucial for your strategic planning.

[link to SWOT]

• Example for a Hair Salon : Opportunities might include a gap in the market for salons specializing in sustainable practices. A threat could be the rising cost of eco-friendly products.

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How to Write The Industry Section of a Business Plan

Writing a Business Plan: Section 2

Susan Ward wrote about small businesses for The Balance for 18 years. She has run an IT consulting firm and designed and presented courses on how to promote small businesses.

Geber86 / Getty Images

When writing a business plan, the Industry section is best organized as two parts: an overview of the industry and a summary of your business's position within the overall industry.

Before writing this section of the business plan, use these questions to focus your research:

• What is the size of your industry?
• What sectors does this industry include?
• Who are the major players in this industry?
• What are the markets and customers for this industry?
• What are the industry's estimated sales this year? Last year? The year before?
• What national and economic trends have affected this industry and how?
• What national and economic trends might affect it in the future and how?
• What is the long-term outlook for this industry?
• What products or services will your business be selling?
• What is your Unique Selling Proposition? (What is it about your business that makes it unique and sets it apart from competitors?)
• What are the barriers to entry in your industry?
• How will you overcome these barriers?
• Who are your competitors?
• What is the market share of your competitors?
• What is your business's competitive advantage (i.e., your market niche or estimated market share)?
• What is your target market?
• How are you protecting your product or process (i.e., patents, copyrights, trademarks, franchise rights that you either hold or plan to acquire)?

Once you have all this information, you'll write this section of the business plan in the form of several short paragraphs. (Remember, each of these paragraphs is a summary, not a detailed point-by-point explanation.) Use appropriate headings for each paragraph. 

Finding Information on Your Industry

But where do you find the information that you need for writing the Industry Overview section of your business plan?

United States Research

In the United States, you may want to start your research by reviewing information from the U.S. Census Bureau, Industry Statistics Portal. This site provides data for selected industries separated into categories using the North American Industry Classification System (NAICS). The Bureau of Labor Statistics also offers a large selection of information grouped by NAICS industry.

There are also other sources of information—some free and some paid sources—including IBIS World, Select USA, and the U.S. the Department of Commerce Bureau of Economic Analysis.

Canadian Research

When you're writing a business plan and looking for information on Canadian industries, Industry Canada is your logical first stop. Their Find Statistics by Industry  page lets you see key economic indicators for different sectors of the Canadian economy, access industry profiles, and analysis and research small businesses in Canada generally.

Another primary source for industry and economic information that you can easily access online when you're writing a business plan is Statistics Canada. From this homepage you can find a wealth of free statistical information; use this page, to search for Statistics Canada publications back to 1980.

There are also provincial statistics websites where you'll be able to find more economic, social, and demographic statistics relating to your industry and the business environment.

The Canada Business Service Centres located in each province also offer excellent collections of resources online, and telephone and email information services. You'll find a list of links to the Canada Business Service Centre in each province in my Provincial Programs and Services Resources.

The business sections of national newspapers and business magazines will also be helpful; these often carry features on the past and future business trends.

And don't forget your local sources of business information when you're researching your business plans, such as your Economic Development Centre, Chamber of Commerce, or Women's Enterprise Centre, or the business section of the local library.

Doing Business Plan Research

If your business is related to manufacturing when you're writing a business plan begin by determining the NAICS of your particular industry, and the sector and sub-sector if applicable. It will make it easier for you to find statistical information relating to your industry. If your business is a service, begin with Industry Canada's service industry profiles.

Refer to the list of questions earlier in this article on how to write a business plan as a research guide. Whenever you find a piece of information that you want:

• Check its date and determine whether or not the information is current enough to be valid;
• Write down the date and source of the information, as you'll need to cite your information sources in the business plan.

When you're writing a business plan, you want your research information to be as up-to-date as possible. After all, there's no point in starting a business if you don't want it to succeed.

Industry Analysis

Understanding the competitiveness of an industry

What is Industry Analysis?

Industry analysis is a market assessment tool used by businesses and analysts to understand the competitive dynamics of an industry. It helps them get a sense of what is happening in an industry, e.g., demand-supply statistics , degree of competition within the industry, state of competition of the industry with other emerging industries, future prospects of the industry taking into account technological changes, credit system within the industry, and the influence of external factors on the industry.

Industry analysis, for an entrepreneur or a company, is a method that helps to understand a company’s position relative to other participants in the industry. It helps them to identify both the opportunities and threats coming their way and gives them a strong idea of the present and future scenario of the industry. The key to surviving in this ever-changing business environment is to understand the differences between yourself and your competitors in the industry and use it to your full advantage.

Learn more in CFI’s Corporate & Business Strategy Course .

Types of industry analysis

There are three commonly used and important methods of performing industry analysis. The three methods are:

• Competitive Forces Model (Porter’s 5 Forces)
• Broad Factors Analysis (PEST Analysis)
• SWOT Analysis

#1 Competitive Forces Model (Porter’s 5 Forces)

One of the most famous models ever developed for industry analysis, famously known as Porter’s 5 Forces , was introduced by Michael Porter in his 1980 book “ Competitive Strategy: Techniques for Analyzing Industries and Competitors. ”

According to Porter, analysis of the five forces gives an accurate impression of the industry and makes analysis easier. In our Corporate & Business Strategy course , we cover these five forces and an additional force — power of complementary good/service providers.

The above image comes from a section of CFI’s Corporate & Business Strategy Course .

1. Intensity of industry rivalry

The number of participants in the industry and their respective market shares are a direct representation of the competitiveness of the industry. These are directly affected by all the factors mentioned above. Lack of differentiation in products tends to add to the intensity of competition. High exit costs such as high fixed assets, government restrictions, labor unions, etc. also make the competitors fight the battle a little harder.

2. Threat of potential entrants

This indicates the ease with which new firms can enter the market of a particular industry. If it is easy to enter an industry, companies face the constant risk of new competitors. If the entry is difficult, whichever company enjoys little competitive advantage reaps the benefits for a longer period. Also, under difficult entry circumstances, companies face a constant set of competitors.

3. Bargaining power of suppliers

This refers to the bargaining power of suppliers . If the industry relies on a small number of suppliers, they enjoy a considerable amount of bargaining power. This can particularly affect small businesses because it directly influences the quality and the price of the final product.

4. Bargaining power of buyers

The complete opposite happens when the bargaining power lies with the customers. If consumers/buyers enjoy market power, they are in a position to negotiate lower prices, better quality, or additional services and discounts. This is the case in an industry with more competitors but with a single buyer constituting a large share of the industry’s sales.

5. Threat of substitute goods/services

The industry is always competing with another industry producing a similar substitute product. Hence, all firms in an industry have potential competitors from other industries. This takes a toll on their profitability because they are unable to charge exorbitant prices. Substitutes can take two forms – products with the same function/quality but lesser price, or products of the same price but of better quality or providing more utility.

#2 Broad Factors Analysis (PEST Analysis)

Broad Factors Analysis , also commonly called the PEST Analysis stands for Political, Economic, Social and Technological.  PEST analysis is a useful framework for analyzing the external environment.

To use PEST as a form of industry analysis, an analyst will analyze each of the 4 components of the model.  These components include:

1. Political

Political factors that impact an industry include specific policies and regulations related to things like taxes, environmental regulation, tariffs, trade policies, labor laws, ease of doing business, and overall political stability.

2. Economic

The economic forces that have an impact include inflation, exchange rates (FX), interest rates, GDP growth rates, conditions in the capital markets (ability to access capital), etc.

The social impact on an industry refers to trends among people and includes things such as population growth, demographics (age, gender, etc.), and trends in behavior such as health, fashion, and social movements.

4. Technological

The technological aspect of PEST analysis incorporates factors such as advancements and developments that change the way a business operates and the ways in which people live their lives (e.g., the advent of the internet).

#3 SWOT Analysis

SWOT Analysis stands for Strengths, Weaknesses, Opportunities, and Threats.  It can be a great way of summarizing various industry forces and determining their implications for the business in question.

The above image comes from a section of CFI’s Corporate & Business Strategy Course .  Check it out to learn more about performing SWOT analysis.

1. Internal

Internal factors that already exist and have contributed to the current position and may continue to exist.

2. External

External factors are usually contingent events. Assess their importance based on the likelihood of them happening and their potential impact on the company. Also, consider whether management has the intention and ability to take advantage of the opportunity/avoid the threat.

Importance of Industry Analysis

Industry analysis, as a form of market assessment, is crucial because it helps a business understand market conditions. It helps them forecast demand and supply and, consequently, financial returns from the business. It indicates the competitiveness of the industry and costs associated with entering and exiting the industry. It is very important when planning a small business. Analysis helps to identify which stage an industry is currently in; whether it is still growing and there is scope to reap benefits or has reached its saturation point.

With a very detailed study of the industry, entrepreneurs can get a stronghold on the operations of the industry and may discover untapped opportunities. It is also important to understand that industry analysis is somewhat subjective and does not always guarantee success. It may happen that incorrect interpretation of data leads entrepreneurs to a wrong path or into making wrong decisions. Hence, it becomes important to collect data carefully.

Additional Resources

Thank you for reading the CFI guide to industry analysis. To continue advancing your skills as a financial analyst, these additional CFI resources will be of value:

• Top Valuation Methods
• Business Lifecycle
• DCF Modeling Guide
• Strategic Analysis Guides
• See all management & strategy resources
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Home » Business Plans

How to Write a Business Plan Industry Analysis

How do you conduct industry analysis for a business plan? Do you need help conducting market research and industry analysis for your business plan? Then I advice you read on. So you have a great business idea, you have refined and fine-tuned it, and you are ready to launch. You are going to offer a product or service with a clearly defined customer base, and you are confident that you will be successful in the long term.

Well, if the above applies perfectly to you, then you have not completed your assignment. What happens when you enter an examination hall without having studied for the exam at all? You’d spend all your time in the hall blaming yourself for being silly, right? Now, starting a business is even much more important because there’s a lot more at stake than passing or failing a grade. So, you must not leave out any aspect of research undone.

In this section of your business plan, you will demonstrate that the industry’s market size is worth going after, who your main competitors will be if you decide to take a plunge, and how you will be able to carve out a niche for yourself and give your competitors a run for their money. Planning a business goes beyond analyzing the potential of your offer. You must analyze the following three factors as well:

• The strengths and weaknesses of your business
• The competition
• Who your customers are, what they want, and how they want it

These are the major components of a business plan’s market or industrial analysis and it is also known as a SWOT (Strength, Weaknesses, Opportunities and Threats) analysis. This section of your business plan reveals the chances of your business to achieve success with its offers. And that’s why the industry analysis is a very important section of your business plan, which must be carefully conducted and documented.

So in this article, we will be looking at how to conduct industry analysis for a business plan. If you are a budding entrepreneur, or you are planning to start a new business; then below are the exact steps to follow when conducting an industry analysis for a new business:

How to Conduct Industry Analysis for a Business Plan

1.  analyze the competition.

Of the three factors listed above, the competition may prove the most difficult to analyze, especially if you are new to the industry. But there are ways to simplify the task. You can start by looking at your direct competitors. If you are planning to start a new restaurant in an area, your direct competitors are other restaurants within that locality, while your indirect competitors are those that are slightly remote but still around.

Now, you are not just counting the number of rivals you have. You are trying to see how you can push ahead of them by filling a loophole they never noticed all these while. Some people find it hard to leave their workplace for the restaurant at lunchtime, but it’s either they do it or go hungry. You can disrupt the market’s status quo by offering to deliver lunch to people right in their workplaces. Filling loopholes like this one should be your goal.

If you don’t device strategies for pushing ahead of the competition, you will just enter the industry and join the survival race that you may never win. So, you need to introduce an innovation that will threaten your rivals. Remember, it’s either you differentiate or you fizzle out fast!

2.  Assess the industry / market size

After analyzing your direct and indirect competitors, you will need to analyze your chances of standing firm even in the face of stiffer competition. Your first step in market research is to get an idea of how big the opportunity is and why it’s worth going after.

This means finding out how many customers you are catering to and much revenue you are likely to make. This is a convincing first step to lure in whoever is reading your business plan to become intrigued and dig further into your findings. Here are some factors you should consider:

• The individual strengths and weaknesses of your competitors.
• The rate at which new competitors enter the market or the rate at which old competitors are leaving the market.
• The products or services that fetch most revenue for your competitors.
• How you will overcome the threat of substitute goods.

You can get lots of helpful information about your market from government sources, trade associations, financial services firms, online data providers, and free resources on the web.

3. Analyze industry forces and trends

You will need to outline what’s happening in the industry from many perspectives that would help the reader get the full gist on whether the market is lucrative or not. A great general-purpose tool for doing just that is the PEST Analysis. Here’s what it stands for and what you should consider:

• P – Political factors ( the role government plays in your industry )
• E – Economic factors ( the state of the economy on both local and national level )
• S – Social factors ( relevant changes in matters like lifestyle trends, demographics, consumer attitudes, buying patterns and opinions )
• T – Technological factors ( the impact of changing technological trends on your industry )

4.  Develop your marketing plan

Developing your marketing plan entails answering the following questions:

• What products or services are you offering?
• How much will you charge for your offers?
• Where will you sell your product, and who are your target customers?
• What special incentives would you use to encourage customers to buy your product?

