industry dynamics in business plan

Analyze your market like a pro with this step-by-step guide + insider tips

Don’t fall into the trap of assuming that you already know enough about your market.

No matter how fantastic your product or service is, your business cannot succeed without sufficient market demand .

You need a clear understanding of who will buy your product or service and why .

You want to know if there is a clear market gap and a market large enough to support the survival and growth of your business.

Industry research and market analysis will help make sure that you are on the right track .

It takes time , but it is time well spent . Thank me later.

WHAT is Market Analysis?

The Market Analysis section of a business plan is also sometimes called:

Market Demand, Market Trends, Target Market, The Market
Industry Analysis & Trends, Industry & Market Analysis, Industry and Market Research

WHY Should You Do Market Analysis?

First and foremost, you need to demonstrate beyond any reasonable doubt that there is real need and sufficient demand for your product or service in the market, now and going forward.

What makes you think that people will buy your products or services?
Can you prove it?

Your due diligence on the market opportunity and validating the problem and solution described in the Product and Service section of your business plan are crucial for the success of your venture.

Also, no company operates in a vacuum. Every business is part of a larger overall industry, the forces that affect your industry as a whole will inevitably affect your business as well.

Evaluating your industry and market increases your own knowledge of the factors that contribute to your company’s success and shows the readers of your business plan that you understand the external business conditions.

External Support

In fact, if you are seeking outside financing, potential backers will most definitely be interested in industry and market conditions and trends.

You will make a positive impression and have a better chance of getting their support if you show market analysis that strengthens your business case, combining relevant and reliable data with sound judgement.

Let’s break down how to do exactly that, step by step:

HOW To Do Market Analysis: Step-by-Step

So, let’s break up how market analysis is done into three steps:

Industry: the total market
Target Market: specific segments of the industry that you will target
Target Customer: characteristics of the customers that you will focus on

Step 1: Industry Analysis

How do you define an industry.

For example, the fashion industry includes fabric suppliers, designers, companies making finished clothing, distributors, sales representatives, trade publications, retail outlets online and on the high street.

How Do You Analyze an Industry?

Briefly describe your industry, including the following considerations:

1.1. Economic Conditions

Outline the current and projected economic conditions that influence the industry your business operates in, such as:

Official economic indicators like GDP or inflation
Labour market statistics
Foreign trade (e.g., import and export statistics)

1.2. Industry Description

Highlight the distinct characteristic of your industry, including:

Market leaders , major customer groups and customer loyalty
Supply chain and distribution channels
Profitability (e.g., pricing, cost structure, margins), financials
Key success factors
Barriers to entry preventing new companies from competing in the industry

1.3. Industry Size and Growth

Estimate the size of your industry and analyze how industry growth affects your company’s prospects:

Current size (e.g., revenues, units sold, employment)
Historic and projected industry growth rate (low/medium/high)
Life-cycle stage /maturity (emerging/expanding/ mature/declining)

1.4. Industry Trends

Industry Trends: Describe the key industry trends and evaluate the potential impact of PESTEL (political / economic / social / technological / environmental / legal) changes on the industry, including the level of sensitivity to:
Seasonality
Economic cycles
Government regulation (e.g. environment, health and safety, international trade, performance standards, licensing/certification/fair trade/deregulation, product claims) Technological change
Global Trends: Outline global trends affecting your industry
Identify global industry concerns and opportunities
International markets that could help to grow your business
Strategic Opportunity: Highlight the strategic opportunities that exist in your industry

Step 2: Target Customer Identification

Who is a target customer.

One business can have–and often does have–more than one target customer group.

The success of your business depends on your ability to meet the needs and wants of your customers. So, in a business plan, your aim is to assure readers that:

Your customers actually exist
You know exactly who they are and what they want
They are ready for what you have to offer and are likely to actually buy

How Do You Identify an Ideal Target Customer?

2.1. target customer.

Identify the customer, remembering that the decision-maker who makes the purchase can be a different person or entity than the end-user.

2.2. Demographics

For consumers ( demographics ): Age, gender, income, occupation, education, family status, home ownership, lifestyle (e.g., work and leisure activities)
For businesses ( firmographic ): Industry, sector, years in business, ownership, size (e.g., sales, revenues, budget, employees, branches, sq footage)

2.3. Geographic Location

Where are your customers based, where do they buy their products/services and where do they actually use them

2.4 Purchasing Patterns

Identify customer behaviors, i.e., what actions they take
how frequently
and how quickly they buy

2.5. Psychographics

Identify customer attitudes, i.e., how they think or feel
Urgency, price, quality, reputation, image, convenience, availability, features, brand, customer service, return policy, sustainability, eco-friendliness, supporting local business
Necessity/luxury, high involvement bit ticket item / low involvement consumable

Step 3: Target Market Analysis

What is a target market.

Target market, or 'target audience', is a group of people that a business has identified as the most likely to purchase its offering, defined by demographic, psychographic, geographic and other characteristics. Target market may be broken down to target customers to customize marketing efforts.

How Do You Analyze a Target Market?

So, how many people are likely to become your customers?

To get an answer to this questions, narrow the industry into your target market with a manageable size, and identify its key characteristics, size and trends:

3.1. Target Market Description

Define your target market by:

Type: B2C, B2B, government, non-profits
Geographic reach: Specify the geographic location and reach of your target market

3.2. Market Size and Share

Estimate how large is the market for your product or service (e.g., number of customers, annual purchases in sales units and $ revenues). Explain the logic behind your calculation:

TAM (Total Available/Addressable/Attainable Market) is the total maximum demand for a product or service that could theoretically be generated by selling to everyone in the world who could possibly buy from you, regardless of competition and any other considerations and restrictions.
SAM (Serviceable Available Market) is the portion of the TAM that you could potentially address in a specific market. For example, if your product/service is only available in one country or language.
SOM (Service Obtainable Market / Share of Market) is the share of the SAM that you can realistically carve out for your product or service. This the target market that you will be going after and can reasonably expect to convert into a customer base.

3.3. Market Trends

Illustrate the most important themes, changes and developments happening in your market. Explain the reasons behind these trends and how they will favor your business.

3.4. Demand Growth Opportunity

Estimate future demand for your offering by translating past, current and future market demand trends and drivers into forecasts:

Historic growth: Check how your target market has grown in the past.
Drivers past: Identify what has been driving that growth in the past.
Drivers future: Assess whether there will be any change in influence of these and other drivers in the future.

How Big Should My Target Market Be?

Well, if the market opportunity is small, it will limit how big and successful your business can become. In fact, it may even be too small to support a successful business at all.

On the other hand, many businesses make the mistake of trying to appeal to too many target markets, which also limits their success by distracting their focus.

What If My Stats Look Bad?

Large and growing market suggests promising demand for your offering now and into the future. Nevertheless, your business can still thrive in a smaller or contracting market.

Instead of hiding from unfavorable stats, acknowledge that you are swimming against the tide and devise strategies to cope with whatever lies ahead.

Step 4: Industry and Market Analysis Research

The market analysis section of your business plan should illustrate your own industry and market knowledge as well as the key findings and conclusions from your research.

Back up your findings with external research sources (= secondary research) and results of internal market research and testing (= primary research).

What is Primary and Secondary Market Research?

Yes, there are two main types of market research – primary and secondary – and you should do both to adequately cover the market analysis section of your business plan:

Primary market research is original data you gather yourself, for example in the form of active fieldwork collecting specific information in your market.
Secondary market research involves collating information from existing data, which has been researched and shared by reliable outside sources . This is essentially passive desk research of information already published .

Unless you are working for a corporation, this exercise is not about your ability to do professional-level market research.

Instead, you just need to demonstrate fundamental understanding of your business environment and where you fit in within the market and broader industry.

Why Do You Need To Do Primary & Secondary Market Research?

There are countless ways you could go collecting industry and market research data, depending on the type of your business, what your business plan is for, and what your needs, resources and circumstances are.

For tried and tested tips on how to properly conduct your market research, read the next section of this guide that is dedicated to primary and secondary market research methods.

