There are four pillars to evaluate the future success of ANY company. These include Management, Capital Reinvestment, Triple Digit Growth and comparison of Industry Growth Standards.
Today, I will be discussing the importance of industry analysis. Industry analysis can help a company identify both the opportunities and threats coming their way and give them a strong idea of the present and future scenario of the industry.
The key to surviving is to understand the differences between yourself and your competitors in the industry and use it to your full advantage. Knowing how well competitors perform is key to your own victory.
Whether you’re entering an industry for the first time or looking for ways to take your business to the next level, it’s important to conduct regular industry analyses to get the most relevant information.
Essentially, an industry analysis is meant to help you review market and financial factors in your industry and track your competition.
Think about your market size, the number of competitors you have, how their businesses are doing and how their offerings compare to yours. Look at market reports and see what kind of supplier availability is within your market or niche. Determine where you and your competitors stand with buyer influence and power. Ask yourself if someone could easily replicate your product or make it more cheaply. Finally determine if new competitors can easily enter your industry. If so, start thinking of ways you can continue to offer better products and services and further differentiate yourself from competitors.
Conducting Industry Analysis
There are two principal methods businesses can use to conduct an industry analysis.
- The first is a quantitative analysis, which involves the use of mathematical forecasting to assess data.
- The second is a qualitative analysis, which requires owners to use their own judgment when reviewing information.
Once you’ve assessed your competitors’ strengths and weaknesses, you can identify and implement strategies to boost your market share.
There are three commonly used methods of performing industry analysis:
- Porter’s 5 Forces gives you an idea of outside forces that can be impacting your business. This is useful for big-picture thinking, and for developing a brand strategy.
- PEST Analysis is a useful framework for analyzing the external environment.
- SWOT Analysis looks specifically at your company’s internal strengths and weaknesses, as well as external forces that could threaten your business.
Industry analysis can help a company understand market conditions, forecast demand and supply and financial returns. It can indicate the competitiveness of an industry and costs associated with entering and exiting the industry, identify which stage an industry is in and whether there is room for growth.
When we select companies for Solomon’s Picks, we use detailed industry analysis to measure growth.