In short, this section of your industry analysis outlines how you will deliver your product to the customers and how you will win customers to your side.

5.  Craft your growth plan

While some entrepreneurs are of the opinion that this step should come only after you have established your business, crafting your market development plan helps you envision your company growing in a few years. Your growth plan should address the following questions:

• According to recent data, is the market for your product growing or dwindling?
• Do you plan to introduce new products or line extensions in the next few years?
• If you plan to introduce new offers, would they be closely related to your current offers or within another niche entirely?
• Are there strategies for giving your business the competitive advantage in the industry?
• Are there plans to handle increasing demand?

6.  Fine-tune your analysis

After the steps discussed above, cross check your analyses to ensure that your findings are factual and your figures are accurate. Another handy tool to have in your arsenal when conducting industry research is the almighty Porter’s 5 Forces Analysis . ( Don’t worry if you’ve never attended a business strategy class in your life, it’s actually quite straightforward ). Here’s the breakdown:

Threat of new entrants

How difficult ( or easy ) is it for someone to enter your specific vertical? If it’s very easy then most likely the space will be crowded with competitors fighting for margins. Conversely, if it’s very difficult, that that in itself can become a competitive advantage.

Threat of substitute products or services

How likely is it that another product or service could decrease demand or displace you and potentially the entire industry all together?

Bargaining power of customers

When it comes to pricing and terms, how much power does your customer have? Are they organized enough to exercise their purchase power, or is there so much competition that they have their pick resulting in pricing wars amongst providers?

Bargaining power of suppliers

This refers to how dependent you are on a given supplier to operate your business. If it’s difficult or near impossible for you to switch, that means they have the upper hand, whereas, if the switching costs are low, you can negotiate better terms for yourself.

Competitive rivalry of the market

Factoring in the first four forces, you can arrive at a good understanding of the playing field and whether it’s in your favor if you enter it, how long you’ll be able to last, through what means you’ll carve a space for yourself, and what you’re up against.

As a final note, you must never forget that the industry analysis is a vital part of your business plan and it will probably be the most extensive portion of it. So, take your time to conduct extensive research on your competitors and market trends over the recent years.

• Go to Chapter 9 Part B: Writing a Business Plan Competitive Market Analysis
• Go Back to Chapter 8: Writing your Company’s Profile
• Go Back to Introduction and Table of Content

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How to Write a Market Analysis for a Business Plan

Dan Marticio is a freelance writer. He’s written on a broad range of topics from stocks and net worth to productivity hacks. His work has appeared on Fundera and LendingTree.

Robert Beaupre leads the SMB team at NerdWallet. He has covered financial topics as an editor for more than a decade. Before joining NerdWallet, he served as senior editorial manager of QuinStreet's insurance sites and managing editor of Insure.com. In addition, he served as an online media manager for the University of Nevada, Reno.

Many, or all, of the products featured on this page are from our advertising partners who compensate us when you take certain actions on our website or click to take an action on their website. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money .

A lot of preparation goes into starting a business before you can open your doors to the public or launch your online store. One of your first steps should be to write a business plan . A business plan will serve as your roadmap when building your business.

Within your business plan, there’s an important section you should pay careful attention to: your market analysis. Your market analysis helps you understand your target market and how you can thrive within it.

Simply put, your market analysis shows that you’ve done your research. It also contributes to your marketing strategy by defining your target customer and researching their buying habits. Overall, a market analysis will yield invaluable data if you have limited knowledge about your market, the market has fierce competition, and if you require a business loan. In this guide, we'll explore how to conduct your own market analysis.

How to conduct a market analysis: A step-by-step guide

In your market analysis, you can expect to cover the following:

Industry outlook

Target market

Market value

Competition

Barriers to entry

Let’s dive into an in-depth look into each section:

Step 1: Define your objective

Before you begin your market analysis, it’s important to define your objective for writing a market analysis. Are you writing it for internal purposes or for external purposes?

If you were doing a market analysis for internal purposes, you might be brainstorming new products to launch or adjusting your marketing tactics. An example of an external purpose might be that you need a market analysis to get approved for a business loan .

The comprehensiveness of your market analysis will depend on your objective. If you’re preparing for a new product launch, you might focus more heavily on researching the competition. A market analysis for a loan approval would require heavy data and research into market size and growth, share potential, and pricing.

Step 2: Provide an industry outlook

An industry outlook is a general direction of where your industry is heading. Lenders want to know whether you’re targeting a growing industry or declining industry. For example, if you’re looking to sell VCRs in 2020, it’s unlikely that your business will succeed.

Starting your market analysis with an industry outlook offers a preliminary view of the market and what to expect in your market analysis. When writing this section, you'll want to include:

Market size

Are you chasing big markets or are you targeting very niche markets? If you’re targeting a niche market, are there enough customers to support your business and buy your product?

Product life cycle

If you develop a product, what will its life cycle look like? Lenders want an overview of how your product will come into fruition after it’s developed and launched. In this section, you can discuss your product’s:

Research and development

Projected growth

How do you see your company performing over time? Calculating your year-over-year growth will help you and lenders see how your business has grown thus far. Calculating your projected growth shows how your business will fare in future projected market conditions.

Step 3: Determine your target market

This section of your market analysis is dedicated to your potential customer. Who is your ideal target customer? How can you cater your product to serve them specifically?

Don’t make the mistake of wanting to sell your product to everybody. Your target customer should be specific. For example, if you’re selling mittens, you wouldn’t want to market to warmer climates like Hawaii. You should target customers who live in colder regions. The more nuanced your target market is, the more information you’ll have to inform your business and marketing strategy.

With that in mind, your target market section should include the following points:

Demographics

This is where you leave nothing to mystery about your ideal customer. You want to know every aspect of your customer so you can best serve them. Dedicate time to researching the following demographics:

Income level

Create a customer persona

Creating a customer persona can help you better understand your customer. It can be easier to market to a person than data on paper. You can give this persona a name, background, and job. Mold this persona into your target customer.

What are your customer’s pain points? How do these pain points influence how they buy products? What matters most to them? Why do they choose one brand over another?

Research and supporting material

Information without data are just claims. To add credibility to your market analysis, you need to include data. Some methods for collecting data include:

Target group surveys

Focus groups

Reading reviews

Feedback surveys

You can also consult resources online. For example, the U.S. Census Bureau can help you find demographics in calculating your market share. The U.S. Department of Commerce and the U.S. Small Business Administration also offer general data that can help you research your target industry.

Step 4: Calculate market value

You can use either top-down analysis or bottom-up analysis to calculate an estimate of your market value.

A top-down analysis tends to be the easier option of the two. It requires for you to calculate the entire market and then estimate how much of a share you expect your business to get. For example, let’s assume your target market consists of 100,000 people. If you’re optimistic and manage to get 1% of that market, you can expect to make 1,000 sales.

A bottom-up analysis is more data-driven and requires more research. You calculate the individual factors of your business and then estimate how high you can scale them to arrive at a projected market share. Some factors to consider when doing a bottom-up analysis include:

Where products are sold

Who your competition is

The price per unit

How many consumers you expect to reach

The average amount a customer would buy over time

While a bottom-up analysis requires more data than a top-down analysis, you can usually arrive at a more accurate calculation.

Step 5: Get to know your competition

Before you start a business, you need to research the level of competition within your market. Are there certain companies getting the lion’s share of the market? How can you position yourself to stand out from the competition?

There are two types of competitors that you should be aware of: direct competitors and indirect competitors.

Direct competitors are other businesses who sell the same product as you. If you and the company across town both sell apples, you are direct competitors.

An indirect competitor sells a different but similar product to yours. If that company across town sells oranges instead, they are an indirect competitor. Apples and oranges are different but they still target a similar market: people who eat fruits.

Also, here are some questions you want to answer when writing this section of your market analysis:

What are your competitor’s strengths?

What are your competitor’s weaknesses?

How can you cover your competitor’s weaknesses in your own business?

How can you solve the same problems better or differently than your competitors?

How can you leverage technology to better serve your customers?

How big of a threat are your competitors if you open your business?

Step 6: Identify your barriers

Writing a market analysis can help you identify some glaring barriers to starting your business. Researching these barriers will help you avoid any costly legal or business mistakes down the line. Some entry barriers to address in your marketing analysis include:

Technology: How rapid is technology advancing and can it render your product obsolete within the next five years?

Branding: You need to establish your brand identity to stand out in a saturated market.

Cost of entry: Startup costs, like renting a space and hiring employees, are expensive. Also, specialty equipment often comes with hefty price tags. (Consider researching equipment financing to help finance these purchases.)

Location: You need to secure a prime location if you’re opening a physical store.

Competition: A market with fierce competition can be a steep uphill battle (like attempting to go toe-to-toe with Apple or Amazon).

Step 7: Know the regulations

When starting a business, it’s your responsibility to research governmental and state business regulations within your market. Some regulations to keep in mind include (but aren’t limited to):

Employment and labor laws

Advertising

Environmental regulations

If you’re a newer entrepreneur and this is your first business, this part can be daunting so you might want to consult with a business attorney. A legal professional will help you identify the legal requirements specific to your business. You can also check online legal help sites like LegalZoom or Rocket Lawyer.

Tips when writing your market analysis

We wouldn’t be surprised if you feel overwhelmed by the sheer volume of information needed in a market analysis. Keep in mind, though, this research is key to launching a successful business. You don’t want to cut corners, but here are a few tips to help you out when writing your market analysis:

Use visual aids

Nobody likes 30 pages of nothing but text. Using visual aids can break up those text blocks, making your market analysis more visually appealing. When discussing statistics and metrics, charts and graphs will help you better communicate your data.

Include a summary

If you’ve ever read an article from an academic journal, you’ll notice that writers include an abstract that offers the reader a preview.

Use this same tactic when writing your market analysis. It will prime the reader of your market highlights before they dive into the hard data.

Get to the point

It’s better to keep your market analysis concise than to stuff it with fluff and repetition. You’ll want to present your data, analyze it, and then tie it back into how your business can thrive within your target market.

Revisit your market analysis regularly

Markets are always changing and it's important that your business changes with your target market. Revisiting your market analysis ensures that your business operations align with changing market conditions. The best businesses are the ones that can adapt.

Why should you write a market analysis?

Your market analysis helps you look at factors within your market to determine if it’s a good fit for your business model. A market analysis will help you:

1. Learn how to analyze the market need

Markets are always shifting and it’s a good idea to identify current and projected market conditions. These trends will help you understand the size of your market and whether there are paying customers waiting for you. Doing a market analysis helps you confirm that your target market is a lucrative market.

2. Learn about your customers

The best way to serve your customer is to understand them. A market analysis will examine your customer’s buying habits, pain points, and desires. This information will aid you in developing a business that addresses those points.

3. Get approved for a business loan

Starting a business, especially if it’s your first one, requires startup funding. A good first step is to apply for a business loan with your bank or other financial institution.

A thorough market analysis shows that you’re professional, prepared, and worth the investment from lenders. This preparation inspires confidence within the lender that you can build a business and repay the loan.

4. Beat the competition

Your research will offer valuable insight and certain advantages that the competition might not have. For example, thoroughly understanding your customer’s pain points and desires will help you develop a superior product or service than your competitors. If your business is already up and running, an updated market analysis can upgrade your marketing strategy or help you launch a new product.

Final thoughts

There is a saying that the first step to cutting down a tree is to sharpen an axe. In other words, preparation is the key to success. In business, preparation increases the chances that your business will succeed, even in a competitive market.

The market analysis section of your business plan separates the entrepreneurs who have done their homework from those who haven’t. Now that you’ve learned how to write a market analysis, it’s time for you to sharpen your axe and grow a successful business. And keep in mind, if you need help crafting your business plan, you can always turn to business plan software or a free template to help you stay organized.

This article originally appeared on JustBusiness, a subsidiary of NerdWallet.

On a similar note...

Analyze your market like a pro with this step-by-step guide + insider tips

Don’t fall into the trap of assuming that you already know enough about your market.

No matter how fantastic your product or service is, your business cannot succeed without sufficient market demand .

You need a clear understanding of who will buy your product or service and why .

You want to know if there is a clear market gap and a market large enough to support the survival and growth of your business.

Industry research and market analysis will help make sure that you are on the right track .

It takes time , but it is time well spent . Thank me later.

WHAT is Market Analysis?

The Market Analysis section of a business plan is also sometimes called:

• Market Demand, Market Trends, Target Market, The Market
• Industry Analysis & Trends, Industry & Market Analysis, Industry and Market Research

WHY Should You Do Market Analysis?

First and foremost, you need to demonstrate beyond any reasonable doubt that there is real need and sufficient demand for your product or service in the market, now and going forward.

• What makes you think that people will buy your products or services?
• Can you prove it?