In any case, tell the reader how you carried out your market research. Prove what the facts are and where you got your data. Be as specific as possible. Provide statistics, numbers, and sources.

When doing secondary research, always make sure that all stats, facts and figures are from reputable sources and properly referenced in both the main text and the Appendix of your business plan. This gives more credibility to your business case as the reader has more confidence in the information provided.

Go to the Primary and Secondary Market Research post for my best tips on industry, market and competitor research.

7 TOP TIPS For Writing Market Analysis

1. realistic projections.

Above all, make sure that you are realistic in your projections about how your product or service is going to be accepted in the market, otherwise you are going to seriously undermine the credibility of your entire business case.

2. Laser Focus

Discuss only characteristic of your target market and customers that are observable, factual and meaningful, i.e. directly relate to your customers’ decision to purchase.

Always relate the data back to your business. Market statistics are meaningless until you explain where and how your company fits in.

For example, as you write about the market gap and the needs of your target customers, highlight how you are uniquely positioned to fill them.

In other words, your goal is to:

Present your data
Analyze the data
Tie the data back to how your business can thrive within your target market

3. Target Audience

On a similar note, tailor the market analysis to your target audience and the specific purpose at hand.

For example, if your business plan is for internal use, you may not have to go into as much detail about the market as you would have for external financiers, since your team is likely already very familiar with the business environment your company operates in.

4. Story Time

Make sure that there is a compelling storyline and logical flow to the market information presented.

The saying “a picture is worth a thousand words” certainly applies here. Industry and market statistics are easier to understand and more impactful if presented as a chart or graph.

6. Information Overload

Keep your market analysis concise by only including pertinent information. No fluff, no repetition, no drowning the reader in a sea of redundant facts.

While you should not assume that the reader knows anything about your market, do not elaborate on unnecessary basic facts either.

Do not overload the reader in the main body of the business plan. Move everything that is not essential to telling the story into the Appendix. For example, summarize the results of market testing survey in the main body of the business plan document, but move the list of the actual survey questions into the appendix.

7. Marketing Plan

Note that market analysis and marketing plan are two different things, with two distinct chapters in a business plan.

As the name suggests, market analysis examines where you fit in within your desired industry and market. As you work thorugh this section, jot down your ideas for the marketing and strategy section of your business plan.

Final Thoughts

Remember that the very act of doing the research and analysis is a great opportunity to learn things that affect your business that you did not know before, so take your time doing the work.

Why are Industry & Market Research and Analysis IMPORTANT?

Industry and market research and analysis are important because they allow you to gain knowledge of the industry, the target market you are planning to sell to, and your competition, so you can make informed strategic decisions on how to make your business succeed.

How Can Industry & Market Research and Analysis BENEFIT a Business?

Industry and market research and analysis benefit a business by uncovering opportunities and threats within its environment, including attainable market size, ideal target customers, competition and any potential difficulties on the company’s journey to success.

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How to Conduct an Industry Analysis? Steps, Template, Examples

Appinio Research · 16.11.2023 · 39min read

Are you ready to unlock the secrets of Industry Analysis, equipping yourself with the knowledge to navigate markets and make informed strategic decisions? Dive into this guide, where we unravel the significance, objectives, and methods of Industry Analysis.

Whether you're an entrepreneur seeking growth opportunities or a seasoned executive navigating industry shifts, this guide will be your compass in understanding the ever-evolving business terrain.

What is Industry Analysis?

Industry analysis is the process of examining and evaluating the dynamics, trends, and competitive forces within a specific industry or market sector. It involves a comprehensive assessment of the factors that impact the performance and prospects of businesses operating within that industry. Industry analysis serves as a vital tool for businesses and decision-makers to gain a deep understanding of the environment in which they operate.

Key components of industry analysis include:

Market Size and Growth: Determining the overall size of the market, including factors such as revenue, sales volume, and customer base. Analyzing historical and projected growth rates provides insights into market trends and opportunities.
Competitive Landscape: Identifying and analyzing competitors within the industry. This includes assessing their market share, strengths, weaknesses, and strategies. Understanding the competitive landscape helps businesses position themselves effectively.
Customer Behavior and Preferences: Examining consumer behavior , preferences, and purchasing patterns within the industry. This information aids in tailoring products or services to meet customer needs.
Regulatory and Legal Environment: Assessing the impact of government regulations, policies, and legal requirements on industry operations. Compliance and adaptation to these factors are crucial for business success.
Technological Trends: Exploring technological advancements and innovations that affect the industry. Staying up-to-date with technology trends can be essential for competitiveness and growth.
Economic Factors: Considering economic conditions, such as inflation rates, interest rates, and economic cycles, that influence the industry's performance.
Social and Cultural Trends: Examining societal and cultural shifts, including changing consumer values and lifestyle trends that can impact demand and preferences.
Environmental and Sustainability Factors: Evaluating environmental concerns and sustainability issues that affect the industry. Industries are increasingly required to address environmental responsibility.
Supplier and Distribution Networks: Analyzing the availability of suppliers, distribution channels, and supply chain complexities within the industry.
Risk Factors: Identifying potential risks and uncertainties that could affect industry stability and profitability.

Objectives of Industry Analysis

Industry analysis serves several critical objectives for businesses and decision-makers:

Understanding Market Dynamics: The primary objective is to gain a comprehensive understanding of the industry's dynamics, including its size, growth prospects, and competitive landscape. This knowledge forms the basis for strategic planning.
Identifying Growth Opportunities: Industry analysis helps identify growth opportunities within the market. This includes recognizing emerging trends, niche markets, and underserved customer segments.
Assessing Competitor Strategies: By examining competitors' strengths, weaknesses, and strategies, businesses can formulate effective competitive strategies. This involves positioning the company to capitalize on its strengths and exploit competitors' weaknesses.
Risk Assessment and Mitigation: Identifying potential risks and vulnerabilities specific to the industry allows businesses to develop risk mitigation strategies and contingency plans. This proactive approach minimizes the impact of adverse events.
Strategic Decision-Making: Industry analysis provides the data and insights necessary for informed strategic decision-making. It guides decisions related to market entry, product development, pricing strategies, and resource allocation.
Resource Allocation: By understanding industry dynamics, businesses can allocate resources efficiently. This includes optimizing marketing budgets, supply chain investments, and talent recruitment efforts.
Innovation and Adaptation: Staying updated on technological trends and shifts in customer preferences enables businesses to innovate and adapt their offerings effectively.

Importance of Industry Analysis in Business

Industry analysis holds immense importance in the business world for several reasons:

Strategic Planning: It forms the foundation for strategic planning by providing a comprehensive view of the industry's landscape. Businesses can align their goals, objectives, and strategies with industry trends and opportunities.
Risk Management: Identifying and assessing industry-specific risks allows businesses to manage and mitigate potential threats proactively. This reduces the likelihood of unexpected disruptions.
Competitive Advantage: In-depth industry analysis helps businesses identify opportunities for gaining a competitive advantage. This could involve product differentiation, cost leadership, or niche market targeting .
Resource Optimization: Efficient allocation of resources, both financial and human, is possible when businesses have a clear understanding of industry dynamics. It prevents wastage and enhances resource utilization.
Informed Investment: Industry analysis assists investors in making informed decisions about allocating capital. It provides insights into the growth potential and risk profiles of specific industry sectors.
Adaptation to Change: As industries evolve, businesses must adapt to changing market conditions. Industry analysis facilitates timely adaptation to new technologies, market shifts, and consumer preferences .
Market Entry and Expansion: For businesses looking to enter new markets or expand existing operations, industry analysis guides decision-making by evaluating the feasibility and opportunities in target markets.
Regulatory Compliance: Understanding the regulatory environment is critical for compliance and risk avoidance. Industry analysis helps businesses stay compliant with relevant laws and regulations.

In summary, industry analysis is a fundamental process that empowers businesses to make informed decisions, stay competitive, and navigate the complexities of their respective markets. It is an invaluable tool for strategic planning and long-term success.

How to Prepare for Industry Analysis?

Let's start by going through the crucial preparatory steps for conducting a comprehensive industry analysis.

