Unit 5: Industry and Competitor Analysis

Before going to study about the industry trend analysis, its better to study well about
trend analysis, so Trend analysis is a technique used in technical analysis that tries/used
to predict future stock price movements based on recently observed trend data.
Trend analysis is based on the idea that what has happened in the past gives traders an
idea of what will happen in the future.
There are three main types of trends: Short-, Intermediate- and Long-term.
Trend analysis is the process of looking at current trends in order to predict future ones
and is considered a form of comparative analysis. This can include attempting to
determine whether a current market trend, such as gains in a particular market sector, is
likely to continue, as well as whether a trend in one market area could result in a trend
in another. Though a trend analysis may involve a large amount of data, there is no
guarantee that the results will be correct.
Industry Trend Analysis: An industry trend analysis is a qualitative and quantitative
report on a specific sector of economic activity defined by national or
international industry classification systems. Analyzing industry trends helps
business leaders, economists, and policy makers to understand the structure of
an industry.
Industry is any activity in which raw materials are processed into finished goods. There
are various methods used to collect, quantify and interpret economic activity in an
industry trend analysis.
An industry analysis is a business function completed by business owners and other
individuals to assess the current business environment. This analysis helps businesses
understand various economic pieces of the marketplace and how these various pieces may
be used to gain a competitive advantage. Although business owners may conduct an industry
analysis according to their specific needs, a few basic standards exist for conducting this
important business function.
Industry analysis is a tool that facilitates a company's understanding of its position
relative to other companies that produce similar products or services. Understanding the
forces at work in the overall industry is an important component of effective strategic
planning. Industry analysis enables small business owners to identify the threats and
opportunities facing their businesses, and to focus their resources on developing unique
capabilities that could lead to a competitive advantage.
Industry analysis is a market assessment tool used by businesses and analysts to understand
the competitive dynamics of an industry. It helps them get a sense of what is happening in an
industry, e.g., demand-supply statistics, degree of competition within the industry,
state of competition of the industry with other emerging industries, future prospects of the
industry taking into account technological changes, credit system within the industry, and
the influence of external factors on the industry.
Industry analysis, for an entrepreneur or a company, is a method that helps to understand a
company’s position relative to other participants in the industry. It helps them to identify
both the opportunities and threats coming their way and gives them a strong idea of the
present and future scenario of the industry. The key to surviving in this ever-changing
business environment is to understand the differences between yourself and your
Why Is Industry Analysis Important?
Industry analysis is a tool that many businesses use to assess the market. It is used by
market analysts, as well as by business owners, to figure out how the industry
dynamics work for the specific industry studied. Industry analysis helps the analyst
develop strong sense of what is going on in the industry.
The importance of industry analysis is multiple. As an entrepreneur trying to find your
way in the industry of your choice,
• you can use industry analysis to understand what your position is, relative to the
position that other players in the industry have.
• You can use industry analysis to your advantage to identify opportunities and threats
within your environment, as well as to plan for the future of your business, in the
context of the future of your industry.
• The only way you can survive in any competitive industry is that you will need to
understand how you measure up against your competitors, and then use that
information to your fullest advantage.
Following points describes the importance of industry analysis to the business.
1. Industry Analysis Can Be Used to Predict Performance
One of the greatest indicators of how well your business will perform in an industry is
the performance of the industry as a whole. If the industry is doing well, then your
business is likely to do well within that industry, provided you run it well enough.
2. Industry Analysis and Positioning of a Business
During the planning phase of your business, you will be better able to position yourself
in the market if you understand how the market works. For example, if you understand
the kind of products being sold in the market, as well as how saturated the market is,
you will be better able to figure out how you can differentiate yourself from the
competition..
3. Industry Analysis to Identify Threats and Opportunities
Throughout the process of industry analysis, you will be able to identify many different
threats and opportunities. Threats are any phenomena that would impede the growth of
your business, while opportunities are phenomena that would catalyze the growth of
your business.
4. What Types of Industry Analyses Are There?
There are three main ways in which you can perform industry analysis. These are:
a) The Competitive Forces Model, also known as Porter’s 5 Forces.
b) The Broad Factors Analysis, also known as PEST Analysis.
c) SWOT Analysis.
5. Porter’s 5 Forces/Competitive Forces Model
This is one of the most famous models of industry analysis that we have today. It was
first used by Michael Porter in the book Competitive Strategy: Techniques for
Analyzing Industries and Competitors.
Porter recognized that organizations likely keep a close watch on their rivals, but he
encouraged them to look beyond the actions of their competitors and examine what
other factors could impact the business environment. He identified five forces that
make up the competitive environment, and which can erode your profitability. These
are:
a. Competitive Rivalry (competitors). This looks at the number and strength of your
competitors.
How many rivals do you have? Who are they, and how does the quality of their
products and services compare with yours?