Your due diligence on the market opportunity and validating the problem and solution described in the Product and Service section of your business plan are crucial for the success of your venture.

Also, no company operates in a vacuum. Every business is part of a larger overall industry, the forces that affect your industry as a whole will inevitably affect your business as well.

Evaluating your industry and market increases your own knowledge of the factors that contribute to your company’s success and shows the readers of your business plan that you understand the external business conditions.

External Support

In fact, if you are seeking outside financing, potential backers will most definitely be interested in industry and market conditions and trends.

You will make a positive impression and have a better chance of getting their support if you show market analysis that strengthens your business case, combining relevant and reliable data with sound judgement.

Let’s break down how to do exactly that, step by step:

HOW To Do Market Analysis: Step-by-Step

So, let’s break up how market analysis is done into three steps:

• Industry:  the total market
• Target Market: specific segments of the industry that you will target
• Target Customer: characteristics of the customers that you will focus on

Step 1: Industry Analysis

How do you define an industry.

For example, the fashion industry includes fabric suppliers, designers, companies making finished clothing, distributors, sales representatives, trade publications, retail outlets online and on the high street.

How Do You Analyze an Industry?

Briefly describe your industry, including the following considerations:

1.1. Economic Conditions

Outline the current and projected economic conditions that influence the industry your business operates in, such as:

• Official economic indicators like GDP or inflation
• Labour market statistics
• Foreign trade (e.g., import and export statistics)

1.2. Industry Description

Highlight the distinct characteristic of your industry, including:

• Market leaders , major customer groups and customer loyalty
• Supply chain and distribution channels
• Profitability (e.g., pricing, cost structure, margins), financials
• Key success factors
• Barriers to entry preventing new companies from competing in the industry

1.3. Industry Size and Growth

Estimate the size of your industry and analyze how industry growth affects your company’s prospects:

• Current size (e.g., revenues, units sold, employment)
• Historic and projected industry growth rate (low/medium/high)
• Life-cycle stage /maturity (emerging/expanding/ mature/declining)

1.4. Industry Trends

• Industry Trends: Describe the key industry trends and evaluate the potential impact of PESTEL (political / economic / social / technological / environmental / legal) changes on the industry, including the level of sensitivity to:
• Seasonality
• Economic cycles
• Government regulation (e.g. environment, health and safety, international trade, performance standards, licensing/certification/fair trade/deregulation, product claims) Technological change
• Global Trends: Outline global trends affecting your industry
• Identify global industry concerns and opportunities
• International markets that could help to grow your business
• Strategic Opportunity: Highlight the strategic opportunities that exist in your industry

Step 2: Target Customer Identification

Who is a target customer.

One business can have–and often does have–more than one target customer group.

The success of your business depends on your ability to meet the needs and wants of your customers. So, in a business plan, your aim is to assure readers that:

• Your customers actually exist
• You know exactly who they are and what they want
• They are ready for what you have to offer and are likely to actually buy

How Do You Identify an Ideal Target Customer?

2.1. target customer.

• Identify the customer, remembering that the decision-maker who makes the purchase can be a different person or entity than the end-user.

2.2. Demographics

• For consumers ( demographics ): Age, gender, income, occupation, education, family status, home ownership, lifestyle (e.g., work and leisure activities)
• For businesses ( firmographic ): Industry, sector, years in business, ownership, size (e.g., sales, revenues, budget, employees, branches, sq footage)

2.3. Geographic Location

• Where are your customers based, where do they buy their products/services and where do they actually use them

2.4 Purchasing Patterns

• Identify customer behaviors, i.e., what actions they take
• how frequently
• and how quickly they buy

2.5. Psychographics

• Identify customer attitudes, i.e., how they think or feel
• Urgency, price, quality, reputation, image, convenience, availability, features, brand, customer service, return policy, sustainability, eco-friendliness, supporting local business
• Necessity/luxury, high involvement bit ticket item / low involvement consumable

Step 3: Target Market Analysis

What is a target market.

Target market, or 'target audience', is a group of people that a business has identified as the most likely to purchase its offering, defined by demographic, psychographic, geographic and other characteristics. Target market may be broken down to target customers to customize marketing efforts.

How Do You Analyze a Target Market?

So, how many people are likely to become your customers?

To get an answer to this questions, narrow the industry into your target market with a manageable size, and identify its key characteristics, size and trends:

3.1. Target Market Description

Define your target market by:

• Type: B2C, B2B, government, non-profits
• Geographic reach: Specify the geographic location and reach of your target market

3.2. Market Size and Share

Estimate how large is the market for your product or service (e.g., number of customers, annual purchases in sales units and $ revenues). Explain the logic behind your calculation:

• TAM (Total Available/Addressable/Attainable Market) is the total maximum demand for a product or service that could theoretically be generated by selling to everyone in the world who could possibly buy from you, regardless of competition and any other considerations and restrictions.
• SAM (Serviceable Available Market) is the portion of the TAM that you could potentially address in a specific market. For example, if your product/service is only available in one country or language.
• SOM (Service Obtainable Market / Share of Market) is the share of the SAM that you can realistically carve out for your product or service. This the target market that you will be going after and can reasonably expect to convert into a customer base.

3.3. Market Trends

Illustrate the most important themes, changes and developments happening in your market. Explain the reasons behind these trends and how they will favor your business.

3.4. Demand Growth Opportunity

Estimate future demand for your offering by translating past, current and future market demand trends and drivers into forecasts:

• Historic growth: Check how your target market has grown in the past.
• Drivers past: Identify what has been driving that growth in the past.
• Drivers future: Assess whether there will be any change in influence of these and other drivers in the future.

How Big Should My Target Market Be?

Well, if the market opportunity is small, it will limit how big and successful your business can become. In fact, it may even be too small to support a successful business at all.

On the other hand, many businesses make the mistake of trying to appeal to too many target markets, which also limits their success by distracting their focus.

What If My Stats Look Bad?

Large and growing market suggests promising demand for your offering now and into the future. Nevertheless, your business can still thrive in a smaller or contracting market.

Instead of hiding from unfavorable stats, acknowledge that you are swimming against the tide and devise strategies to cope with whatever lies ahead.

Step 4: Industry and Market Analysis Research

The market analysis section of your business plan should illustrate your own industry and market knowledge as well as the key findings and conclusions from your research.

Back up your findings with external research sources (= secondary research) and results of internal market research and testing (= primary research).

What is Primary and Secondary Market Research?

Yes, there are two main types of market research – primary and secondary – and you should do both to adequately cover the market analysis section of your business plan:

• Primary market research is original data you gather yourself, for example in the form of active fieldwork collecting specific information in your market.
• Secondary market research involves collating information from existing data, which has been researched and shared by reliable outside sources . This is essentially passive desk research of information already published .

Unless you are working for a corporation, this exercise is not about your ability to do professional-level market research.

Instead, you just need to demonstrate fundamental understanding of your business environment and where you fit in within the market and broader industry.

Why Do You Need To Do Primary & Secondary Market Research?

There are countless ways you could go collecting industry and market research data, depending on the type of your business, what your business plan is for, and what your needs, resources and circumstances are.

For tried and tested tips on how to properly conduct your market research, read the next section of this guide that is dedicated to primary and secondary market research methods.

In any case, tell the reader how you carried out your market research. Prove what the facts are and where you got your data. Be as specific as possible. Provide statistics, numbers, and sources.

When doing secondary research, always make sure that all stats, facts and figures are from reputable sources and properly referenced in both the main text and the Appendix of your business plan. This gives more credibility to your business case as the reader has more confidence in the information provided.

Go to the Primary and Secondary Market Research post for my best tips on industry, market and competitor research.

7 TOP TIPS For Writing Market Analysis

1. realistic projections.

Above all, make sure that you are realistic in your projections about how your product or service is going to be accepted in the market, otherwise you are going to seriously undermine the credibility of your entire business case.

2. Laser Focus

Discuss only characteristic of your target market and customers that are observable, factual and meaningful, i.e. directly relate to your customers’ decision to purchase.

Always relate the data back to your business. Market statistics are meaningless until you explain where and how your company fits in.

For example, as you write about the market gap and the needs of your target customers, highlight how you are uniquely positioned to fill them.

In other words, your goal is to:

• Present your data
• Analyze the data
• Tie the data back to how your business can thrive within your target market

3. Target Audience

On a similar note, tailor the market analysis to your target audience and the specific purpose at hand.

For example, if your business plan is for internal use, you may not have to go into as much detail about the market as you would have for external financiers, since your team is likely already very familiar with the business environment your company operates in.

4. Story Time

Make sure that there is a compelling storyline and logical flow to the market information presented.

The saying “a picture is worth a thousand words” certainly applies here. Industry and market statistics are easier to understand and more impactful if presented as a chart or graph.

6. Information Overload

Keep your market analysis concise by only including pertinent information. No fluff, no repetition, no drowning the reader in a sea of redundant facts.

While you should not assume that the reader knows anything about your market, do not elaborate on unnecessary basic facts either.

Do not overload the reader in the main body of the business plan. Move everything that is not essential to telling the story into the Appendix. For example, summarize the results of market testing survey in the main body of the business plan document, but move the list of the actual survey questions into the appendix.

7. Marketing Plan

Note that market analysis and marketing plan are two different things, with two distinct chapters in a business plan.

As the name suggests, market analysis examines where you fit in within your desired industry and market. As you work thorugh this section, jot down your ideas for the marketing and strategy section of your business plan.

Final Thoughts

Remember that the very act of doing the research and analysis is a great opportunity to learn things that affect your business that you did not know before, so take your time doing the work.

Related Questions

What is the purpose of industry & market research and analysis.

The purpose of industry and market research and analysis is to qualitatively and quantitatively assess the environment of a business and to confirm that the market opportunity is sufficient for sustainable success of that business.

Why are Industry & Market Research and Analysis IMPORTANT?

Industry and market research and analysis are important because they allow you to gain knowledge of the industry, the target market you are planning to sell to, and your competition, so you can make informed strategic decisions on how to make your business succeed.

How Can Industry & Market Research and Analysis BENEFIT a Business?

Industry and market research and analysis benefit a business by uncovering opportunities and threats within its environment, including attainable market size, ideal target customers, competition and any potential difficulties on the company’s journey to success.

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What Is an Industry Analysis and Trends Business Plan?

An industry analysis and trends business plan is a component of a business plan that provides a comprehensive insight into industry conditions and trends. 3 min read updated on February 01, 2023

An industry analysis and trends business plan is a component of a business plan that provides a comprehensive insight into industry conditions and trends that can impact a company's success and growth. A thorough analysis of your industry and its trends can give you and other people a clearer idea of the feasibility and relevance of your business idea or goals.

Elements of a Business Plan

There are many different types of business plans. When you are creating your business plan, the information you choose to include will depend on your audience and personal preferences, as well as the questions you wish to answer and problems you seek to solve. While business plans may vary greatly, most of them contain the following elements:

• Executive summary
• Business description
• Analysis of business environment analysis
• Industry analysis
• Market analysis
• Competitive analysis
• Marketing plan
• Management plan
• Operations plan
• Financial projections
• What Is an Industry Analysis?

An industry analysis enables you to gain a better understanding of the industry and market in which you will be conducting business. By conducting an industry analysis before you start writing your business plan , you will be able to:

• Identify industry trends, such as potentially problematic aspects of the industry
• Identify trends and opportunities in products and services
• Calculate capital requirements
• Determine business risks and find ways to reduce them

An industry analysis must be specific to the industry in which you are conducting or are planning to conduct business. With the information you obtain from the analysis, you can devise a long-term strategy to mitigate risks and take full advantage of growth opportunities.

It is important not to confuse an industry analysis with a competitor or market analysis. An industry analysis seeks to describe the products or services offered in a specific industry and the boundaries of the marketplace in relation to economic, political, and regulatory issues. In other words, it defines the scope of the marketplace. A market analysis , on the other hand, helps you determine whether or not a market within your industry will be profitable for your products or services.

Conducting an Industry Analysis

The most widely used method for evaluating any industry was devised by Michael E. Porter from Harvard University. This method can help you create an effective strategy for competing in your industry. According to Porter, all industries and markets are influenced by five forces, which include:

• Ease of entry — Companies that are already operating in an industry will enjoy a competitive advantage over newcomers. However, their profits will be reduced unless they find a way to slow down or block the new entries. As for new businesses, they will face a variety of barriers, including government regulations, patents and copyrights, and customer loyalty.
• Suppliers' power — Suppliers of materials, products, or services can have a significant impact on a business' ability to compete. In the event that there are few suppliers offering the products or materials or few alternative products, the suppliers have the power to dictate quantities, prices, and delivery times for companies that have no choice but to buy from them.
• Buyers' power — In an industry where buyers can choose from many competing products, consumers will have strong bargaining power. This can affect the ability of a company to price its products or services without being afraid of losing customers.
• Availability of alternative products — In the situation where two businesses with similar products are competing within an industry, both of them will benefit as their marketing efforts will generally increase demand for their products. However, their market share will be reduced if there is another company selling a different kind of products that can serve as a substitute for theirs.
• Competitive rivalry — Competitive rivalry takes into account the number of competitors present in a particular industry, as well as their relative strength. In an industry where many companies are selling similar products, there is little opportunity for one company to control consumers' or suppliers' tendency to go elsewhere.