1. Data Collection and Research

Primary Research: When embarking on an industry analysis, consider conducting primary research . This involves gathering data directly from industry sources, stakeholders, and potential customers. Methods may include surveys , interviews, focus groups , and observations. Primary research provides firsthand insights and can help validate secondary research findings.
Secondary Research: Secondary research involves analyzing existing literature, reports, and publications related to your industry. Sources may include academic journals, industry-specific magazines, government publications, and market research reports. Secondary research provides a foundation of knowledge and can help identify gaps in information that require further investigation.
Data Sources: Explore various data sources to collect valuable industry information. These sources may include industry-specific associations, government agencies, trade publications, and reputable market research firms. Make sure to cross-reference data from multiple sources to ensure accuracy and reliability.

2. Identifying Relevant Industry Metrics

Understanding and identifying the right industry metrics is essential for meaningful analysis. Here, we'll discuss key metrics that can provide valuable insights:

Market Size: Determining the market's size, whether in terms of revenue, units sold, or customer base, is a fundamental metric. It offers a snapshot of the industry's scale and potential.
Market Growth Rate: Assessing historical and projected growth rates is crucial for identifying trends and opportunities. Understanding how the market has evolved over time can guide strategic decisions.
Market Share Analysis: Analyzing market share among industry players can help you identify dominant competitors and their respective positions. This metric also assists in gauging your own company's market presence.
Market Segmentation : Segmenting the market based on demographics, geography, behavior, or other criteria can provide deeper insights. Understanding the specific needs and preferences of various market segments can inform targeted strategies.

3. Gathering Competitive Intelligence

Competitive intelligence is the cornerstone of effective industry analysis. To gather and utilize information about your competitors:

Competitor Identification: Begin by creating a comprehensive list of your primary and potential competitors. Consider businesses that offer similar products or services within your target market. It's essential to cast a wide net to capture all relevant competitors.
SWOT Analysis : Conduct a thorough SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis for each competitor. This analysis helps you identify their internal strengths and weaknesses, as well as external opportunities and threats they face.
Market Share Analysis: Determine the market share held by each competitor and how it has evolved over time. Analyzing changes in market share can reveal shifts in competitive dynamics.
Product and Pricing Analysis: Evaluate your competitors' product offerings and pricing strategies . Identify any unique features or innovations they offer and consider how your own products or services compare.
Marketing and Branding Strategies: Examine the marketing and branding strategies employed by competitors. This includes their messaging, advertising channels, and customer engagement tactics. Assess how your marketing efforts stack up.

Industry Analysis Frameworks and Models

Now, let's explore essential frameworks and models commonly used in industry analysis, providing you with practical insights and examples to help you effectively apply these tools.

Porter's Five Forces Model

Porter's Five Forces is a powerful framework developed by Michael Porter to assess the competitive forces within an industry. This model helps you understand the industry's attractiveness and competitive dynamics.

How to Conduct an Industry Analysis Template Examples Porters Five Forces Analysis Appinio

It consists of five key forces:

Threat of New Entrants: This force evaluates how easy or difficult it is for new companies to enter the industry. Factors that increase barriers to entry include high capital requirements, strong brand loyalty among existing players, and complex regulatory hurdles. For example, the airline industry has significant barriers to entry due to the need for large capital investments in aircraft, airport facilities, and regulatory approvals.
Bargaining Power of Suppliers: This force examines the influence suppliers have on the industry's profitability. Powerful suppliers can demand higher prices or impose unfavorable terms. For instance, in the automotive industry, suppliers of critical components like microchips can wield significant bargaining power if they are few in number or if their products are highly specialized.
Bargaining Power of Buyers: The bargaining power of buyers assesses how much influence customers have in negotiating prices and terms. In industries where buyers have many alternatives, such as the smartphone market, they can demand lower prices and better features, putting pressure on manufacturers to innovate and compete.
Threat of Substitutes: This force considers the availability of substitute products or services that could potentially replace what the industry offers. For example, the rise of electric vehicles represents a significant threat to the traditional gasoline-powered automotive industry as consumers seek eco-friendly alternatives.
Competitive Rivalry: Competitive rivalry assesses the intensity of competition among existing firms in the industry. A highly competitive industry, such as the smartphone market, often leads to price wars and aggressive marketing strategies as companies vie for market share.

Example: Let's consider the coffee shop industry . New entrants face relatively low barriers, as they can set up a small shop with limited capital. However, the bargaining power of suppliers, such as coffee bean producers, can vary depending on the region and the coffee's rarity. Bargaining power with buyers is moderate, as customers often have several coffee shops to choose from. Threats of substitutes may include energy drinks or homemade coffee, while competitive rivalry is high, with numerous coffee chains and independent cafes competing for customers.

SWOT Analysis

SWOT Analysis is a versatile tool used to assess an organization's internal strengths and weaknesses, as well as external opportunities and threats. By conducting a SWOT analysis, you can gain a comprehensive understanding of your industry and formulate effective strategies.

Strengths: These are the internal attributes and capabilities that give your business a competitive advantage. For instance, if you're a tech company, having a talented and innovative team can be considered a strength.
Weaknesses: Weaknesses are internal factors that hinder your business's performance. For example, a lack of financial resources or outdated technology can be weaknesses that need to be addressed.
Opportunities: Opportunities are external factors that your business can capitalize on. This could be a growing market segment, emerging technologies, or changing consumer trends.
Threats: Threats are external factors that can potentially harm your business. Examples of threats might include aggressive competition, economic downturns, or regulatory changes.

Example: Let's say you're analyzing the fast-food industry. Strengths could include a well-established brand, a wide menu variety, and efficient supply chain management. Weaknesses may involve a limited focus on healthy options and potential labor issues. Opportunities could include the growing trend toward healthier eating, while threats might encompass health-conscious consumer preferences and increased competition from delivery apps.

PESTEL Analysis

PESTEL Analysis examines the external macro-environmental factors that can impact your industry. The acronym stands for:

Political: Political factors encompass government policies, stability, and regulations. For example, changes in tax laws or trade agreements can affect industries like international manufacturing.
Economic: Economic factors include economic growth, inflation rates, and exchange rates. A fluctuating currency exchange rate can influence export-oriented industries like tourism.
Social: Social factors encompass demographics, cultural trends, and social attitudes. An aging population can lead to increased demand for healthcare services and products.
Technological: Technological factors involve advancements and innovations. Industries like telecommunications are highly influenced by technological developments, such as the rollout of 5G networks.
Environmental: Environmental factors cover sustainability, climate change, and ecological concerns. Industries such as renewable energy are directly impacted by environmental regulations and consumer preferences.
Legal: Legal factors encompass laws, regulations, and compliance requirements. The pharmaceutical industry, for instance, faces stringent regulatory oversight and patent protection laws.

Example: Consider the automobile manufacturing industry. Political factors may include government incentives for electric vehicles. Economic factors can involve fluctuations in fuel prices affecting consumer preferences for fuel-efficient cars. Social factors might encompass the growing interest in eco-friendly transportation options. Technological factors could relate to advancements in autonomous driving technology. Environmental factors may involve emissions regulations, while legal factors could pertain to safety standards and recalls.

Industry Life Cycle Analysis

Industry Life Cycle Analysis categorizes industries into various stages based on their growth and maturity. Understanding where your industry stands in its life cycle can help shape your strategies.

Introduction: In the introduction stage, the industry is characterized by slow growth, limited competition, and a focus on product development. New players enter the market, and consumers become aware of the product or service. For instance, electric scooters were introduced as a new mode of transportation in recent years.
Growth: The growth stage is marked by rapid market expansion, increased competition, and rising demand. Companies focus on gaining market share, and innovation is vital. The ride-sharing industry, exemplified by companies like Uber and Lyft, experienced significant growth in this stage.
Maturity: In the maturity stage, the market stabilizes, and competition intensifies. Companies strive to maintain market share and differentiate themselves through branding and customer loyalty programs. The smartphone industry reached maturity with multiple established players.
Decline: In the decline stage, the market saturates, and demand decreases. Companies must adapt or diversify to survive. The decline of traditional print media is a well-known example.

