What is Industry Analysis?
Industry analysis is the act of analyzing a business, industry or sector to determine market shares, growth rates and other important data for the purpose of making risk-adjusted investment decisions in that particular field. It can be conducted by any type of company or organization including an individual private investor. Fintalent’s Industry Analysis consultants describe it as a process where a company, individual or analyst tries to understand the industry they are operating in. Industry analysis can also be called market and company analysis.
Types of Company Analysis
There are several ways to conduct analysis of a specific industry and the information gathered can be broken down into several types.
Quantitative-Based Analysis – This involves certain mathematical formulas and statistics being used to estimate future success rates of companies within an industry. This is the most common type of analysis and one that’s generally easier to come by.
Qualitative-Based Analysis – This type of analysis is based on questionnaires, interviews and various other sources of information like company reports and press releases that are written by companies or individuals within a given industry.
Having an understanding of your industry and the different players in it is essential for success. If you don’t know what your competitors are up to you risk falling behind quickly or even being out-played. Understanding who your customers are and how they behave will help you better tailor your products or services to them and increase their chances of buying from you over someone else in the industry. Understanding your competitors can also help you identify where there are market gaps or opportunities to grow.
The objective of any industry analysis should be to understand and evaluate the industry and its dynamics, in order to maximize the potential for success. The findings could then be used as a basis to formulate an overall strategic direction for the company over a period of time. It may also provide insights into various aspects such as market share, profitability, pricing strategies, customer relationship management (CRM), supply chain management (SCM), and distribution strategies.
Unlike market research, which is frequently conducted by companies to understand the behavior and attitude of their customers, industry analysis is generally based on primary and secondary research. It is carried out by an analyst having a detailed knowledge of the market and its dynamics, since he or she would also be involved in formulating an overall strategic direction for the company over a period of time.
Industry analysis helps companies effectively manage the business, by identifying opportunities and threats. It also helps in understanding the behavior of the market and its dynamics, which would form a basis for formulating an overall strategic direction for the company over a period of time. Therefore, industry analysis is important to any organization.
An analyst needs to have good knowledge of his or her industry in order to conduct effective industry analysis. This would not only be in terms of existing players, but also what is happening with new players entering the market; how competitors are performing; and how customers are behaving. The research should also cover industries that are similar or of equal importance to your own.
Why Does Industry Analysis Matter?
Industry analysis is important for a couple of reasons. It provides data that can be used to determine the health of an industry on a general level and what companies within the industry will succeed. It also gives insight into how a specific company might perform within an industry. This is vital information for any type of investor, business or person interested in making decisions about an industry.