How to Conduct an Industry Analysis

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.