Example: Let's analyze the video streaming industry . The introduction stage saw the emergence of streaming services like Netflix. In the growth stage, more players entered the market, and the industry saw rapid expansion. The industry is currently in the maturity stage, with established platforms like Netflix, Amazon Prime, and Disney+ competing for market share. However, with continued innovation and changing consumer preferences, the decline stage may eventually follow.

Value Chain Analysis

Value Chain Analysis dissects a company's activities into primary and support activities to identify areas of competitive advantage. Primary activities directly contribute to creating and delivering a product or service, while support activities facilitate primary activities.

Primary Activities: These activities include inbound logistics (receiving and storing materials), operations (manufacturing or service delivery), outbound logistics (distribution), marketing and sales, and customer service.
Support Activities: Support activities include procurement (acquiring materials and resources), technology development (R&D and innovation), human resource management (recruitment and training), and infrastructure (administrative and support functions).

Example: Let's take the example of a smartphone manufacturer. Inbound logistics involve sourcing components, such as processors and displays. Operations include assembly and quality control. Outbound logistics cover shipping and distribution. Marketing and sales involve advertising and retail partnerships. Customer service handles warranty and support.

Procurement ensures a stable supply chain for components. Technology development focuses on research and development of new features. Human resource management includes hiring and training skilled engineers. Infrastructure supports the company's administrative functions.

By applying these frameworks and models effectively, you can better understand your industry, identify strategic opportunities and threats, and develop a solid foundation for informed decision-making.

Data Interpretation and Analysis

Once you have your data, it's time to start interpreting and analyzing the data you've collected during your industry analysis.

You can unlock the full potential of your data with Appinio 's comprehensive research platform. Beyond aiding in data collection, Appinio simplifies the intricate process of data interpretation and analysis. Our intuitive tools empower you to effortlessly transform raw data into actionable insights, giving you a competitive edge in understanding your industry.

Whether it's assessing market trends, evaluating the competitive landscape, or understanding customer behavior, Appinio offers a holistic solution to uncover valuable findings. With our platform, you can make informed decisions, strategize effectively, and stay ahead of industry shifts.

Experience the ease of data collection and interpretation with Appinio – book a demo today!

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1. Analyze Market Size and Growth

Analyzing the market's size and growth is essential for understanding its dynamics and potential. Here's how to conduct a robust analysis:

Market Size Calculation: Determine the total market size in terms of revenue, units sold, or the number of customers. This figure serves as a baseline for evaluating the industry's scale.
Historical Growth Analysis: Examine historical data to identify growth trends. This includes looking at past year-over-year growth rates and understanding the factors that influenced them.
Projected Growth Assessment: Explore industry forecasts and projections to gain insights into the expected future growth of the market. Consider factors such as emerging technologies, changing consumer preferences, and economic conditions.
Segmentation Analysis: If applicable, analyze market segmentation data to identify growth opportunities in specific market segments. Understand which segments are experiencing the most significant growth and why.

2. Assess Market Trends

Stay ahead of the curve by closely monitoring and assessing market trends. Here's how to effectively evaluate trends within your industry.

Consumer Behavior Analysis: Dive into consumer behavior data to uncover shifts in preferences, buying patterns, and shopping habits. Understand how technological advancements and cultural changes influence consumer choices.
Technological Advancements: Keep a keen eye on technological developments that impact your industry. Assess how innovations such as AI, IoT, blockchain, or automation are changing the competitive landscape.
Regulatory Changes: Stay informed about regulatory shifts and their potential consequences for your industry. Regulations can significantly affect product development, manufacturing processes, and market entry strategies.
Sustainability and Environmental Trends: Consider the growing importance of sustainability and environmental concerns. Evaluate how your industry is adapting to eco-friendly practices and how these trends affect consumer choices.

3. Evaluate Competitive Landscape

Understanding the competitive landscape is critical for positioning your business effectively. To perform a comprehensive evaluation:

Competitive Positioning: Determine where your company stands in comparison to competitors. Identify your unique selling propositions and areas where you excel.
Market Share Analysis: Continuously monitor market share among industry players. Identify trends in market share shifts and assess the strategies that lead to such changes.
Competitive Advantages and Weaknesses: Analyze your competitors' strengths and weaknesses. Identify areas where you can capitalize on their weaknesses and where you need to fortify your own strengths.

4. Identify Key Success Factors

Recognizing and prioritizing key success factors is crucial for developing effective strategies. To identify and leverage these factors:

Customer Satisfaction: Prioritize customer satisfaction as a critical success factor. Satisfied customers are more likely to become loyal advocates and contribute to long-term success.
Quality and Innovation: Focus on product or service quality and continuous innovation. Meeting and exceeding customer expectations can set your business apart from competitors.
Cost Efficiency: Strive for cost efficiency in your operations. Identifying cost-saving opportunities can lead to improved profitability.
Marketing and Branding Excellence: Invest in effective marketing and branding strategies to create a strong market presence. Building a recognizable brand can drive customer loyalty and growth.

5. Analyze Customer Behavior and Preferences

Understanding your target audience is central to success. Here's how to analyze customer behavior and preferences:

Market Segmentation: Use market segmentation to categorize customers based on demographics, psychographics , and behavior. This allows for more personalized marketing and product/service offerings.
Customer Surveys and Feedback: Gather customer feedback through surveys and feedback mechanisms. Understand their pain points, preferences, and expectations to tailor your offerings.
Consumer Journey Mapping: Map the customer journey to identify touchpoints where you can improve engagement and satisfaction. Optimize the customer experience to build brand loyalty.

By delving deep into data interpretation and analysis, you can gain valuable insights into your industry, uncover growth opportunities, and refine your strategic approach.

How to Conduct Competitor Analysis?

Competitor analysis is a critical component of industry analysis as it provides valuable insights into your rivals, helping you identify opportunities, threats, and areas for improvement.

1. Identify Competitors

Identifying your competitors is the first step in conducting a thorough competitor analysis. Competitors can be classified into several categories:

Direct Competitors: These are companies that offer similar products or services to the same target audience. They are your most immediate competitors and often compete directly with you for market share.
Indirect Competitors: Indirect competitors offer products or services that are related but not identical to yours. They may target a slightly different customer segment or provide an alternative solution to the same problem.
Potential Competitors: These companies could enter your market in the future. Identifying potential competitors early allows you to anticipate and prepare for new entrants.
Substitute Products or Services: While not traditional competitors, substitute products or services can fulfill the same customer needs or desires. Understanding these alternatives is crucial to your competitive strategy.

2. Analyze Competitor Strengths and Weaknesses

Once you've identified your competitors, you need to analyze their strengths and weaknesses. This analysis helps you understand how to position your business effectively and identify areas where you can gain a competitive edge.

Strengths: Consider what your competitors excel at. This could include factors such as brand recognition, innovative products, a large customer base, efficient operations, or strong financial resources.
Weaknesses: Identify areas where your competitors may be lacking. Weaknesses could involve limited product offerings, poor customer service, outdated technology, or financial instability.

3. Competitive Positioning

Competitive positioning involves defining how you want your business to be perceived relative to your competitors. It's about finding a unique position in the market that sets you apart. Consider the following strategies:

Cost Leadership: Strive to be the low-cost provider in your industry. This positioning appeals to price-conscious consumers.
Differentiation: Focus on offering unique features or attributes that make your products or services stand out. This can justify premium pricing.
Niche Market: Target a specific niche or segment of the market that may be underserved by larger competitors. Tailor your offerings to meet their unique needs.
Innovation and Technology: Emphasize innovation and technology to position your business as a leader in product or service quality.
Customer-Centric: Prioritize exceptional customer service and customer experience to build loyalty and a positive reputation.

4. Benchmarking and Gap Analysis

Benchmarking involves comparing your business's performance and practices with those of your competitors or industry leaders. Gap analysis helps identify areas where your business falls short and where improvements are needed.

