Industry Analysis: Definition and Explanation
What is Industry Analysis?
Industry analysis is related to different factors that are involved in the functioning of an industry. Some key components that are being analyzed in an industry analysis involve the life cycle and the history of an industry, its financial efficiency level and various other trends that directly or indirectly affect the output of the production.
So, we can simply say that an industry analysis report or industry analysis sample is an assessment tool that is designed to make an idea clear about the complexity level of any particular industry or business.
What does an Industry Analysis Involve?
Industry analysis reports or industry analysis profiles most often involve a brief review of the economic condition of an industry. It further involves the political and social factors that influence the production levels.
The study of these factors is very significant as it directly affects the sales and purchase patterns. More detailed reports also identify the condition of the competitors within a given market, the attitudes of suppliers and the buying pattern of the people and the opportunities for new entrants.
SWOT Analysis and PEST Analysis of an Industry
The SWOT analysis provides with the Strength, Weaknesses, Opportunities and Threats for a business opportunity or business plan. Businesses have made SWOT analysis an essential element of their strategic planning process as it helps them define a sustainable niche in the market.
The PEST analysis of an industry lays the preliminary basis for the dimension of the analysis report as per requirement and need. PEST is the acronym for Political, Economic, Social and Technological factors. The environment in which an entity, lets say an organization operates is made up of external and internal environment. The internal environment is composed of the internal customers, which are the employees of the organization, the internal policies, mission and vision.
Essential Components and Elements of an Industry Analysis
Here is a brief description of some important elements related to an industry analysis.
1. Industry and its Norms
In this process of evaluation, analyst identifies the industry or a company in a given chain along with its essential details regarding production and distribution of goods in the market.
2. Economical Aggregate
It is also important to analyze the economical structure of a company over the full ongoing economic cycle. In this process, specific details are taken into consideration in a broader view and detailed perspective.
This sort of industrial analysis strategy helps the analysts to identify and understand the performance of the company in changing economic scenario like recession.
3. Past Performance Pattern of the Industry
For a detailed report, it is also considered a very common type of analysis strategy. This is also known as time series industrial analysis. Various trends are recorded here.
Limitations Regarding Industrial Analysis
Analysts should always be conscious about some important factors while developing industrial analysis. This generally involve the following,
- Inflation may hit the balance sheets and record of the industry so analysts must be conscious enough to formulate quick report if an industry is badly hit by inflation as it may also affect the profit pattern of the company.
- Seasonal factors also play an important role in an industry. Seasonal factors may affect the sale and purchase pattern as well. So, analyst should consider it as well.