Where rivalry is powerful, companies can attract customers with aggressive price cuts
and high-impact marketing campaigns. Also, in markets with lots of competitors, your
suppliers and buyers can go elsewhere if they feel that they're not getting a good deal
from you.
On the other hand, where competitive rivalry is minimal, and no one else is doing what
you do, then you'll likely have great strength and healthy profits.
b. Supplier Power. This is determined by how easy it is for your suppliers to increase
their prices. How many potential suppliers do you have? How unique is the product or
service that they provide, and how expensive would it be to switch from one supplier to
another?
The more you have to choose from, the easier it will be to switch to a cheaper
alternative. But the fewer suppliers there are, and the more you need their help, the
c. Buyer Power. Here, you ask yourself how easy it is for buyers to drive your prices
down. How many buyers are there, and how big are their orders? How much would it
cost them to switch from your products and services to those of a competitor? Are your
buyers strong enough to dictate terms to you?
When you deal with only a few savvy customers, they have more power, but your
power increases if you have many customers.
d. Threat of Substitution (Replacement). Companies are concerned about the threat
of substitute products (or services) displacing their own. The threat of substitutes is
high when rivals or even companies outside the industry offer more attractive and/or
lower cost products. Buyers then have the opportunity to make a price/performance
trade-off. The cost of switching is also a factor; if it is high, the treat of substitution is
low.
e. Threat of New Entry. Your position can be affected by people's ability to enter your
market. So, think about how easily this could be done. How easy is it to get a foothold
in your industry or market? How much would it cost, and how tightly is your sector
regulated?
If it takes little money and effort to enter your market and compete effectively, or if you
have little protection for your key technologies, then rivals can quickly enter your
market and weaken your position. If you have strong and durable barriers to entry, then
you can preserve a favorable position and take fair advantage of it.
6. PEST Analysis/ Broad Factors Analysis
This type of analysis stands for Political, Economic, Social, and Technological or PEST
analysis. It is a highly useful framework with which we can gain an understanding of
the environment within which we operate. In order to perform the complete PEST
analysis, each of the four factors that make it up must be analyzed in detail:
i. Political factors: These are the factors that affect an industry, which are determined
by the authorities. They include regulations and policies that affect the industry either
directly or indirectly, such as trade policies, tariffs, environmental regulation, taxes, the
ease of doing business, labor laws, and the political stability of the country or region
within which the business and industry operate.
ii. Economic factors: These are the economic forces that govern the industry and the
country within which the business operates. They include such factors as the ability to
access capital, the GDP growth rate, the interest rates, the exchange rates, and so on.
iii. Social factors: These are prevalent trends in the society within which the business
and industry operate. They include such aspects of society as social movements,
fashion, health, demographics and population.
iv. Technological factors: This includes all factors that have to deal with any
developments or advancements in technology that could change the mode of operation
of the industry or business, or even disrupt the industry entirely.
7. SWOT Analysis
The acronym SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. It is a framework
that pretty much supersedes others already mentioned, in the sense that it can be used to evaluate
those others. With SWOT analysis, you can figure out what your strengths are, according to your
PEST analysis, what your weaknesses are, what opportunities your environment presents, and what
threats you have to deal with.
i. Strengths are the characteristics your business has that give it some kind of advantage over
competitors.
ii. Weaknesses are the characteristics your business has that give it some kind of disadvantage,
relative to its competitors.
iii. Opportunities are the elements in your business’ external environment that allow you to form and
implement strategies to make the business more profitable.
iv. Threats are the elements in your business’ external environment that could potentially harm the
integrity or profitability of your business.
Whenever you conduct any kind of analysis on the industry, you will come across two types of
factors: internal and external.
Internal factors are those that already exist within the business and that have contributed to your
business’ current position. These factors may or may not cease to exist in the near future.
External factors are those that exist outside of the control of the business; these are considered
contingencies. They are assessed on the probability of their occurrence and on the kind of impact they
would have on the business, if they happened.
Importance of Porter's Five Forces Analysis
Porter's Five Forces Analysis is an important tool for understanding the forces that shape
competition within an industry. It is also useful for helping you to adjust your strategy to suit your
Types of industry analysis
There are three commonly used and important methods
of performing industry analysis. The three methods are:
1. Competitive Forces Model (Porter’s 5 Forces)
2. Broad Factors Analysis (PEST Analysis)
3. SWOT Analysis
1. Competitive Forces Model (Porter’s 5 Forces)
One of the most famous models ever developed for industry analysis, famously known
as Porter’s 5 Forces, was introduced by Michael Porter in his 1980 book “
Competitive Strategy: Techniques for Analyzing Industries and Competitors.”