There are many free industry analysis tools and resources available to business owners who are preparing to create a business plan, such as:

• Securities and Exchange Commission
• U.S. Census Bureau
• Hoover's Online
• Thomas Register
• Library of Congress Legislative Information
• Websites of trade associations and companies

If you need help creating an industry analysis and trends business plan, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.

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• Parts of Business Plan and Definition
• Business Description Outline
• Market Analysis: Everything You Need To Know
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Industry Analysis

A tool to assess the competitiveness of the industry

Almat currently works as a Financial Advisory Services (Business Valuation) Consultant 2 at Deloitte Kazakhstan, where he works with clients across multiple industries. Prior to joining Deloitte, Almat spent 9 months as an Audit Assistant 1 for KPMG Caucasus and Central Asia, where he focused on the asset management and banking services industries.

Almat has a Bachelor of Finance from KIMEP University.

What is Industry Analysis?

• How To Do An Industry Analysis
• Types Of Industry Analysis
• Importance Of Industry Analysis

  Are you an equity research analyst who analyzes companies? Or are you a business person? Probably you are in a top managerial position within the firm. Anyway, you need to know one thing: how to analyze the industry.

Industry analysis is a tool to assess the competitiveness of the industry. However, it is just an analysis of the market in a particular sector. 

It helps you get a sense of:

• The competition is in the industry
• The demand for and the supply of the products
• The impact of external factors (economic and political events, technological changes, etc.)

Industry analysis helps both analysts and entrepreneurs understand the company's position in the industry. It is a straightforward way to identify opportunities and potential threats to the company. Also, this analysis clarifies the trends in the industry.

The best and surest way to survive for the company is to know its industry, itself, and its competitors. 

Therefore, the company must exploit all the advantages that differentiate itself from its competitors—only in that way can it address the customers' ever-changing demand.

As of May 2022, you might see that the only constant we have is changes. This is because the recent events have directly affected all businesses around the world. And the only possible way both to strive and stay alive is to adapt to the current environment.

The more you understand the industry, the better your business/investments will be in that industry. That's an unwritten law of business and investing.

Overall, there are three elements that you have to consider when conducting industry analysis:

• The underlying forces at work
• The overall attractiveness
• The critical factors that determine success within the industry

Below we will discuss:

• How to conduct the industry analysis
• What are the different types of it
• The importance of the industry analysis

Key Takeaways

• Industry analysis assesses competitiveness and positions within the industry.
• It identifies opportunities, threats, and trends for informed decision-making.
• Steps include industry identification, overview, forecasting, regulations, unique positioning, limitations and risks, and networking.
• Common methods are Porter's Five Forces, PEST Analysis, and SWOT Analysis.
• Industry analysis guides decision-making, strategy development, and investment recommendations.

How to do an industry analysis

There are seven steps to analyzing an industry: 

1. Identify your industry and provide a brief overview

Explore the industry on a local, provincial/state, national/federal, regional/continental, and global level. Make sure you know the relevant industry codes. Provide historical data and statistics of the industry and growth potential for the company, considering economic factors.

2. Summarize the nature of the industry

Consider specific patterns, trends, and changes in the economy. Then, make an income projection and document all the innovations and emerging technologies in the segment. Also, don't forget to discuss the marketing strategies to address them. 

Operational and management trends will be the key factors in constructing the marketing strategy.

3. Provide a forecast for your industry

You have to construct the industry's projections in 5, 10, and 20 years. As in all kinds of reports, you have to cite all the resources you've used. The larger the industry size, the more resources you have to use. Also, you should state at which  stage  the industry is:

4. Identify government regulations that affect the industry

Laws, rules, and regulations are inevitable factors in the report. State all the recent changes in laws and the needed licenses or certifications for the business to operate in its target market. Also, add all the applicable fees and costs.

5. Explain your unique position within the industry

Once you've completed one of the three industry analysis methods (described in the next section), list all the direct and indirect competitors and industry leaders. Then understand the differences between your firm and other firms and find their unique advantages.

6. List potential limitations and risks

You must include all the possible threats to the firm in the context of 5, 10, and even 20 years. The threats come from external factors such as regulations, technological changes, customer behavior, and competitors' strategies.

7. Talk to people!

Last but not least is talking to people. Most people underestimate how it is essential to network and gather information from people who work in the industry. Attend trade shows, industry conferences, cold calls, or cold emails to people , and join industry associations.

Types of industry analysis

To pick the proper method of industry analysis , we have to answer these questions:

• What are the main features of the industry in which the company operates?
• What are the competitive forces and their strengths in the industry?
• What are the changes and their drivers in the industry? How do they affect the company?
• How intense is the rivalry? Who are the strong and weak competitors?
• What are the next moves of your competitors?
• What is the crucial factor for success in the future?
• How attractive is the industry in the long-term perspective?

There are three most common ways to analyze the industry:

• Competitive Forces Model or Porter's Five Forces
• Broad Factors Analysis (PEST Analysis)
• SWOT Analysis

These methods fully answer all the mentioned questions. Other methods include ratio analysis, Thompson and Strickland's-7 forces model, and the "Structure-Conduct-Performance." 

We will focus only on the widely used top three methods for our purpose.

We discuss each of them in the following sections. So, let's now discuss the first method: Porter's Five Forces.

#1 Competitive Forces Model (Porter's 5 Forces)

Michael Porter introduced his Five Forces in 1980 in his book called "Competitive Strategy: Techniques for Analyzing Industries and Competitors." According to Michael Porter, these five forces describe any industry completely.

These five forces and additional "power of complementary goods/services" are:

1. Intensity of industry rivalry 

The industry's competitiveness depends on how many competitors exist at the current moment. Also, we should consider the market share of those competitors. The industry tends to be competitive if the product is less differentiated. 

For example, the biotechnology industry has less competition. Compare it with the restaurant business. In every corner of any city, you will find many restaurants.

Also, the high exit costs motivate current players to fight for the existing market. Examples of high exit costs might be high fixed assets, labor unions, government restrictions, and many others.

2. Threat of potential entrants

The threat of potential entrants is how easily new players can enter the market. If it is easy to start a business in the industry, the risk of new competitors will be unavoidable. Vice-versa, if it's hard to enter the market, then the sector has a minimal threat of new entrants.

The existing competitors in the industry can use their competitive advantage to prevent new entrants from entering the field.

This force is also called "barriers to entry." The barriers can be in the form of regulations, licensing, or technological advancements.

For example,  Microsoft ,  Apple , and  Google  dominate the mobile and desktop operating systems market due to technological advancements and network effects. Contrast this with the blogging and dropshipping business, where you don't need expertise or capital expenditure.

3. Bargaining power of suppliers

Suppliers also play an essential role in any industry. If there is a small number of suppliers, then the bargaining power of suppliers is high. However, if there are many suppliers, companies have more control over suppliers.

For example, software companies heavily rely on operating system providers such as Apple, Microsoft, and Google. So, the bargaining power of suppliers is high. But, in the car manufacturing industry, many small manufacturing shops provide specific parts.

Due to the access to numerous suppliers, this power is low for the car manufacturing industry.

4. Bargaining power of buyers

If the industry has many customers, then the bargaining power of buyers is low. The opposite is true for markets with few consumers.

For example, contrast the two different investment management companies: one is a mutual fund, and the other is a wealth management company. The prior one works with the masses and manages vast capital—the former works with  ultra-high-net-worth individuals (UHNWIs) .

The mutual fund has more power over multiple clients, while the wealth management company is dependent on a few UHNWIs.

5. Threat of substitute goods/services

The businesses are not only competing in the same industry. They also compete with companies in complementary industries. This is true for all industries. The more substitutes the product has, the lower prices can charge an average player.

Substitutes can take two forms:

• Product with the same function/quality, but at the lower price
• Product of better quality at the same price (more utility compared with other products)

One of the excellent examples is the auto industry. The car has such substitutes as public transportation, ride-sharing services (Uber, Lyft), bicycles, and scooters. All of these substitutes are doing the same job but in different ways.

The threat of substitutes is higher when substitute products are available at a lower price.

6. Existence of Complements

This is a new concept that many business practitioners suggested. The existence of complements affects the demand side of the industry. The higher the demand for complementary goods, the higher the demand for the goods offered by the industry.

For example, if the demand for cars increases, the demand for oil products (gas/petrol) will rise. So complementary goods and services exist in all industries.

#2 Broad Factors Analysis (PEST Analysis)

The comprehensive factor analysis considers all the external factors that might affect business operations. The external components include:

1. Political

This factor is all about the laws and regulations on tariffs, trade policies, taxes, environmental regulations, and political stability. The greatest example of political factors that affect businesses could be the trade war between U.S. and China.

2. Economic

This factor considers inflation, exchange rates (FX), interest rates, GDP growth rates, the stock market, and many other economic factors. The interest rates are affected by the monetary policy of the central bank .

As the name suggests, the social factor focuses on people. Therefore, such characteristics of people as age, population, and gender might drastically change the demand for the company's products.

Consumer behavior is another crucial factor to consider. It is affected by the population's health, fashion, and social changes. For example, if the population prefers environmentally friendly products (like Tesla cars), you should adjust to serve your customers.

Or the most recent trend among IT products' clients is the preference for cybersecurity and privacy above all. If you want to serve your target market in your industry, always check what your customers want.

4. Technological

Technological advancement is one of the most important factors to consider in scaling the business. Technological development directly affects how the company must operate to be successful.

#3 SWOT Analysis

SWOT analysis is most common in academia/research and business. SWOT consists of two different types of forces:

1. Internal

Internal factors are concerned with the things that are in control of the firm: production, cost, efficiency, customer services, and so on. Internal factors cover the following two sides:

The company's strengths include a competitive advantage against other industry players.

The weaknesses include the firm's characteristics, making it weaker than other competitors. For example, poorly skilled labor or unjust labor compensation might disadvantage the company.

2. External

External factors are concerned with the future condition of the company. The typical external factors are concerned with politics, the general economy , market conditions, customer tastes, and other outside factors not controlled by the company. External factors include the following:

Opportunities 

Favorable external conditions might boost the company's profitability. For example, the government might put tariffs and quotas on imports. That might favorably affect domestic businesses at the cost of foreign companies.

The elements of the external environment could endanger the integrity and profitability of the business. Therefore, companies must assess the likelihood and severity of external conditions. If the threat is both likely and severe, the best strategy is to avoid that risk.

  Importance of Industry Analysis

As you saw, all types of analysis cover a broad range of factors. These factors give you a clear understanding of the industry. So, industry analysis indicates the entry and exit costs of the industry.

The analysis helps to determine the development stage of the company and industry. The growth stage shows the company if there is room for development.

Industry knowledge directly correlates with the success of an entrepreneur. A successful founder has expertise in how:

• The industry operates
• How the power is distributed among stakeholders
• How the industry is affected by external factors

The industry analysis is also applicable to investment bankers and equity research analysts who focus on a single industry.

Suppose you work in the technology industry group of an Investment Bank . Before making any recommendations, you must analyze the tech industry. 

You give a piece of crucial advice if you know the position of the target and the acquirer compared with their competitors.

Want to break into investment banking, check our Investment Banking Interview course.

If you want to learn about careers in different financial industries, check out our Industry Comparisons course.

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Industry Analysis Examples

39 free industry analysis examples & templates.

If you read an industry analysis example, you’ll see that it’s a type of business function done by business owners in order to evaluate the current status of the business environment. The industry analysis reports help business owners understand the different economic pieces and who they can use these pieces to gain a competitive edge.

Table of Contents

• 1 Industry Analysis Examples
• 2 Methods for making industry analysis examples
• 3 Industry Analysis Templates
• 4 Industry Analysis Reports
• 5 How to perform an industry analysis?

Methods for making industry analysis examples

An industry analysis example is a type of tool used in market assessment by analysts and businesses to understand their industry’s competitive advantage. This document helps businesses get a sense of what’s happening in their industry.

For a company or an entrepreneur , creating an industry analysis template is a way to understand its position in relation to others in the industry. The industry research reports also help them identify threats and opportunities which come their way to give them a clear picture of the present situation and the future of the industry.