Performance Benchmarking: Compare key performance metrics, such as revenue, profitability, market share, and customer satisfaction, with those of your competitors. Identify areas where your performance lags behind or exceeds industry standards.
Operational Benchmarking: Analyze your operational processes, supply chain, and cost structures compared to your competitors. Look for opportunities to streamline operations and reduce costs.
Product or Service Benchmarking: Evaluate the features, quality, and pricing of your products or services relative to competitors. Identify gaps and areas for improvement.
Marketing and Sales Benchmarking: Assess your marketing strategies, customer acquisition costs, and sales effectiveness compared to competitors. Determine whether your marketing efforts are performing at a competitive level.

Market Entry and Expansion Strategies

Market entry and expansion strategies are crucial for businesses looking to enter new markets or expand their presence within existing ones. These strategies can help you effectively target and penetrate your chosen markets.

Market Segmentation and Targeting

Market Segmentation: Begin by segmenting your target market into distinct groups based on demographics , psychographics, behavior, or other relevant criteria. This helps you understand the diverse needs and preferences of different customer segments.
Targeting: Once you've segmented the market, select specific target segments that align with your business goals and capabilities. Tailor your marketing and product/service offerings to appeal to these chosen segments.

Market Entry Modes

Selecting the proper market entry mode is crucial for a successful expansion strategy. Entry modes include:

Exporting: Sell your products or services in international markets through exporting. This is a low-risk approach, but it may limit your market reach.
Licensing and Franchising: License your brand, technology, or intellectual property to local partners or franchisees. This allows for rapid expansion while sharing the risk and control.
Joint Ventures and Alliances: Partner with local companies through joint ventures or strategic alliances. This approach leverages local expertise and resources.
Direct Investment: Establish a physical presence in the target market through subsidiaries, branches, or wholly-owned operations. This offers full control but comes with higher risk and investment.

Competitive Strategy Formulation

Your competitive strategy defines how you will compete effectively in the target market.

Cost Leadership: Strive to offer products or services at lower prices than competitors while maintaining quality. This strategy appeals to price-sensitive consumers.
Product Differentiation: Focus on offering unique and innovative products or services that stand out in the market. This strategy justifies premium pricing.
Market Niche: Target a specific niche or segment within the market that is underserved or has particular needs. Tailor your offerings to meet the unique demands of this niche.
Market Expansion : Expand your product or service offerings to capture a broader share of the market. This strategy involves diversifying your offerings to appeal to a broader audience.
Global Expansion: Consider expanding internationally to tap into new markets and diversify your customer base. This strategy involves thorough market research and adaptation to local cultures and regulations.

International Expansion Considerations

If your expansion strategy involves international markets, there are several additional considerations to keep in mind.

Market Research: Conduct in-depth market research to understand the target country's cultural, economic, and legal differences.
Regulatory Compliance: Ensure compliance with international trade regulations, customs, and import/export laws.
Cultural Sensitivity: Adapt your marketing and business practices to align with the cultural norms and preferences of the target market.
Localization: Consider adapting your products, services, and marketing materials to cater to local tastes and languages.
Risk Assessment: Evaluate the political, economic, and legal risks associated with operating in the target country. Develop risk mitigation strategies.

By carefully analyzing your competitors and crafting effective market entry and expansion strategies, you can position your business for success in both domestic and international markets.

Risk Assessment and Mitigation

Risk assessment and mitigation are crucial aspects of industry analysis and strategic planning. Identifying potential risks, assessing vulnerabilities, and implementing effective risk management strategies are essential for business continuity and success.

1. Identify Industry Risks

Market Risks: These risks pertain to factors such as changes in market demand, economic downturns, shifts in consumer preferences, and fluctuations in market prices. For example, the hospitality industry faced significant market risks during the COVID-19 pandemic, resulting in decreased travel and tourism .
Regulatory and Compliance Risks: Regulatory changes, compliance requirements, and government policies can pose risks to businesses. Industries like healthcare are particularly susceptible to regulatory changes that impact operations and reimbursement.
Technological Risks: Rapid technological advancements can disrupt industries and render existing products or services obsolete. Companies that fail to adapt to technological shifts may face obsolescence.
Operational Risks: These risks encompass internal factors that can disrupt operations, such as supply chain disruptions, equipment failures, or cybersecurity breaches.
Financial Risks: Financial risks include factors like liquidity issues, credit risk , and market volatility. Industries with high capital requirements, such as real estate development, are particularly vulnerable to financial risks.
Competitive Risks: Intense competition and market saturation can pose challenges to businesses. Failing to respond to competitive threats can result in loss of market share.
Global Risks: Industries with a worldwide presence face geopolitical risks, currency fluctuations, and international trade uncertainties. For instance, the automotive industry is susceptible to trade disputes affecting the supply chain.

2. Assess Business Vulnerabilities

SWOT Analysis: Revisit your SWOT analysis to identify internal weaknesses and threats. Assess how these weaknesses may exacerbate industry risks.
Financial Health: Evaluate your company's financial stability, debt levels, and cash flow. Identify vulnerabilities related to financial health that could hinder your ability to withstand industry-specific challenges.
Operational Resilience: Assess the robustness of your operational processes and supply chain. Identify areas where disruptions could occur and develop mitigation strategies.
Market Positioning: Analyze your competitive positioning and market share. Recognize vulnerabilities in your market position that could be exploited by competitors.
Compliance and Regulatory Adherence: Ensure that your business complies with relevant regulations and standards. Identify vulnerabilities related to non-compliance or regulatory changes.

3. Risk Management Strategies

Risk Avoidance: In some cases, the best strategy is to avoid high-risk ventures or markets altogether. This may involve refraining from entering certain markets or discontinuing products or services with excessive risk.
Risk Reduction: Implement measures to reduce identified risks. For example, diversifying your product offerings or customer base can reduce dependence on a single revenue source.
Risk Transfer: Transfer some risks through methods such as insurance or outsourcing. For instance, businesses can mitigate cybersecurity risks by purchasing cyber insurance.
Risk Acceptance: In cases where risks cannot be entirely mitigated, it may be necessary to accept a certain level of risk and have contingency plans in place to address potential issues.
Continuous Monitoring: Establish a system for continuous risk monitoring. Regularly assess the changing landscape and adjust risk management strategies accordingly.

4. Contingency Planning

Contingency planning involves developing strategies and action plans to respond effectively to unforeseen events or crises. It ensures that your business can maintain operations and minimize disruptions in the face of adverse circumstances. Key elements of contingency planning include:

Risk Scenarios: Identify potential risk scenarios specific to your industry and business. These scenarios should encompass a range of possibilities, from minor disruptions to major crises.
Response Teams: Establish response teams with clearly defined roles and responsibilities. Ensure that team members are trained and ready to act in the event of a crisis.
Communication Plans: Develop communication plans that outline how you will communicate with employees, customers, suppliers, and other stakeholders during a crisis. Transparency and timely communication are critical.
Resource Allocation: Determine how resources, including personnel, finances, and equipment, will be allocated in response to various scenarios.
Testing and Simulation: Regularly conduct tests and simulations of your contingency plans to identify weaknesses and areas for improvement. Ensure your response teams are well-practiced and ready to execute the plans effectively.
Documentation and Record Keeping: Maintain comprehensive documentation of contingency plans, response procedures, and communication protocols. This documentation should be easily accessible to relevant personnel.
Review and Update: Continuously review and update your contingency plans to reflect changing industry dynamics and evolving risks. Regularly seek feedback from response teams to make improvements.

By identifying industry risks, assessing vulnerabilities, implementing risk management strategies, and developing robust contingency plans, your business can navigate the complexities of the industry landscape with greater resilience and preparedness.

Industry Analysis Template

When embarking on the journey of Industry Analysis, having a well-structured template is akin to having a reliable map for your exploration. It provides a systematic framework to ensure you cover all essential aspects of the analysis. Here's a breakdown of an industry analysis template with insights into each section.

Industry Overview

Objective: Provide a broad perspective of the industry.
Market Definition: Define the scope and boundaries of the industry, including its products, services, and target audience.
Market Size and Growth: Present current market size, historical growth trends, and future projections.
Key Players: Identify major competitors and their market share.
Market Trends: Highlight significant trends impacting the industry.

