How To Prepare an Industry Analysis For Your Business
Struggling to see what the competition has which you don’t? Learn how to prepare an industry analysis for your business here.
When it comes to your business, every decision you make should be meaningful and strategic. But how can you know whether you’ve made the right one? The answer is never clear cut, however, you can increase the odds. By conducting an industry analysis, you can learn how to read the market and your competition. Additionally, you can leverage the experiences of others for your own benefit.
Read on to find out how to prepare an industry analysis for your own business.
What Is An Industry Analysis?
An industry analysis is a market assessment tool used to evaluate competition. It looks into:
- The state of competition within the market;
- How your business sits against others in the market; and
- Where viable opportunities and real threats lie.
It can assess competition within the market generally or against specific competitors.
Industry analysis should not be viewed as a one-off task. Rather, it should be conducted periodically, much like revising your business plan. The market is constantly changing and evolving. Thus, your business and understanding of the market should not become complacent.
How to Conduct Industry Analysis
Industry analysis can be broken down into five steps.
1. Define Your Industry
In order to make the most out of the exercise, you need to get specific. This includes correctly identifying the industry which you are a part of.
An industry can be divided into sub-industries and these industries can be further divided based on geographic location. Alternatively, an industry could be narrowed down by customer base or product offering.
For example, you may be a part of the food and grocery retail market. However, you are more specifically part of the Australian food and grocery retail market. Taking this one step further, you are a part of the Sydney independent and organic food and grocery retail market.
The more specific you are about identifying your industry, the more prevalent the analysis will be.
2. Pose Your Questions
Secondly, you will need to come up with specific objectives and/or questions. Think about what you are trying to get out of the industry analysis. Are you looking to increase sales or refine your target market? Alternatively, are you trying to establish more competitive prices than Company XYZ?
The type of industry analysis you conduct will depend on the questions to wish to have answered.
3. Collect Your Data
Now that you have set the parameters for your industry analysis, its time to collect the requisite data. You can either hire the services of an external company or perform your own research.
The data should be authentic and up to date. You also want to collect data over a time period that will allow you to identify trends. Anything too short will not produce trends but anything going too far back will be irrelevant.
Sources of data include:
- Financial reports;
- Market reports;
- Journal articles;
- Government statistics;
- Marketing campaigns; and
- The competitor’s website.
Be sure to not overlook visual cues such as the store layout, product placement, and foot traffic.
4. Analyse the Data
Once you have collected your data, you can start analysing it. The aim is to identify the strengths and weaknesses of your competitors. It’s important to go about this from both a business and consumer perspective. This will give you a more holistic assessment.
5. Evaluate Your Position
This last step in conducting industry analysis involves some self-reflection. You’ll need to assess where you sit amongst your competitors. This may be a brutal process, but its important that you remain objective and honest. You can’t address issues that you refuse to acknowledge.
Common Forms of Industry Analysis
There are multiple ways of conducting industry analysis. The one(s) you use will depend on what your objectives are.
Some of the most common forms of industry analysis include:
- SWOT Analysis – Aims to assess the strengths, weaknesses, opportunities and threat of a business;
- Competitive Forces Model (Porter’s 5 Forces) – Addresses the five main forces that affect the competitive environment; and
- Broad Factors Analysis (PEST Analysis) – Aims to address external factors that may influence the market. This includes political, economic, social, and technological factors.
Whether you are a newcomer or are a seasoned pro, industry analysis is always a beneficial exercise. By understanding the market you operate within, you are in a better position to secure long-term success for your business.
Shantelle is a Legal Tech Intern at Lawpath, working as part of the Content Team. She is currently in her final year of a Bachelor of Laws and a Bachelor of Business at the University of Technology Sydney. She is interested in emerging technologies and privacy.