Industry Analysis Templates

If you want to survive in a business environment that’s always changing, you need to understand how you differ from your competitors and use this information to your advantage. When creating industry analysis reports, there are three main methods to use:

• Competitive Forces Model or Porter’s 5 Forces This is the most commonly used method when performing industry analysis. This method was first introduced by Michael Porter back in the year 1980 in his book entitled “Competitive Strategy: Techniques for Analyzing Industries and Competitors .” In his book, Porter says that analyzing five factors provides you with an accurate impression of your industry which, in turn, makes your analysis easier. These five factors are: The Intensity of the Industry Rivalry How many participants are in the industry and the respective market shares that they own directly represent that industry’s competitiveness. Both the number and the market shares are directly affected by all of the other factors. There are some high exit costs like labor unions, government restrictions, high fixed assets, and the like which also push competitors to fight harder so that they can stand out from the competition. The Threat of Potential Entrants This serves as an indication of how easy new firms can get into the market of a specific industry. If you find it easy to get into an industry, this means that you would also have to face the risk of new competitors entering the industry too. Conversely, if getting into the market is highly challenging, businesses which can enter the market can enjoy a competitive advantage while reaping the benefits for a long period of time. Aside from this, businesses won’t have to face constant entry of competitors because of how difficult the process of entry is. The Bargaining Power of the Suppliers Business owners typically build relationships with different suppliers for their business. If your particular industry depends on very few suppliers, they hold a substantial amount of bargaining power. Unfortunately, this can have an impact on smaller businesses since it has a direct influence on the price and quality of their final products. The Bargaining Power of the Buyers Of course, the complete opposite would happen when the customers are the ones who hold substantial bargaining power. If the customers or buyers hold this market power, they would be in the position to negotiate for higher quality, lower prices or even for additional discounts or services. This is usually the case in industries where there are a lot of similar business competing with each other for a single buyer. In such a case, you may have to think of strategies to convince the buyer to choose your business. The Threat of Alternative Goods or Services All businesses in industries are in constant competition with each other. Sometimes, industries also compete with each other when they’re in the business of producing similar alternative products. Therefore, all of the firms in a specific industry would also have potential competitors from different industries. Unfortunately, this affects their profitability since they can’t charge high prices. Alternative goods can come in two forms. First, are products which feature the same functionality but come at a cheaper price. Second are products with the same price but are of a higher quality or with more functionality.
• Broad Factors Analysis or PEST Analysis This method is very useful for creating an industry analysis sample as it comes with a framework for the analysis of an external environment. To use this method for your industry analysis template, you would have to analyze the model’s individual components which are: Political These factors are the ones which have an impact on the industry. They include specific regulations and policies related to tariffs, taxes, labor laws, environmental regulation, the ease of doing business, trade policies, and political stability. Economic These factors refer to the economic forces which have a direct impact like exchange rates, inflation, the capital market conditions, GDP growth rates, interest rates, and so on. Social These factors are the ones which make a social impact on industries like demographics, population growth, and how the different trends behave like in the case of social, health, and fashion movements. Technological These factors refer to developments and advancements which may change the way your business operates as well as those which affect the lifestyles of people.
• SWOT Analysis SWOT means Strengths, Weaknesses, Opportunities, and Threats. This method is an excellent way of coming up with a summary for your industry research reports of different methods of industry analysis. With it, you can determine the implications of these reports for your business. Factors to consider for this method are: Internal These are the factors which are already in existence and which have contributed to your business’ current position. External These are the factors which occur as contingent events. Evaluate the importance of these factors by examining the likelihood of their occurrence and how they would affect your business. Also, consider whether you can take advantage of any opportunities or avoid any threats.

Industry Analysis Reports

How to perform an industry analysis?

Creating an industry analysis sample is just one aspect of industry analysis. Even without an industry analysis example, the process is both time-consuming and complicated. If you miss any of the dimensions, you will end up with incomplete industry analysis reports and faulty analysis.

Therefore, you must know the steps to follow for this process. In doing this, you can get the most out of your industry analysis while creating an effective industry analysis template. Here are the steps:

• Review the available reports If you have any previous industry analysis samples, go through them first. This gives you a better understanding of what you must do. Also, some reports may also contain relevant information which you won’t have to repeat in your new analysis. Of course, you shouldn’t rely solely on these previous reports, especially when you consider how volatile the market is and how some factors in the industry may constantly change.
• Approach the appropriate industry Keep in mind that come industries have sub-parts so you must focus on the most relevant one. If you don’t approach the right industry, it would be quite impossible for you to come up with an accurate industry analysis example. Choose your industry and find out if it has sub-parts. If so, choose the one which suits the purpose of your company the most. Also, you may want to investigate the varying market segments in your industry.
• Come up with a scenario for demand and supply All economists know that demand and supply are the main factors which govern markets. For that reason, you must come up with a demand and supply scenario for your industry or product. Do this by examining the past trends along with the forecasting outlook for the future. You can also perform a comparative analysis with the other competing companies in the same way. Doing this gives you a better idea of your company’s economic health.
• Come up with the competitive scenario This is the most important step in the process. Here, you must come up with and assess the competitive scenario. Typically, analysts use Porters 5 Forces Model for this step. The model serves as your framework for your industry analysis. The great thing about this model is that it works with different kinds of industries.
• Learn about recent developments You can complete your industry research reports just by analyzing the industry on a micro-level. Instead, you must also incorporate the influencing factors at a macro-level. This means that you also learn about recent developments in the industry, innovations in the industry analysis report, and both global and sector comparative valuations.
• Focus on the dynamics of the industry Make sure that your industry analysis example focuses on a specific industry. To do this, you must focus on the dynamics of that industry. Your analysis must be to-the-point and in-depth.

These are the basic steps to follow when performing industry analysis. Following all of these steps ensures that you get the most out of the process and that you can come up with an effective and informative industry analysis report.

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Industry Analysis

Ai generator.

In the business industry, the key to success lies in the full understanding of all the elements that you need to consider before implementing strategies and other corporate activities. One item that you need to have at your disposal is an analysis of the industry where you belong.

An industry analysis allows you to identify and manage your strengths and weaknesses as a business entity. More so, it helps you to be more observant towards threats and opportunities which can affect your operations, marketing strategies and branding. We have put together a list of industry analysis examples so that you can have references if you already plan to create one.

Industry Analysis Example

• Google Docs
• Editable PDF

Size: A4, US

Industry Gap Analysis Example

Industry Analysis Template

• Apple Pages

Size: 53 KB

Advertising Agency Industry Analysis Template

Size: 35 KB

Industry SWOT Analysis Template

Size: 30 KB

Global Amusement Park Industry Analysis Example

Beer Brewer Industry Analysis Example

Size: 120 KB

Importance of an Industry Analysis

It is not only internal transactions that affect the success of your company. External factors present in the marketplace can also impact the current and future conditions of your business. Just like how a comparative market analysis works, having an industry analysis can help you a lot in relation to the identification of external elements that you need to look into and prepare for. Listed below are some of the reasons why an industry analysis is important for your business.

1. Through industry analysis, you can easily familiarize yourself with the marketplace where you execute your operations. It is important for you to be familiar with the competition, market movement, and trends so you can easily adapt to the environment. You may also see sales analysis .

2. Executing an industry analysis will allow you to know the strategies that you need to implement so that you can stand out from your competitors in the most effective and efficient manner. This means that the analysis of the industry can actually affect how you operate internally. You may also see statement analysis .

3. Having an industry analysis in hand can make it easier for you to identify the factors that are keys to the success of your business. Hence, you can ensure that you are on the right track of business development.

4. Making a document that focuses on industry analysis will help you on your strategic planning, marketing, and branding proposals, as well as on the implementation of all the call to actions that can ensure the sustainability of your business. You may also see critical analysis .

Industry Analysis Template Sample

Size: 65 KB

Literature Review and Industry Analysis Example

Size: 363 KB

Things to Remember When Making an Industry Analysis

An industry analysis is created for a business to be aware of the marketplace in a more thorough manner. However, not all industry analysis work the same way. A few of the items that you always need to remember within the development of your business’ industry analysis include the following:

1. Unlike Personal SWOT Analysis Examples , you have to ensure that the industry analysis is focused not only on your internal operations and business brand but also on the entirety of the market where you are immersed into.

2. Assess the characteristics or qualities of products that customers within your market are mostly drawn with.

3. You have to fully determine all the success factors that you would like to tap so you can strengthen your presence within the industry. You may also see business analysis .

4. Identify the decision-making influences that affect the way customers select the business that they will trust.

5. Compare the operations of your business to those of your competitors especially in terms of corporate image development, marketing, and product and/or service offering. You may also see operational analysis .

6. List down the competitive advantages that you can hold on or the items which positively differentiate you from businesses that offer the same products and/or services like yours.

7. Forecast the sustainability of your business based on your ability to incorporate trends to your business, the presence of your competition, the quality and desirability of your offers, and the response of the customers about your business. You may also see needs analysis .

Size: 40 KB

Example of an Industry Analysis

Size: 211 KB

Elements to Consider When Making an Industry Analysis

Your business needs to develop brand awareness and customer retention to ensure that it will still be sustainable in the future. You have to create activities and programs that can maintain the relevance of your business in the marketplace. Through industry analysis, you can be knowledgeable of how you can compete with other businesses. There are certain elements that can affect the effectiveness of an industry analysis. Some of these elements include the following:

1. The ability of your business to generate leads, acquire new market niches, and take care of your current market hold.

2. The processes that your business implements especially in relation to developing brand ambassadors like your employees. You may also see process analysis .

3. The knowledge of your business regarding customer retention and relationship marketing and development.

4. The desirability of your marketing advertisements, campaigns, programs, and activities.

5. The results of your stakeholder analysis which can be affected by external factors like new market opportunities.

6. The number of competitors that you will include in the assessment.

7. The current condition of the market where your business belongs.

8. The effect of your business undertakings to your actual sales. You may also see analysis essay .

9. The perception of customers about your products and/or services.

10. The activities of your target market and audience.You may also see company analysis .

11. The platforms and channels that you have selected for product distribution.

12. The sustainability of your business based on the existence of strong competitors and your ability to compete with them.

Not all of the above-mentioned information is applicable in all businesses. You have to identify the nature and processes of your operations first before listing down all the elements that you need to look into. You may also see organizational analysis .

Industry Environment Analysis Example

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Industry Analysis: Baking Industry Example

Size: 663 KB

Tips for Industry Analysis Development

An industry analysis is a great way for your business to have an update on what is happening in the marketplace. Remember that it is not only the market niches and segments that you plan to penetrate that matters. There are also other entities and factors within the industry landscape that you have to consider for you to fully achieve your business goals. These are the reasons why industry analysis is very important to be created. Here are some tips that you can incorporate into the process of developing your industry analysis:

1. Make sure that you will truly understand the industry after the process of analyzing it as the assessment of the details that you have gathered can measure the success of the document. Getting all the information that you need is not the end of industry analysis. The way that you make use of this information is what truly matters. You may also see SWOT analysis .

2. Be thorough with how you review the current position of the business and if this position truly is advantageous for your operations. You have to ensure that you can associate metrics on how to properly present your company to the market so that it can be more successful in the future. You may also see fault tree analysis .

3. List down all the opportunities and threats that can affect your business. Knowing more only means that you can develop more programs that can help your business lessen or even diminish the impact of threats while making the most out of all the opportunities that are open for your business. You may also see financial analysis .

4. Ensure that your industry analysis is organized. Create specific clauses and groups of discussion especially those that you need to give focus on. Coming up with a well-formatted industry analysis can help the stakeholders and all the entities to whom the analysis is for to easily understand the content of the document. You may also see literary analysis .

Industry Analysis Sample

Industry Analysis: Soft Drinks Example

Size: 170 KB

Prepare Your Business When Creating an Industry Analysis

You have to remember that an industry analysis does not always result in the success of businesses in the marketplace. There are different variations of activities and trends that can also affect how your company will perform in the business environment even if you have already accomplished your industry analysis. More so, there are internal activities that can also influence the efficiency of your industry analysis. Some of the items that you have to be aware of regarding this matter include the following:

1. Do not spend more than what is necessary and planned to be shelled out within the processes of industry analysis.

2. Take your time when planning for the industry analysis but ensure that its implementation will not hinder your operations to continuously provide the quality that your customers or clients expect. You may also see requirement analysis .

3. Be realistic with your approach to industry analysis. It is essential for you to be as objective as possible so you can properly assess all gathered data and information.

Market analysis and competitive analysis  must both be considered and compared to the results of your industry analysis so you can further develop a more effective and outstanding business plan. With the samples and tips that we have given you, do not hesitate to develop your own industry analysis now.

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How to Write a Market Analysis for a Business Plan?

Free Market Analysis Kit

• April 11, 2024

13 Min Read

Market analysis is the foundation upon which the success of your business relies.

Whether you are a seasoned entrepreneur planning to enter a new geographical market or an emerging startup struggling to place together your business plan—a thorough understanding of the market, customers, and competitors is essential for a business to thrive successfully. 

Now, writing a market analysis for your business plan is quite a challenge. But with this step-by-step guide, we have made the entire process quite simple and easy to follow. 

Also, get tips to write this section and our curated market analysis example for a business plan. 

Ready to dive in? Let’s get started.

What is Market Analysis?

Market analysis is a detailed analysis of your business’s target market and the competitive landscape within a specific industry. It is an important section of your business plan offering a thorough insight into the state of the industry, the potential target market, and your business’s competition.

A well-targeted market analysis forms the base upon which the foundation of your business relies. It assures the readers that you have a thorough understanding of the market you are about to enter.

Why should you Conduct Market Analysis?