Competitive Analysis

Objective: Understand the competitive landscape within the industry.
Competitor Identification: List direct and indirect competitors.
Competitor Profiles: Provide detailed profiles of major competitors, including their strengths, weaknesses, strategies, and market positioning.
SWOT Analysis: Conduct a SWOT analysis for each major competitor.
Market Share Analysis: Analyze market share distribution among competitors.

Market Analysis

Objective: Explore the characteristics and dynamics of the market.
Customer Segmentation: Define customer segments and their demographics, behavior, and preferences.
Demand Analysis: Examine factors driving demand and customer buying behavior.
Supply Chain Analysis: Map out the supply chain, identifying key suppliers and distribution channels.
Regulatory Environment: Discuss relevant regulations, policies, and compliance requirements.

Technological Analysis

Objective: Evaluate the technological landscape impacting the industry.
Technological Trends: Identify emerging technologies and innovations relevant to the industry.
Digital Transformation: Assess the level of digitalization within the industry and its impact on operations and customer engagement.
Innovation Opportunities: Explore opportunities for leveraging technology to gain a competitive edge.

Financial Analysis

Objective: Analyze the financial health of the industry and key players.
Revenue and Profitability: Review industry-wide revenue trends and profitability ratios.
Financial Stability: Assess financial stability by examining debt levels and cash flow.
Investment Patterns: Analyze capital expenditure and investment trends within the industry.

Consumer Insights

Objective: Understand consumer behavior and preferences.
Consumer Surveys: Conduct surveys or gather data on consumer preferences, buying habits , and satisfaction levels.
Market Perception: Gauge consumer perception of brands and products in the industry.
Consumer Feedback: Collect and analyze customer feedback and reviews.

SWOT Analysis for Your Business

Objective: Assess your own business within the industry context.
Strengths: Identify internal strengths that give your business a competitive advantage.
Weaknesses: Recognize internal weaknesses that may hinder your performance.
Opportunities: Explore external opportunities that your business can capitalize on.
Threats: Recognize external threats that may impact your business.

Conclusion and Recommendations

Objective: Summarize key findings and provide actionable recommendations.
Summary: Recap the most critical insights from the analysis.
Recommendations: Offer strategic recommendations for your business based on the analysis.
Future Outlook: Discuss potential future developments in the industry.

While this template provides a structured approach, adapt it to the specific needs and objectives of your Industry Analysis. It serves as your guide, helping you navigate through the complex landscape of your chosen industry, uncovering opportunities, and mitigating risks along the way.

Remember that the depth and complexity of your industry analysis may vary depending on your specific goals and the industry you are assessing. You can adapt this template to focus on the most relevant aspects and conduct thorough research to gather accurate data and insights. Additionally, consider using industry-specific data sources, reports, and expert opinions to enhance the quality of your analysis.

Industry Analysis Examples

To grasp the practical application of industry analysis, let's delve into a few diverse examples across different sectors. These real-world scenarios demonstrate how industry analysis can guide strategic decision-making.

Tech Industry - Smartphone Segment

Scenario: Imagine you are a product manager at a tech company planning to enter the smartphone market. Industry analysis reveals that the market is highly competitive, dominated by established players like Apple and Samsung.

Use of Industry Analysis:

Competitive Landscape: Analyze the strengths and weaknesses of competitors, identifying areas where they excel (e.g., Apple's brand loyalty ) and where they might have vulnerabilities (e.g., consumer demand for more affordable options).
Market Trends: Identify trends like the growing demand for sustainable technology and 5G connectivity, guiding product development and marketing strategies.
Regulatory Factors: Consider regulatory factors related to intellectual property rights, patents, and international trade agreements that can impact market entry and operations.
Outcome: Armed with insights from industry analysis, you decide to focus on innovation, emphasizing features like eco-friendliness and affordability. This niche approach helps your company gain a foothold in the competitive market.

Healthcare Industry - Telehealth Services

Scenario: You are a healthcare entrepreneur exploring opportunities in the telehealth sector, especially in the wake of the COVID-19 pandemic. Industry analysis is critical due to rapid market changes.

Market Size and Growth: Evaluate the growing demand for telehealth services, driven by the need for remote healthcare during the pandemic and convenience factors.
Regulatory Environment: Understand the evolving regulatory landscape, including changes in telemedicine reimbursement policies and licensing requirements.
Technological Trends: Explore emerging technologies such as AI-powered diagnosis and remote monitoring that can enhance service offerings.
Outcome: Industry analysis underscores the potential for telehealth growth. You adapt your business model to align with regulatory changes, invest in cutting-edge technology, and focus on patient-centric care, positioning your telehealth service for success.

Food Industry - Plant-Based Foods

Scenario: As a food industry entrepreneur , you are considering entering the plant-based foods market, driven by increasing consumer interest in health and sustainability.

Market Trends: Analyze the trend toward plant-based diets and sustainability, reflecting changing consumer preferences.
Competitive Landscape: Assess the competitive landscape, understanding that established companies and startups are vying for market share.
Consumer Behavior: Study consumer behavior, recognizing that health-conscious consumers seek plant-based alternatives.
Outcome: Informed by industry analysis, you launch a line of plant-based products emphasizing both health benefits and sustainability. Effective marketing and product quality gain traction among health-conscious consumers, making your brand a success in the plant-based food industry.

These examples illustrate how industry analysis can guide strategic decisions, whether entering competitive tech markets, navigating dynamic healthcare regulations, or capitalizing on shifting consumer preferences in the food industry. By applying industry analysis effectively, businesses can adapt, innovate, and thrive in their respective sectors.

Industry Analysis is the compass that helps businesses chart their course in the vast sea of markets. By understanding the industry's dynamics, risks, and opportunities, you gain a strategic advantage that can steer your business towards success. From identifying competitors to mitigating risks and formulating competitive strategies, this guide has equipped you with the tools and knowledge needed to navigate the complexities of the business world.

Remember, Industry Analysis is not a one-time task; it's an ongoing journey. Keep monitoring market trends, adapting to changes, and staying ahead of the curve. With a solid foundation in industry analysis, you're well-prepared to tackle challenges, seize opportunities, and make well-informed decisions that drive your business toward prosperity. So, set sail with confidence and let industry analysis be your guiding star on the path to success.

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How to Write an Effective Business Plan: Industry Profile

Treana wunsch.

December 7, 2022

Having an industry profile section in a business plan is essential for success. It serves to provide the reader with background information on the industry, along with its current trends and future projections. This section will help to assess whether or not an idea is feasible, as well as how competitive it may be in the marketplace.

The industry profile should include both qualitative and quantitative data. Qualitative data can illustrate points such as the current market share of competitors, product, price, promotion and distribution trends or any other relevant factors that may affect the business’s ability to succeed. Quantitative data consists of numerical figures like sales volume and growth rate of particular products within the industry over time.

Including this kind of information will help potential investors understand why your business should exist by highlighting its unique niche within the marketplace.

What is an industry?

An industry is an economic sector that produces goods and services. It is the driving force behind a country’s economy. Industries can range from large-scale enterprises with hundreds of employees to small, family-run businesses. As such, each industry has unique characteristics that must be taken into consideration when writing an effective business plan.

When researching an industry for your business plan, it’s important to understand the factors affecting its performance, including market trends and government regulations. Additionally, you should consider the competition in the market – both current players and potential new entrants – as well as customer habits and preferences. All this information will help you gain insight into how best to position your business within this particular industry in order to succeed.

Industry classification

When creating an industry profile, it’s important to understand the classification system used by experts in the field. This includes macro industries, subsectors, industries and even trade groups, each of which provides further detail on a company’s market.

The North American Industry Classification System (NAICS) is one of the most widely used systems for classifying businesses by type of activity and geographic location. It categorizes establishments based on their primary production process or product line and assigns them a six-digit code that uniquely identifies them within their sector. The NAICS also makes it easy to compare businesses across different sectors and regions by grouping similar companies together under broader categories such as transportation or manufacturing.