According to Porter, analysis of the five forces gives an accurate impression of the
industry and makes analysis easier. In our Corporate & Business Strategy course, we
cover these five forces and an additional force — power of complementary
good/service providers.
i. Intensity of industry rivalry (competition/challenges)
The number of participants in the industry and their respective market shares are a
direct representation of the competitiveness of the industry. These are directly affected
by all the factors mentioned above. Lack of differentiation in products tends to add to
the intensity of competition. High exit costs such as high fixed assets, government
restrictions, labor unions, etc. also make the competitors fight the battle a little harder.
ll. Threat of potential entrants
This indicates the ease with which new firms can enter the market of a particular industry. If it is
easy to enter an industry, companies face the constant risk of new competitors. If the entry is
difficult, whichever company enjoys little competitive advantage reaps the benefits for a longer
period. Also, under difficult entry circumstances, companies face a constant set of competitors.
iii. Bargaining power of suppliers
This refers to the bargaining power of suppliers. If the industry relies on a small number of
suppliers, they enjoy a considerable amount of bargaining power. This can particularly affect
small businesses because it directly influences the quality and the price of the final product.
iv. Bargaining power of buyers
The complete opposite happens when the bargaining power lies with the customers. If
consumers/buyers enjoy market power, they are in a position to negotiate lower prices, better
quality, or additional services and discounts. This is the case in an industry with more
competitors but with a single buyer constituting a large share of the industry’s sales.
v. Threat of substitute goods/services
The industry is always competing with another industry producing a similar substitute product.
Hence, all firms in an industry have potential competitors from other industries. This takes a toll
on their profitability because they are unable to charge exorbitant prices. Substitutes can take two
forms – products with the same function/quality but lesser price, or products of the same price
but of better quality or providing more utility.
2 Broad Factors Analysis (PEST Analysis)
Broad Factors Analysis, also commonly called the PEST Analysis stands for Political, Economic,
Social and Technological. PEST analysis is a useful framework for analyzing the external
To use PEST as a form of industry analysis, an analyst will analyze each of the 4 components
of the model. These components include:
1. Political
Political factors that impact an industry include specific policies and regulations related to
things like taxes, environmental regulation, tariffs, trade policies, labor laws, ease of doing
business, and overall political stability.
2. Economic
The economic forces that have an impact include inflation, exchange rates (FX), interest rates,
GDP growth rates, conditions in the capital markets (ability to access capital), etc.
3. Social
The social impact on an industry refers to trends among people and includes things such as
population growth, demographics (age, gender, etc.), and trends in behavior such as health,
fashion, and social movements.
4. Technological
The technological aspect of PEST analysis incorporates factors such as advancements and
developments that change the way a business operates and the ways in which people live their
lives (e.g., the advent of the internet).
3 SWOT Analysis
SWOT Analysis stands for Strengths, Weaknesses, Opportunities, and Threats. It can be a
great way of summarizing various industry forces and determining their implications for the
business in question.
1. Internal
Internal factors that already exist and have contributed to the current position and may continue to
exist.
2. External
External factors are usually contingent events. Assess their importance based on the likelihood of
them happening and their potential impact on the company. Also, consider whether management
has the intention and ability to take advantage of the opportunity/avoid the threat.
(1. SWIFT (Analysis) Summary: The Structured What-If Technique is a
"brainstorming" method where "What-If" questions are generated using a variety of
sources such as checklists, past incidents, standards and guidelines etc)
FOLLOWINGS ARE THE AREAS OR FIELDS OF SPACES OF IDUSTRIAL ANALYSIAS
Identifying competitors
A person, team, or company that is competing against others: Their prices are better than
any of their competitors. How many competitors took part in the race?
Identifying competitors doesn’t have to be complicated.
The first step to finding your competitors is to differentiate between your direct and indirect
competition.
• Direct competition is a term that refers to the companies or publishers who sell or
market the same products as your business. Your customers will often evaluate both you
and your direct competitors before making a purchase decision or converting.
• Indirect competition (competitors attracts your suppliers, customers, investors towards
them & in their business) is a term that refers to the companies or publishers that don’t
sell or market the same products, but are in competition with your business numerically.
They may write the same type of content as you and be competing for the same
keywords. In short, they are competing for your customers’ attention.
As you skill/craft your marketing strategy, you need to be aware of both your indirect and
your direct competition.
Let’s discuss three ways to identify both your direct and indirect competitors.
A. A few effective techniques for identifying direct competitors:
1. Market Research
Take a look at the market for your product and evaluate which other companies are selling a
product that would compete with yours. Talk to your sales team and find out which
competitors they see come up often in their sales process. From there, you’ll be able to take
a closer look at those companies, their product and marketing efforts, and create strategies to
outperform them.
2. Solicit/Get Customer Feedback
Again, your customers are the key to unlocking your direct competitors. Once they’ve
decided on your business and product, you can ask them which other businesses/products
they were evaluating. Customers often reveal unexpected competitors that aren’t even on
your radar.