Wondering how market analysis will contribute to the success of your business? Well, check these benefits of conducting a comprehensive market analysis for your business:

1. Reduces the risk

Instead of operating on instincts and gut feelings, market research enables you to make decisions based on data and analysis. When you know with surety what works and what doesn’t, you will make decisions that are more likely to succeed than fail.

To summarize, having an in-depth market analysis will reduce the risks associated with starting a business in a thriving marketplace.

2. Identifies emerging trends

A market analysis identifies emerging market trends and patterns and thereby helps you stay at the top of the competition. Not only the trends, but you can also identify challenges that may potentially arise in your business and design a pivot plan.

3. Assist in product development

A detailed analysis of the target market, industry, and competitors helps you create the product that the customer will be willing to buy. The analysis will not only assist in product development, but also with pricing, marketing, and sales strategies to ensure thriving business conditions.

4. Optimize your target market

Your business is not for everyone and the sooner you realize this the better. A target market analysis helps in understanding who your potential customers are and accordingly strategize your marketing efforts to attract them.

5. Establishes evaluation benchmarks

Market analysis benefits your business by offering evaluation metrics and KPIs. Such metrics help in measuring a company’s performance and its edge over the competitors.

Lastly, a thorough market analysis is quintessential if you are planning to secure funds. As a matter of fact, it is non-negotiable.

Now that you know how important having a market analysis section is, let’s learn a detailed way of conducting such analysis.

How to Simplify Your Market Analysis?

Market analysis is a broad concept covering a wide range of details. There’s no denying that it is a tiring task requiring extremely dedicated efforts.

From understanding the purpose of research to undertaking surveys, gathering data, and converting it into worthy analysis—the research itself is a lot for an individual to cover.

Upmetrics market analysis tool kit includes a variety of guidebooks and templates that will help you with target customer analysis , surveys, and competitor surveys.

The documents will guide you in a strategic direction to conduct qualitative research and analysis. They are well-crafted and quite simple to follow even for someone with no prior experience at market analysis.

Got it? No more side talking, let’s get straight to what you are here for.

How to Conduct a Market Analysis?

Conducting thorough market research and analysis could be a hassle, but not with this easy-to-follow 7-step guide. Let’s get over it.

1. Determine your objective

When you write a business plan , market analysis is going to be one prominent component.

However, it is important to know the clear objective of conducting such analysis before you kickstart.

For instance, are you planning to acquire funding from investors or are you conducting this research to test the viability of your business idea? Are you looking to add a new product segment to your business or are you looking to expand in other states and countries?

That being said, the purpose of your market analysis will determine the extent and scope of research essential for your business.

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2. Conduct an Industry Analysis

In this part of your analysis, you will highlight the state of the current industry and show where it seems to be moving. Investors would want to know if the industry is growing or declining, so present accordingly.

This section should include metrics for market size, projected growth, average market growth rate,  product life cycle, and market trends.

Ensure that you gather data from highly authoritative sites like the US Bureau of Labor Statistics (BLS), Bureau of Economic Analysis, and industry publications to make your analysis.

To make this section enriching and meaningful, begin with a macro industry overview and then drill down to your specific market and business offering as thorough details as possible.

3. Identify your target audience

This section of your market analysis is dedicated to your potential target customers.

And, although your product might be suitable for everyone, there is a high possibility that not all of them will be your customers due to many reasons.

It is therefore better to target a specific category of customers to grow your business effectively and efficiently.

Now, you can begin by creating a buyer’s persona of your ideal customer describing their demographic and psychographic details. This includes talking about the age, gender, location, income, occupation, needs, pain points, problems, and spending capacity of your target customer.

You can conduct surveys, interviews, and focus groups, and gather data from high-end sources to get essential details for a customer profile.

However, make sure that you dig into details to make this section resourceful for business planning and strategizing.

4. Analyze your competitors

Competitive analysis is the most important aspect of your market analysis highlighting the state of the competitive landscape, potential business competitors, and your competitive edge in the market.

Now, a business may have direct as well as indirect competitors. And while indirect competition won’t affect your business directly, it definitely would have an impact on your market share.

To begin this section, identify your top competitors and list them down.

Conduct a SWOT analysis of your top competitors and evaluate their strengths and weaknesses against your business.

Identify their USPs, study their market strategies, understand how they pose a threat to your business, and ideate strategies to leverage their weaknesses.

Don’t undervalue or overestimate your competitors. Instead, focus on offering a realistic state of competition to the readers.

Additionally, readers also want to know your strengths and how you will leverage a competitive edge over your competitors. Ensure that this section highlights your edge in terms of pricing, product, market share, target customer, or anything else.

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5. Calculate your market share

The analysis section of your business plan must also include details of your market share.

If your estimated market share is not big enough, chances are your business idea might not be profitable enough to pursue further.

Now, you can use these proven metrics to forecast your market share:

TAM (Total available market)

It represents the total demand available in the market. In other words, it is the maximum amount of sales or revenue the market has to offer.

SAM (Serviceable available market)

It represents the segment of TAM that you can obtain with your solution within your limitations. These limitations can be geographical location, business model, type of product, etc.

SOM (Serviceable obtainable market)

It represents the segment of SAM that you can realistically capture after considering your competitors, customer preferences, production capabilities, etc.

SOM is your estimated market share. Once you have calculated it, you can actualize it via suitable pricing strategies.

Apart from this method, you can also use other approaches like top-down, bottom-up, and triangulation to estimate your market share.

However, whatever method you use, ensure that the projections are realistic and attainable.

6. Know the regulations and restrictions

Before entering a new market or starting a new business , you need to know the regulations and restrictions in your industry.

Understanding these can help you stay out of legal pitfalls and inspire confidence in prospective investors.

Some of the regulations you need to know are:

• Government policies
• Tax regulations
• Trade policies
• Employment laws
• Environmental regulations
• Security and privacy
• Protection of intellectual properties

Include these details in your market analysis section to help readers understand the risk value and federal regulations associated with your business.

7. Organize and implement the data

After completing your research, it’s now time to make sense of all the data you’ve gathered.

There is no strict structure when it comes to organizing your market analysis. However, ensure that your analysis includes specific sections for objective, target market, and competition.

Focus on creating an easy-to-digest and visually appealing analysis section to help the readers gather essential essence.

Now, it’s a waste if you are not putting all this research to some use. Identify the business areas where you can implement your research be it product development, exploring the new market, or business operations, and develop strategies accordingly.

All in all lay the foundation of a successful business with a thorough and insightful market analysis. And, you can do it by having an organized market analysis section in your business plan.

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Tips to Write Your Market Analysis

After conducting thorough market research, it is important to present that information strategically in a business plan to help the readers get meaningful insights.

Well, here are a few tips to help you write the market analysis for a business plan.

1. Stay in context

Remember the objective of your market analysis and stick to it. Keeping the context in mind, identify what essential information to present and back them up with high-end sources.

Also, tie your data with essential analysis to show how your business would survive and thrive in the market.

2. Add visual graphics

No one prefers shifting through pages of pure text content. Graphics and visuals make your market analysis easy to absorb and understand. You are more likely to capture readers with visual attractiveness rather than risk their attention with pure textual content.

3. Offer an engaging summary

Offer readers a quick overview of your detailed market analysis by including a summarizing text. A summary will help readers gather a macro perspective before diving deep into hard facts and figures.

4. Avoid fluff and repetition

Ensure that everything you present in your market analysis section holds a meaning. Avoid adding inessential and fluff information.

To best identify whether or not the information is essential for the reader, ask this simple question: Will the reader learn something about my business’s market or its customers from this information?

If not, the information is most likely inessential. And, those were some quick tips to ensure effective market analysis for your business plan.

Market Analysis in a Business Plan Example

Before we conclude, check out this market analysis example from Upmetrics’ sample yoga studio business plan.

Business Name: Lotus Harmony

Location: Green Valley

Core Objective for Market Analysis

Our goal for the market analysis at Lotus Harmony is straightforward: to deeply understand what the Green Valley community seeks in yoga and wellness. We’ll closely look at local demand and the competitive scene, shaping our services to precisely meet community needs. This approach promises to make Lotus Harmony a distinct and beloved wellness destination in our neighborhood.

Industry Overview of the Green Valley Yoga Market

Market Size:

Green Valley is home to nearly 1M yoga enthusiasts, predominantly aged 25-45. This demographic suggests a robust market for yoga and wellness, ripe for a studio that offers diverse and inclusive programs.

Projected Growth:

The yoga community is expected to grow by 5% annually over the next five years. This growth is driven by an increasing interest in holistic health, presenting a fertile ground for a new yoga studio to thrive.

Market Trends:

A rising trend is the demand for comprehensive wellness services, including mindfulness and nutrition, alongside traditional yoga. Specialized classes like prenatal yoga are also gaining popularity, signaling opportunities for niche offerings.

By tapping into these insights, a new yoga studio in Green Valley can strategically position itself as a premier wellness destination, catering to the evolving needs of the community.

Target Market Analysis for Lotus Harmony

Lotus Harmony Yoga Studio’s ideal customers are mainly Urban Millennials and Gen Z (ages 18-35) who prioritize:

• Wellness and mindfulness as part of their lifestyle.
• Affordable, holistic health experiences blending physical and mental well-being.
• Convenience with flexible class schedules and online access.
• Community and sustainability, preferring spaces that offer personal growth and eco-consciousness.
• A welcoming atmosphere that supports inclusivity and connection.

Competitive Landscape for Lotus Harmony

Lotus Harmony’s success relies on understanding consumer preferences and income, securing prime locations, attracting patrons, and offering quality services. Competing with gyms, wellness centers, and home fitness, it positions itself as a holistic wellness choice, aiming to stand out in Green Valley’s wellness scene.

Market Share for Lotus Harmony

Regulatory Requirements for Lotus Harmony

Here are a few aspects of legal compliance essential for Lotus Harmony:

• Business Registration and Licensing
• Zoning and Land Use Permits
• Health and Safety Compliance
• Professional Liability Insurance
• Instructor Certifications
• Building Safety Certificates
• Accessibility Compliance
• Tax Registration

Final Thoughts

It takes an extremely dedicated effort to undertake market research and craft it into a compelling analysis. However, it’s a worthy business planning effort that will set a cornerstone of success for your business.

Don’t worry. You don’t need to spend days figuring out what and how to write your market analysis. Upmetrics, an AI-powered business planning app , will help you write your overall business plan in less than an hour.

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Frequently Asked Questions

What are the 4 c's of marketing analysis.

The 4 C’s of marketing analysis are customer, cost, convenience, and communication which would together determine whether the company would succeed or fail in the long run.

Is SWOT analysis a market analysis?

SWOT analysis is a small but important tool for market research that would determine the success of a business or its edge over other businesses based on strengths, weaknesses, opportunities, and threats.

How long does a market analysis take?

Market analysis can take anywhere from 4 to 8 weeks, given that secondary sources of data are easily available. However, for complex large-scale projects, analysis can take up to months to complete.

What are the three core components of a market analysis?

The three most crucial components of a market analysis are the study of market size and market share, target market determination, and competitor analysis.

About the Author

Upmetrics Team

Upmetrics is the #1 business planning software that helps entrepreneurs and business owners create investment-ready business plans using AI. We regularly share business planning insights on our blog. Check out the Upmetrics blog for such interesting reads. Read more

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How to Write a Business Plan: Your Step-by-Step Guide

So, you’ve got an idea and you want to start a business —great! Before you do anything else, like seek funding or build out a team, you'll need to know how to write a business plan. This plan will serve as the foundation of your company while also giving investors and future employees a clear idea of your purpose.

Below, Lauren Cobello, Founder and CEO of Leverage with Media PR , gives her best advice on how to make a business plan for your company.

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What is a business plan, and when do you need one?

According to Cobello, a business plan is a document that contains the mission of the business and a brief overview of it, as well as the objectives, strategies, and financial plans of the founder. A business plan comes into play very early on in the process of starting a company—more or less before you do anything else.

“You should start a company with a business plan in mind—especially if you plan to get funding for the company,” Cobello says. “You’re going to need it.”

Whether that funding comes from a loan, an investor, or crowdsourcing, a business plan is imperative to secure the capital, says the U.S. Small Business Administration . Anyone who’s considering giving you money is going to want to review your business plan before doing so. That means before you head into any meeting, make sure you have physical copies of your business plan to share.

Different types of business plans

The four main types of business plans are:

Startup Business Plans

Internal business plans, strategic business plans, one-page business plans.

Let's break down each one:

If you're wondering how to write a business plan for a startup, Cobello has advice for you. Startup business plans are the most common type, she says, and they are a critical tool for new business ventures that want funding. A startup is defined as a company that’s in its first stages of operations, founded by an entrepreneur who has a product or service idea.

Most startups begin with very little money, so they need a strong business plan to convince family, friends, banks, and/or venture capitalists to invest in the new company.

Internal business plans “are for internal use only,” says Cobello. This kind of document is not public-facing, only company-facing, and it contains an outline of the company’s business strategy, financial goals and budgets, and performance data.

Internal business plans aren’t used to secure funding, but rather to set goals and get everyone working there tracking towards them.