How to find your industry

Finding the right industry for your company is a crucial step in the process of writing an effective business plan. Understanding what industry you are entering and who your competitors are will help determine how to structure your plan and position yourself in the market. Knowing where to start can be challenging, so here are some tips on how to find your industry and create an effective business plan.

First off, research current trends in the market and identify areas that you believe have potential for growth or represent a good fit for your company’s products or services. Look at macroeconomic data from government sources such as the Bureau of Labor Statistics, as well as industry-specific reports from organizations like Forbes or Business Insider. Analyze these reports to determine which industries may offer more potential than others, then narrow down your choices by researching key factors such as demand, competition and capital requirements within those industries.

How to find your industry NAICS code

The first step in writing an effective business plan is to identify your industry and the associated North American Industry Classification System (NAICS) code. NAICS codes are used by governments, businesses, and other organizations to classify industries according to the type of economic activity they engage in. Knowing your industry NAICS code is essential for gathering information about your industry and its competitive landscape, as well as determining which regulations apply to you.

Fortunately, it’s easy to find out what your industry NAICS code is. To begin, visit the Statistics Canada website and use their searchable database of NAICS codes. You can also contact a government agency or trade association related to your industry for more help finding your specific NAICS code.

Financial Performance Data by Industry in Canada

Financial performance data by industry in Canada is an important factor to consider when writing an effective business plan. Knowing the key financial ratios specific to your industry will help you benchmark your performance, identify potential weak spots and develop strategies for growth. Different industries have their own unique financial metrics with which they measure success. It is important to understand these ratios and how they apply to you and your target market before writing a comprehensive business plan.

By analyzing the common financial trends of businesses within certain industries in Canada, you can gain valuable insight into how successful companies in that sector operate. Using this information, you can adjust your strategy accordingly so that it meets or exceeds the expectations of investors and other stakeholders involved with your venture. The ability to effectively identify industry-specific financial indicators gives businesses a competitive edge that can result in greater profitability over time.

You can find your industry’s financial performance here . Choose the location you want data from then choose ‘total revenue’ and ‘percentage’ and ‘search for an industry’ as your other options. Then type your NAICS code that you discovered under ‘Search for an industry’ and click on ‘search’.

Your options will come up below. Choose the appropriate option and ‘create report’.

If balance sheet data is available it will also be shown.

The lower portion of the report indicates the percentage of businesses that are profitable.

You can also do an internet search of the NAICS code to see what else comes up.

Industry codes help you to discover your specific industry and define the boundaries of that industry. Understanding the health of your industry and where the future of the industry may be going offers valuable insight into how successful your business could be. You can also measure your business performance against industry performance. All of this helps you to make better decisions for your business.

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Industry Lifecycle

Industry Lifecycle is an important concept for any business to understand and plan for. It is the process of a given industry maturing over time and passing through distinct stages of growth, decline, and eventual restabilization. Knowing the lifecycle of an industry can help you plan ahead by understanding where it is currently, what its likely future will be, and how to best capitalize on its strengths while minimizing weaknesses.

To write an effective business plan, an understanding of the industry’s current position in its lifecycle is essential. This knowledge will help you create realistic goals and strategies that are tailored to your specific market conditions.

This section should provide a comprehensive overview of the industry and its particular lifecycle. The lifecycle of an industry often determines how successful businesses in that sector will be and what strategies are best for them to pursue.

In order to determine the lifecycle of an industry, you must look at key factors such as trends in demand, competition from substitutes or new entrants into the market, technological advances, and changes in consumer preferences. It’s also necessary to assess potential risks within the sector including shifts in regulations or economic dips that could negatively impact performance. Additionally, you should consider how long the industry has been around and whether it’s likely to grow or decline over time.

The automotive industry is a good example of the industry lifecycle. It began with a period of introduction, followed by growth, then maturity and eventually decline. During the introduction phase, new technologies like the automobile were developed and brought to market. There was strong growth as the market for automobiles expanded. As the industry grew, it matured and reached a stable point where existing companies competed. Eventually, the industry declined as new technologies and sources of energy made it obsolete.

Industry History

It’s essential for aspiring entrepreneurs to have a basic understanding of the history of their chosen industry. Industry history is used to build an understanding of the current state of the market, as well as its potential for growth in the future. By studying past trends and developments in an industry, entrepreneurs can identify successful strategies that have been employed by previous businesses, enabling them to develop a comprehensive business plan that stands out from competitors. Moreover, they can use this information to gauge how quickly or slowly their venture may grow over time.

Industry Leaders

Industry Leaders are the heart of any successful business. Whether you’re launching a startup or expanding an existing business, understanding your industry and its leaders is essential for success. An effective business plan must include an industry profile to demonstrate comprehensive knowledge of the competitive landscape and identify strategies for establishing a foothold in the market.

An Industry Profile is a detailed analysis of your industry’s size, structure, growth rate, key players, trends and more. It begins with examining leading companies – their products/services; target markets; operations & financials; competitive advantages – and how they contribute to industry dynamics. Knowing who sets the standard in terms of quality, innovation & sustainability will also help evaluate customer preferences & overall satisfaction levels within the sector. Once identified, these insights can be used to craft actionable plans that position your company as a leader in its respective field.

Industry Threats

To create an accurate industry profile, you must carefully consider the various external factors that can potentially threaten your company’s operations. These threats may include changes in laws or regulations, economic conditions such as inflation or recession, competition from other businesses, technological advances, new entrants into the market, and customer preferences.

By analyzing these elements of your industry and assessing their potential impact on your business plan, you can better anticipate changes in the environment and develop strategies to minimize any adverse effects these threats might have on your company’s profitability.

Industry Predictions

Industry predictions can help businesses stay ahead of the curve and plan for the future. When researching your industry profile, it is essential to look at key economic indicators such as consumer spending habits, employment rates, and capital investments. Additionally, consider major disruptors like technological advancements or regulatory changes that may influence your market dynamics over time. By gaining a comprehensive understanding of these factors, you will be better equipped to make informed decisions when creating your business plan and developing strategies for growth.

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Industry associations.

Industry associations play an integral role in the development of a business plan. They provide industry professionals with information, resources, and contacts to help them create successful business plans and gain strategic insights into their industry. Furthermore, they can also help entrepreneurs identify potential customers and develop marketing strategies based on current industry trends.

The first step to utilizing an industry association is researching the available options and learning about their current activities. After finding one that fits the needs of your business plan, it’s important to join the organization so you have access to all the benefits they offer. Once you’ve joined, be sure to take advantage of any educational opportunities or events designed for members; these are excellent ways for entrepreneurs to network with other professionals in their field and learn more about specific trends related to their industry.

Industry Statistical Analysis

Industry statistical analysis is an important part of writing an effective business plan. Accurate and up-to-date industry data can provide invaluable insight into the current trends, potential risks, and opportunities in a particular market. Taking the time to research recent industry developments allows entrepreneurs to make more informed decisions regarding their business strategies going forward.

When conducting your own industry statistical analysis as part of a business plan, it’s important to look at both economic indicators and demographic trends for relevant market segments. Analyzing existing sales figures for similar businesses or products is also essential for understanding the size of the opportunity or assessing competitive threats. In addition, looking at various macroeconomic trends such as inflation rates or GDP growth can help inform your projections about future performance within the industry.

Putting it all together

Once you’ve gathered all your data, you’ll summarize it in your business plan. It may look like the following example:

As with any section of your business plan, this section required regular review and updating.

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How to Conduct an Industry Analysis

Female entrepreneur in a carpentry shop working on cutting a piece of wood. She has a firm understanding of her industry to grow her business.

8 min. read

Updated March 18, 2024

I bet you agree: You need to know the industry you want to start a business in, and the kind of business you want to start, before you can start it.

Industry analysis is part of good management. That’s not just for the business planning, but rather for business survival, beginning to end. Most of the people who successfully start their own business have already had relevant business experience before they start, most often as employees.

But in this article, I focus on how to consolidate and formalize that industry knowledge into a formal business plan .