In addition, during the sales process your sales team can also ask your potential customers
which businesses they are considering. If they haven’t decided on your product yet, your
team will be able to speak to their needs better if you know which businesses or products
they are considering.
3. Check Online Communities on Social Media or Community Forums
In this day and age, your potential customers will often seek out advice and
recommendations on social media sites and apps, or on community forums. By investigating
the conversations your customers have on these websites, you’ll be able to further identify
your competitors.
B. Few effective techniques for identifying indirect competitors:
1. Keyword Research
Keyword research is the best way to identify your indirect competition. By conducting a
competitive analysis, you can determine which businesses or publishers are competing for
space on Google. After all, many of your customers are looking for your products and
2. Analyzing Google’s Search Engine Results Page
When it comes down to it, many of your indirect competitors are writing about topics
close to your value proposition. If you examine the value proposition of your product,
you’ll be able to identify keywords that are central to your product or offering.
From there, type the keywords into Google and see who is competing with your
content on search engines. Anyone writing content around your value proposition,
represents a person, blog, business, publication, or organization that is the indirect
competition of your business.
3. Take a Look at Paid Data
If you’ve taken the first two steps on this list, step three should be a gentle wind. Head
into AdWords and scan those keywords that are important to your business. Is there a
lot of competition for any of those keywords? If there is, check out which businesses or
websites are purchasing ads for those keywords. If websites are paying for paid space
on the search engine results page for a keyword, they’re competing with your content
for space on Google.
Sources of Competitive intelligence (company’s effort or effectivenes)
Competitive intelligence is the result of a company’s efforts to gather and analyze information
about its industry, business environment, competitors, and competitive products and services.
The information-gathering and analysis process can help a company develop its strategy or
identify competitive gaps.
Competitive intelligence essentially means understanding and learning what's happening in the
world outside your business so you can be as competitive as possible. It means learning as much
as possible--as soon as possible--about your industry in general, your competitors. In short, it
empowers you to anticipate and face challenges head on.
Competitive intelligence is the result of a company's efforts to gather and analyze information
about its industry, business environment, competitors, and competitive products and services.
The information-gathering and analysis process can help a company develop its strategy or
identify competitive gaps.
Competitive intelligence (CI) is the systematic collection and analysis of information from
multiple sources, and a coordinated CI program. [1] It is the action of defining, gathering,
analyzing, and distributing intelligence about products, customers, competitors, and any aspect of
the environment needed to support executives and managers in strategic decision making for an
organization.
Here are the top external sources of competitive intelligence that should be on your detector.
1. Competitor websites: Your website is the window to the world. So it goes without saying that
studying a competitor’s website can provide tremendous insight into the way they operate. Apart
from corporate information such as their products, leadership
team, and geographic presence, websites can tell you a lot about their marketing
strategies.
2. Annual reports: Annual reports are a reliable source of company data such as
revenues, employee numbers, history, business growth strategies, stakeholders,
subsidiaries, and so on. They offer a comprehensive view of your competitor’s
activities and their financial health.
3. Premium databases: In situations where freely-available information is limited,
paid databases like Capital IQ and Factiva can be useful sources of competitive
intelligence. These databases provide in-depth information on companies, products,
pricing, investments, innovation, among other business information.
4. Syndicated reports/analyst reports: When it comes to uncovering industry
benchmarks and best practices, syndicated research reports are incredibly valuable.
They provide viable information on everything from market-related numbers to trends,
growth forecasts to industry-specific company profiles. This offers an overview of your
focus market, including the key players in your industry, how they differentiate
themselves, and how their services map with market needs, providing greater clarity of
your competitive landscape.
5. Primary research: Companies looking for rough insight on their competition can
conduct primary research, such as surveys, interviews or secret shopping. Primary
information gathered from suppliers, distributors, customers, and even industry thought
leaders offer insight on competitor products/services that might not be available
elsewhere. Data collected via primary sources help in understanding buyer behavior
towards your products versus your competition, helping you refine your marketing
strategy according to evolving customer needs.
6. Social media
Social media platforms and online forums are a gold mine of customer and competitive
intelligence. Analyzing social media conversations can reveal how your brand
compares to your competition in terms of customer sentiment and share-of-voice
helping you inform your brand strategy. Honest, unfiltered feedback about your
competitors’ can offer insight into your own products and services. These insights can
then be used to inform your product and marketing strategies. Additionally, tracking
your rival’s social profiles can help you stay informed on their latest developments,
events they are sponsoring or participating in, collaborations, messaging, among others.
7. Patent databases
Analyzing your competitors’ patent portfolio can reveal the products they are building,
the direction of their R&D and help you devise effective innovation strategies
accordingly. Addressing the gaps in your IP can help you stay better prepared for
potential disruptions in your industry due to technological innovation.