As the name implies, strategic business plans are geared more towards strategy and they include an assessment of the current business landscape, notes Jérôme Côté, a Business Advisor at BDC Advisory Services .

Unlike a traditional business plan, Cobello adds, strategic plans include a SWOT analysis (which stands for strengths, weaknesses, opportunities, and threats) and an in-depth action plan for the next six to 12 months. Strategic plans are action-based and take into account the state of the company and the industry in which it exists.

Although a typical business plan falls between 15 to 30 pages, some companies opt for the much shorter One-Page Business Plan. A one-page business plan is a simplified version of the larger business plan, and it focuses on the problem your product or service is solving, the solution (your product), and your business model (how you’ll make money).

A one-page plan is hyper-direct and easy to read, making it an effective tool for businesses of all sizes, at any stage.

How to create a business plan in 7 steps

Every business plan is different, and the steps you take to complete yours will depend on what type and format you choose. That said, if you need a place to start and appreciate a roadmap, here’s what Cobello recommends:

1. Conduct your research

Before writing your business plan, you’ll want to do a thorough investigation of what’s out there. Who will be the competitors for your product or service? Who is included in the target market? What industry trends are you capitalizing on, or rebuking? You want to figure out where you sit in the market and what your company’s value propositions are. What makes you different—and better?

2. Define your purpose for the business plan

The purpose of your business plan will determine which kind of plan you choose to create. Are you trying to drum up funding, or get the company employees focused on specific goals? (For the former, you’d want a startup business plan, while an internal plan would satisfy the latter.) Also, consider your audience. An investment firm that sees hundreds of potential business plans a day may prefer to see a one-pager upfront and, if they’re interested, a longer plan later.

3. Write your company description

Every business plan needs a company description—aka a summary of the company’s purpose, what they do/offer, and what makes it unique. Company descriptions should be clear and concise, avoiding the use of jargon, Cobello says. Ideally, descriptions should be a few paragraphs at most.

4. Explain and show how the company will make money

A business plan should be centered around the company’s goals, and it should clearly explain how the company will generate revenue. To do this, Cobello recommends using actual numbers and details, as opposed to just projections.

For instance, if the company is already making money, show how much and at what cost (e.g. what was the net profit). If it hasn’t generated revenue yet, outline the plan for how it will—including what the product/service will cost to produce and how much it will cost the consumer.

5. Outline your marketing strategy

How will you promote the business? Through what channels will you be promoting it? How are you going to reach and appeal to your target market? The more specific and thorough you can be with your plans here, the better, Cobello says.

6. Explain how you’ll spend your funding

What will you do with the money you raise? What are the first steps you plan to take? As a founder, you want to instill confidence in your investors and show them that the instant you receive their money, you’ll be taking smart actions that grow the company.

7. Include supporting documents

Creating a business plan is in some ways akin to building a legal case, but for your business. “You want to tell a story, and to be as thorough as possible, while keeping your plan succinct, clear, interesting, and visually appealing,” Cobello says. “Supporting documents could include financial projects, a competitive analysis of the market you’re entering into, and even any licenses, patents, or permits you’ve secured.”

A business plan is an individualized document—it’s ultimately up to you what information to include and what story you tell. But above all, Cobello says, your business plan should have a clear focus and goal in mind, because everything else will build off this cornerstone.

“Many people don’t realize how important business plans are for the health of their company,” she says. “Set aside time to make this a priority for your business, and make sure to keep it updated as you grow.”

7 Business Analytics Examples From Top Companies (+Use Cases)

Data-driven companies are 58% more likely to hit revenue goals. This shows how important business analytics is for your product .

Business analytics gives insights that help you make better decisions to improve your product. This article will show seven examples of business analytics to highlight its positive impact.

• Business analytics uses data to find trends and boost performance. It helps companies make smart decisions and optimize operations.
• Tracking customer behavior improves marketing, enhances user experience , and boosts customer satisfaction and loyalty.
• Business analytics has four types: descriptive, diagnostic, predictive , and prescriptive. These analyze past trends , identify causes , forecast future events, and recommend actions.
• Segment customers by demographics and usage to personalize experiences . This boosts satisfaction and retention with tailored messages and offers.
• Map the user journey to find key touchpoints. Use path analysis to optimize the experience , remove friction, and improve outcomes.
• Use feature heatmaps to analyze user behavior. This helps optimize in-app engagement , promote key features, and boost satisfaction and retention.
• Improve product usability by analyzing data to find issues through funnel analysis and session recordings. Then, make targeted improvements.
• Find upselling opportunities by analyzing usage patterns. Target the right segments , features, and timing for tailored upsell messages.
• Use predictive analytics on user data to forecast churn . Monitor with a churn prevention dashboard to improve retention.
• Cuvama used Userpilot for path analysis to find and fix user-specific errors. This enhanced customer experience through direct communication.
• ClearCalcs improved user activation rates with Userpilot by addressing user needs through cohort analysis and personalized onboarding flows.
• RecruitNow used Userpilot to create and analyze onboarding surveys. This improved their training process and saved over 1,000 hours of customer training.
• DocuSign boosted freemium-to-paid conversions by 5% using funnel analytics. They offered free users select premium features, enhancing user experience.
• Netflix’s 93% retention rate comes from using user behavior analytics and personalization . This offers tailored recommendations and content, boosting engagement.
• Amazon drives 35% of sales through personalized recommendations and dynamic pricing. Prices adjust based on user behavior and market factors.
• Uber Eats uses taxi business data to model delivery times and coordinate pick-ups. They also employ meteorologists to ensure efficient, timely deliveries.
• If you want to segment your product, understand user behavior, and predict churn, book a demo now to see how Userpilot can help!

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What are business analytics?

Business analytics is the use of data to make better business decisions. It involves gathering and examining data to find trends and patterns that can improve a company’s performance.

With user analytics, businesses can learn about what their customers like and how they behave. This approach helps companies make smart decisions, improve how they work, and get better results.

Why is it important to track customer behavior analytics?

Tracking customer behavior analytics is essential for business analytics for several reasons:

• Optimize marketing campaigns based on customer preferences : By understanding what your customers like and dislike, you can tailor your marketing campaigns to match their interests. This makes your marketing efforts more effective and engaging , leading to better results.
• Identify friction points : Analyzing user behavior can help you spot areas where customers face difficulties. Addressing these issues can make the user experience smoother and more enjoyable.
• Increase customer satisfaction and loyalty : Using data to understand and meet your customers’ needs makes them happier and more likely to stick with your brand. Satisfied customers are more loyal and can become advocates for your business.

What are the four types of business analytics?

Business analytics can be divided into four main types. Each serves a unique purpose in helping you analyze data to improve performance.

A business analyst plays a role in leveraging these analytics to drive success:

• Descriptive analytics : This type of analytics examines historical data to understand past trends and performance. By analyzing key performance indicators (KPIs), business analysts can identify patterns that inform future strategies. Descriptive analytics helps you make sense of past events for future planning and decision-making .
• Diagnostic analytics : This type of analytics investigates the reasons behind past outcomes. By drilling into the data, business analysts can uncover the root causes of specific results to understand why certain things happened. Diagnostic analytics provides deeper insights into the factors that influenced past performance.
• Predictive analytics : Predictive analytics : This type uses models to forecast future trends and behaviors. Using machine learning and historical data, predictive analytics can help businesses predict future events. This allows them to prepare and plan.
• Prescriptive analytics : This type provides recommendations for decision-making to achieve desired outcomes. By analyzing raw data and predicting future trends, prescriptive analytics offers actionable advice on the best steps to meet business goals. Business analysts use these recommendations to guide organizations in making informed decisions.

How to leverage customer data for actionable insights?

Understanding how to use customer data can change your business. Use this data through analytics to find valuable insights. These insights drive key decisions and improve customer experiences. Here’s how to turn customer data into useful insights.

Create personalized experiences for different segments

To create personalized experiences , segment your customers by different factors. These can include age, gender, and product usage. Using business analytics, gain deeper insights into these segments.

By understanding these segments, you can send personalized messages. Tailor suggestions and offers to each group’s needs. This focused approach improves customer experience. It helps boost satisfaction and retention .

Identify the shortest path to value to help users achieve future outcomes

Mapping the user journey is key to finding important touchpoints. Use path analysis to improve the user experience. Understand these critical moments with business analytics.

Remove friction points and streamline the path to value. Ensure users reach their goals more efficiently. Focus on these improvements to boost the customer experience. This will drive better results for your business.

Optimize in-app engagement

To optimize in-app engagement , start by analyzing user behavior. Use business analytics to understand what drives engagement.

Feature heatmaps are an effective tool for this purpose. They visually show how users interact with different parts of the app. These heatmaps reveal which features are most and least used. This helps identify areas for improvement.

Use this information to promote key features. Target in-app messages to highlight important features. Encourage users to engage more with your app. This leads to better user satisfaction and retention.

Improve product usability for a better user experience

To improve product use and enhance the user experience, start by using business analytics to find and fix problems.

Spot these issues through funnel analysis drop-offs. This shows where users leave a process or feature. Use session recordings (coming soon in Userpilot) to see where users have trouble.

By knowing where and why users struggle, you can make targeted fixes. This ensures a smoother and more satisfying user experience. This proactive approach helps keep users and boosts overall happiness.

Identify the right opportunities for upselling

To find upselling chances, analyze customer usage with business analytics. This helps you pinpoint:

• The right segments to upsell : Find which customer groups are most engaged. Target these users with tailored upsell messages. Segments might include frequent users or those using certain features a lot.
• The right features to upsell : See which features are popular. Offer upgrades or extra features that match their usage. Users of a particular feature might want an upgraded version or added functionality.
• The right time to upsell : Timing is key. Look at when users are most active or reach app milestones. After using a feature often or completing a task, they might welcome an upsell offer for better capabilities or more services.

By analyzing these patterns with business analytics, you can create effective upsell campaigns. This increases revenue and customer satisfaction.

Predict customer churn to increase retention

Creating predictive models using user behavior data can help forecast churn . Use business analytics to find patterns showing a customer might leave.

To manage these insights, create a churn prevention dashboard . This tool helps you monitor churn levels and act quickly. By fixing issues that lead to churn, you can improve retention rates. This keeps your customers happy and engaged.

7 business analytics examples from leading companies

This section will explore how top companies use business analytics to succeed. These examples will show how businesses use data to improve operations, enhance customer experiences, and boost performance.

Cuvama successfully used business intelligence, data analytics, and Userpilot. They used path analysis to find an error message affecting certain users. By accessing profile information through Userpilot, they could click on names in the paths report and contact those users directly to resolve the error.

Leyre Iniguez, Customer Experience Lead at Cuvama, praised the user profile feature: “I love this. I can come here and see who my user is having those problems, so I can directly contact the person and check out what’s happening.” This proactive approach allowed Cuvama to enhance its customer experience significantly.

2. ClearCalcs

ClearCalcs , a structural design software, significantly improved user activation rates using Userpilot. They identified customers delaying activation by using business analytics and cohort analysis . This analysis helped them understand user behavior and address specific needs.

Using Userpilot, ClearCalcs implemented personalized onboarding flows. This played a crucial role in improving user activation and delivering value faster. These tailored onboarding experiences ensured new users quickly found and used the calculators they needed, enhancing their initial interaction with the product.

3. RecruitNow

RecruitNow used Userpilot to train its growing customer base effectively. They used business analytics and Userpilot to create an onboarding survey to monitor their onboarding flow.

RecruitNow tracked survey completions, satisfaction levels, and customer feedback through survey analytics. This data-driven approach allowed them to improve their training process and ensure high customer satisfaction.

Using these insights, RecruitNow saved over 1,000 hours in customer training. This made their onboarding process more efficient and impactful.

4. DocuSign

DocuSign, a leading e-signature platform, aimed to boost its freemium-to-paid conversion rates. They used business and data analytics to give free users access to select premium features.

Using funnel analytics, they identified which features would drive upgrades. This strategy resulted in a 5% improvement in conversions, a significant increase given their 130,000 new users daily. By leveraging data insights, DocuSign successfully enhanced its conversion rates and overall user experience.

With nearly 270 million subscribers, Netflix is the world’s largest streaming service, boasting a 93% retention rate. This success is driven by using business analytics and personalization.

Netflix analyzes viewing patterns, including what users watch, when, and for how long. These insights allow them to offer personalized recommendations, AI-generated trailers, and develop original content that matches their audience’s tastes.

This data-driven approach boosts retention and helps Netflix compete with traditional media giants, as shown by their Golden Globe and Oscars wins.

Amazon, the largest e-commerce business, attributes 35% of its sales to personalized recommendations. By analyzing user behavior—such as viewed items, added to the cart, or purchases—they create tailored suggestions for each user.

Amazon also uses dynamic pricing, adjusting prices up to 2.5 million times daily based on shopping patterns, competitor prices, and product demand. This use of big data and analysis enhances the customer experience and drives significant sales, demonstrating Amazon’s effective data-driven strategies to maintain its market leadership.

7. Uber Eats

Uber Eats used its extensive data from the taxi business to excel in the competitive food delivery market. To ensure timely and warm deliveries, Uber Eats used business analytics and natural language processing to model the physical world and predict delivery times accurately.

They collected data on meal preparation times to coordinate precise pick-ups, allowing drivers to deliver multiple orders efficiently per trip with incentives. Their innovative approach includes employing meteorologists to anticipate weather impacts. Uber Eats shows how Big Data and analysis can expand services, gain a competitive edge, and predict customer needs .

It’s clear that data is crucial for all types of business analytics and can produce fantastic results for your business. With business analytics, you understand how your product is performing.

Getting started with business analytics can be daunting, but Userpilot makes it easy. Userpilot helps you segment users to create personalized experiences, measure in-app engagement, and understand product usage to improve the customer experience. For examples of business analytics in action, Userpilot can show you how it works. If you want to know more, book a demo now .

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Industry sector analysis

Sectors such as semiconductors, steel, renewable energy, and automotives form the cornerstone of modern economies, each with unique structural and functional characteristics that necessitate specific analysis. Conducting sector-specific analysis provides an in depth understanding of these strategic industries and facilitates the formulation of informed policy assessments and recommendations.

• Vulnerabilities in the semiconductor supply chain
• The heterogeneity of steel decarbonisation pathways

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Key messages, effective policymaking requires an in-depth understanding of industrial sectors and market distortions.

Certain sectors have an outsize importance to the functioning of modern economies. Steel is is a fundamental component in many industrial applications. Shipbuilding is crucial for maintaining global maritime trade networks that form the backbone of the global economy. Semiconductors are at the heart of digital technologies and continue to become more embedded across all sectors.

Due to their strategic significance and the potential for market failures, sectors crucial to the green and digital transitions are under scrutiny by policymakers. This focus is essential, considering the pivotal role these sectors play. However, it can also unlevel the global or domestic playing field and lead to anomalies in competition mechanisms, resulting in distortions within markets and industries. A thorough understanding of the unique dynamics within these sectors requires detailed data collection and analysis.

Digitalisation and decarbonisation affect industrial sectors in different ways

Industry analysis often examines sectors in the aggregate. This approach provides a broad overview of the economic landscape and highlights key trends. However, for certain sectors, this aggregate data may not paint an accurate picture, potentially causing misunderstandings and misinterpretations of the dynamics at play. Sectoral analysis in turn helps policymakers in addressing challenges and benefits from opportunities in key sectors.

Granularity and relevant metrics differ across sectors. For example, in the steel industry, excess capacity is a significant issue; in shipbuilding, the impact of subsidies plays a crucial role; and in the semiconductor sector, the low level of interchangeability of most chips means each chip type needs to be looked at separately. These examples highlight only a few sector-specific data considerations; additional complexities arise when examining qualitative aspects.

The ecosystem lens can reveal the underlying networks of the sector and emerging trends

Many industries depend on a large ecosystem, composed of various sectors, firms and technologies. Beyond the production network (input-output linkages), industrial ecosystems consist of investment networks (flows of tangible and intangible capital goods), knowledge networks (e.g. R&D, patents, etc.), and financial networks (M&A, VC investment, etc.), with different types of firms and public and private institutions having different roles in each layer.

These different layers can reveal the directionality of ecosystems in a way that traditional input-output analysis cannot. Financial flows can reveal information on the expectations of the ecosystem’s market players. For example, investments from major players in a sector into innovative start-ups in other sectors present clues as to the evolution of both sectors. Furthermore, knowledge networks can reveal the technological innovations led by sectors with similar challenges, clue to the directions of sectoral technological progress in the sector. Disregarding these relationships and dependencies would limit the ability of industrial policy to reach its objectives.

Heterogeneity of steel decarbonisation pathways

An example of the importance of a sectoral perspective on industry relates to industrial decarbonisation. The steel sector accounts for 8% of global CO2 emissions, which shows how important it is to decarbonise this sector to achieve climate objectives. However, circumstances in steel producing economies are very different across countries. The figure shows how some steel producing economies focus on electric arc furnaces (EAF), which use steel scrap as an input and therefore allow for lower energy use and carbon emissions. Others produce steel primarily via the BF/BOF (Blast Furnace-Basic Oxygen Furnace) route, with higher emissions. The decarbonisation pathways therefore vary significantly across economies, underlining the need for a more granular sectoral perspective. 

Impact of the main trends in the automotive ecosystem on business models

Over the last 25 years, the automotive ecosystem has been experiencing a dramatic industrial transformation, driven by both supply and demand. Going forward, key trends, driven by the green and digital transformations, are changing business models towards a new paradigm, sometimes referred to as CASE (connected, autonomous, shared, electric vehicles). Although perhaps less pervasive, the ecosystem is also affected by the Robotisation (R) of production and the long run evolution of Urban (U) mobility (CASE+RU)

Related data

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Programmes of work

• Global Forum on Productivity The OECD Global Forum on Productivity (GFP) fosters international collaboration among public institutions to advocate and implement policies that boost productivity. Explore the latest research and data on productivity trends and institutions and stay updated on upcoming events. Learn more

Related policy issues

• Culture, creative industries and sports Cultural and creative sectors are an often-overlooked driver of development. However, they generate economic wealth, create jobs, and spur innovation, as well as making places more attractive to live, work and invest in. Similarly, both professional and grassroots sport contributes to happier, healthier and more inclusive societies and can be used as a catalyst for development, for example through the hosting of major sporting events. Learn more
• Decarbonising industry Industrial decarbonisation is pivotal to achieving net-zero emission targets. Effective decarbonisation pathways require swift and bold action from both industry stakeholders and governments worldwide. The OECD provides data-driven, factual analyses and policy recommendations to assist governments and industries in this crucial transition to net zero. Learn more
• Ocean economy The ocean economy is attracting attention across the globe as a source of economic growth, while marine ecosystems are increasingly facing the consequences of unbridled pollution, climate change and biodiversity loss. OECDmonitors the ocean economy to offer insights and policy advice on balancing economic development with ocean health. It supports national ocean economy measurement strategies and provides best practices to harness ocean science and innovation to boost sustainable uses. Learn more
• Semiconductors Semiconductors power every modern electronic device – without them, products like sensors, smartphones and computers would not exist. However, recent bottlenecks have disrupted semiconductor supply. In response, OECD is working on better evidence and policies to strengthen the resilience of semiconductor value chains. Learn more
• Shipbuilding The shipbuilding industry is an essential contributor to the global maritime transport and trade that underpin our economies. However, shipbuilding faces many challenges including market volatility, excess capacity, the imperative of greening and decarbonising as well as geopolitical disruptions. Learn more
• Steel The steel industry plays a strategic role in nearly all economies. Steel is the backbone of manufacturing, construction, infrastructure, transportation and the energy sector, and is a critical input for building the green energy infrastructure. Learn more

How to Write a Business Plan Industry Analysis

By: Author Tony Martins Ajaero

Home » Business Plans

How do you conduct industry analysis for a business plan? Do you need help conducting market research and industry analysis for your business plan? Then I advice you read on. So you have a great business idea, you have refined and fine-tuned it, and you are ready to launch. You are going to offer a product or service with a clearly defined customer base, and you are confident that you will be successful in the long term.

Well, if the above applies perfectly to you, then you have not completed your assignment. What happens when you enter an examination hall without having studied for the exam at all? You’d spend all your time in the hall blaming yourself for being silly, right? Now, starting a business is even much more important because there’s a lot more at stake than passing or failing a grade. So, you must not leave out any aspect of research undone.

In this section of your business plan, you will demonstrate that the industry’s market size is worth going after, who your main competitors will be if you decide to take a plunge, and how you will be able to carve out a niche for yourself and give your competitors a run for their money. Planning a business goes beyond analyzing the potential of your offer. You must analyze the following three factors as well:

• The strengths and weaknesses of your business
• The competition
• Who your customers are, what they want, and how they want it

These are the major components of a business plan’s market or industrial analysis and it is also known as a SWOT (Strength, Weaknesses, Opportunities and Threats) analysis. This section of your business plan reveals the chances of your business to achieve success with its offers. And that’s why the industry analysis is a very important section of your business plan, which must be carefully conducted and documented.

So in this article, we will be looking at how to conduct industry analysis for a business plan. If you are a budding entrepreneur, or you are planning to start a new business; then below are the exact steps to follow when conducting an industry analysis for a new business:

How to Conduct Industry Analysis for a Business Plan

1.  analyze the competition.

Of the three factors listed above, the competition may prove the most difficult to analyze, especially if you are new to the industry. But there are ways to simplify the task. You can start by looking at your direct competitors. If you are planning to start a new restaurant in an area, your direct competitors are other restaurants within that locality, while your indirect competitors are those that are slightly remote but still around.

Now, you are not just counting the number of rivals you have. You are trying to see how you can push ahead of them by filling a loophole they never noticed all these while. Some people find it hard to leave their workplace for the restaurant at lunchtime, but it’s either they do it or go hungry. You can disrupt the market’s status quo by offering to deliver lunch to people right in their workplaces. Filling loopholes like this one should be your goal.

If you don’t device strategies for pushing ahead of the competition, you will just enter the industry and join the survival race that you may never win. So, you need to introduce an innovation that will threaten your rivals. Remember, it’s either you differentiate or you fizzle out fast!

2.  Assess the industry / market size

After analyzing your direct and indirect competitors, you will need to analyze your chances of standing firm even in the face of stiffer competition. Your first step in market research is to get an idea of how big the opportunity is and why it’s worth going after.

This means finding out how many customers you are catering to and much revenue you are likely to make. This is a convincing first step to lure in whoever is reading your business plan to become intrigued and dig further into your findings. Here are some factors you should consider:

• The individual strengths and weaknesses of your competitors.
• The rate at which new competitors enter the market or the rate at which old competitors are leaving the market.
• The products or services that fetch most revenue for your competitors.
• How you will overcome the threat of substitute goods.

You can get lots of helpful information about your market from government sources, trade associations, financial services firms, online data providers, and free resources on the web.

3. Analyze industry forces and trends

You will need to outline what’s happening in the industry from many perspectives that would help the reader get the full gist on whether the market is lucrative or not. A great general-purpose tool for doing just that is the PEST Analysis. Here’s what it stands for and what you should consider:

• P – Political factors ( the role government plays in your industry )
• E – Economic factors ( the state of the economy on both local and national level )
• S – Social factors ( relevant changes in matters like lifestyle trends, demographics, consumer attitudes, buying patterns and opinions )
• T – Technological factors ( the impact of changing technological trends on your industry )

4.  Develop your marketing plan

Developing your marketing plan entails answering the following questions:

• What products or services are you offering?
• How much will you charge for your offers?
• Where will you sell your product, and who are your target customers?
• What special incentives would you use to encourage customers to buy your product?

In short, this section of your industry analysis outlines how you will deliver your product to the customers and how you will win customers to your side.

5.  Craft your growth plan

While some entrepreneurs are of the opinion that this step should come only after you have established your business, crafting your market development plan helps you envision your company growing in a few years. Your growth plan should address the following questions:

• According to recent data, is the market for your product growing or dwindling?
• Do you plan to introduce new products or line extensions in the next few years?
• If you plan to introduce new offers, would they be closely related to your current offers or within another niche entirely?
• Are there strategies for giving your business the competitive advantage in the industry?
• Are there plans to handle increasing demand?

6.  Fine-tune your analysis

After the steps discussed above, cross check your analyses to ensure that your findings are factual and your figures are accurate. Another handy tool to have in your arsenal when conducting industry research is the almighty Porter’s 5 Forces Analysis . ( Don’t worry if you’ve never attended a business strategy class in your life, it’s actually quite straightforward ). Here’s the breakdown:

Threat of new entrants

How difficult ( or easy ) is it for someone to enter your specific vertical? If it’s very easy then most likely the space will be crowded with competitors fighting for margins. Conversely, if it’s very difficult, that that in itself can become a competitive advantage.

Threat of substitute products or services

How likely is it that another product or service could decrease demand or displace you and potentially the entire industry all together?

Bargaining power of customers

When it comes to pricing and terms, how much power does your customer have? Are they organized enough to exercise their purchase power, or is there so much competition that they have their pick resulting in pricing wars amongst providers?

Bargaining power of suppliers

This refers to how dependent you are on a given supplier to operate your business. If it’s difficult or near impossible for you to switch, that means they have the upper hand, whereas, if the switching costs are low, you can negotiate better terms for yourself.

Competitive rivalry of the market

Factoring in the first four forces, you can arrive at a good understanding of the playing field and whether it’s in your favor if you enter it, how long you’ll be able to last, through what means you’ll carve a space for yourself, and what you’re up against.

As a final note, you must never forget that the industry analysis is a vital part of your business plan and it will probably be the most extensive portion of it. So, take your time to conduct extensive research on your competitors and market trends over the recent years.

• Go to Chapter 9 Part B: Writing a Business Plan Competitive Market Analysis
• Go Back to Chapter 8: Writing your Company’s Profile
• Go Back to Introduction and Table of Content

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