Although all business owners need to know their industry, the documented details and explanations are mainly for when you’re writing a business plan you need to show to outsiders, like bank lenders or investors . You’ll need to do some industry analysis so you’re able to explain the general state of your industry, its growth potential, and how your business model fits into the landscape.

And if your business plan is more of an internal strategic roadmap, you should still be very sure—whether you have to prove it to others or not—that you know your market, even if you don’t do a formal industry analysis. Whether you’re a service business, manufacturer, retailer, or something else, you want to know your industry inside and out.

What to cover in your industry analysis

Whether you write it all out in a formal business plan or not, when you’re doing your industry analysis, you’re looking at the following:

Industry participants
Distribution patterns
Competition and buying patterns

Everything in your industry that happens outside of your business will affect your company. The more you know about your industry, the more advantage and protection you will have.

A complete business plan discusses:

General industry economics
Participants
Factors in the competition
And whatever else describes the nature of your business to outsiders

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A note on finding industry information

The internet has had an enormous impact on the state of business information. Finding information isn’t really the problem anymore, after the information explosion and the huge growth in the internet beginning in the 1990s and continuing in the 21st century.

Even 10 or 15 years ago, dealing with information was more a problem of sorting through it all than of finding raw data. That generality is truer every day. There are websites for business analysis, financial statistics, demographics, trade associations, and just about everything you’ll need for a complete business plan.

You should know who else sells in your market. You can’t easily describe a type of business without describing the nature of the participants. There is a huge difference, for example, between an industry like broadband television services, in which there are only a few huge companies in any one country, and one like dry cleaning, in which there are tens of thousands of smaller participants.

This can make a big difference to a business and a business plan. The restaurant industry, for example, is what we call “pulverized,” meaning that it, like the dry cleaning industry, is made up of many small participants. The fast-food business, on the other hand, is composed of a few national brands participating in thousands of branded outlets, many of them franchised .

Economists talk of consolidation in an industry as a time when many small participants tend to disappear and a few large players emerge. In accounting, for example, there are a few large international firms whose names are well-known, and tens of thousands of smaller firms. The automobile business is composed of a few national brands participating in thousands of branded dealerships, and in computer manufacturing, for example, there are a few large international firms whose names are well-known, and thousands of smaller firms.

Products and services can follow many paths between suppliers and users.

Explain how distribution works in your industry:

Is this an industry in which retailers are supported by regional distributors, as is the case for computer products, magazines, or auto parts?
Does your industry depend on direct sales to large industrial customers?
Do manufacturers support their own direct sales forces, or do they work with product representatives?

Some products are almost always sold through retail stores to consumers, and sometimes these are distributed by distribution companies that buy from manufacturers. In other cases, the products are sold directly from manufacturers to stores. Some products are sold directly from the manufacturer to the final consumer through mail campaigns, national advertising, or other promotional means.

In many product categories, there are several alternatives, and distribution choices are strategic.

Amazon made direct delivery a huge competitive advantage, especially in its earlier years. Doordash and competitors chose to be intermediaries between restaurants and customers, and several businesses offer prepackaged meal ingredients delivered with instructions for finishing the preparations in the consumers’ kitchens. Now major grocery chains offer grocery delivery. Red Box made a strategy of DVDs in kiosks. An entire industry of food delivery options gives consumers choices like restaurant meals or fresh meals ingredients being delivered. Many products are distributed through direct business-to-business (B2B) sales and in long-term contracts such as the ones between car manufacturers and their suppliers of parts, materials, and components. In some industries, companies use representatives, agents, or commissioned salespeople.

Technology can change the patterns of distribution in an industry or product category. The internet, for example, changed options for software distribution, books, music, and other products. Cable communication first, and more recently streaming, changed the options for distributing video products and video games. Some kinds of specialty items sell best with late-night infomercials on television, but others end up working on the web instead of television.

Distribution patterns may not be as critical to most service companies, because distribution is normally about physical distribution of specific physical products such as a restaurant, graphic artist, professional services practice, or architect.

For a few services, the distribution may still be relevant. A phone service, cable provider, or an internet provider might describe distribution related to physical infrastructure. Some publishers may prefer to treat their business as a service, rather than a manufacturing company, and in that case distribution may also be relevant.

It is essential to understand the nature of competition in your market. This is still in the general area of describing the industry or type of business.

Explain the general nature of competition in this business, and how the customers seem to choose one provider over another:

What are the keys to success?
What buying factors make the most difference—is it price? Product features? Service? Support? Training? Software? Delivery dates?
Are brand names important?

In the computer business, for example, competition might depend on reputation and trends in one part of the market, and on channels of distribution and advertising in another. In many business-to-business industries, the nature of competition depends on direct selling, because channels are impractical.

Price is vital in products competing with each other on retail shelves, but delivery and reliability might be much more important for materials used by manufacturers in volume, for which a shortage can affect an entire production line.

In the restaurant business, for example, competition might depend on reputation and trends in one part of the market, and on location and parking in another.

In many professional service practices, the nature of competition depends on word of mouth, because advertising is not completely accepted. Is there price competition between accountants, doctors, and lawyers? How powerful are the insurance decisions in medicine, like in or out of network? How do people choose travel agencies or florists for weddings? Why does someone hire one landscape architect over another? Why choose Starbucks, a national brand, over the local coffee house? All of this is the nature of competition.

The key to your specific industry analysis is a collection of decisions and educated guesses you’ll probably have to make for yourself. There are few pat answers. Maybe it’s easy parking, a great location, great reviews on Amazon or Yelp, or recommendations on social media. You can’t necessarily look this up. It’s the kind of educated guessing that makes some businesses more successful than others.

Main competitors

Do a very complete analysis of your main competitors. Make a list, determining who your main competitors are. What are the strengths and weaknesses of each?

Consider your competitors’:

Financial position
Channels of distribution
Brand awareness
Business development
Technology, or other factors that you feel are important
In what segments of the market do they operate? What seems to be their strategy? How much do they impact your products, and what threats and opportunities do they represent?

Finding competitive information

Competitive research starts with a good web search. Look up competitors’ websites and social media, then search for mentions, reviews, announcements, and even vacancies and job search information. An amazing array of competitive information is posted in plain sight, where anybody can find it.

From, there, for a good review of additional sources of information, I suggest Practical Market Research Resources for Entrepreneurs , also here on Bplans.

Competitive matrix

A lot of businesses organize competitive analysis into a competitive matrix. The standard competitive matrix shows how different competitors stack up according to significant factors.

Some people also use a SWOT analysis to think about competition in terms of opportunities and threats, the “OT” of SWOT. Opportunities and threats are generally taken as externals, which would include competition, so it’s valuable to run a SWOT analysis on your business to help figure this out.

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Tim Berry is the founder and chairman of Palo Alto Software , a co-founder of Borland International, and a recognized expert in business planning. He has an MBA from Stanford and degrees with honors from the University of Oregon and the University of Notre Dame. Today, Tim dedicates most of his time to blogging, teaching and evangelizing for business planning.

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What Is an Industry Analysis and Trends Business Plan?

An industry analysis and trends business plan is a component of a business plan that provides a comprehensive insight into industry conditions and trends. 3 min read updated on February 01, 2023

An industry analysis and trends business plan is a component of a business plan that provides a comprehensive insight into industry conditions and trends that can impact a company's success and growth. A thorough analysis of your industry and its trends can give you and other people a clearer idea of the feasibility and relevance of your business idea or goals.

Elements of a Business Plan

There are many different types of business plans. When you are creating your business plan, the information you choose to include will depend on your audience and personal preferences, as well as the questions you wish to answer and problems you seek to solve. While business plans may vary greatly, most of them contain the following elements:

Executive summary
Business description
Analysis of business environment analysis
Industry analysis
Market analysis
Competitive analysis
Marketing plan
Management plan
Operations plan
Financial projections
What Is an Industry Analysis?

An industry analysis enables you to gain a better understanding of the industry and market in which you will be conducting business. By conducting an industry analysis before you start writing your business plan , you will be able to:

Identify industry trends, such as potentially problematic aspects of the industry
Identify trends and opportunities in products and services
Calculate capital requirements
Determine business risks and find ways to reduce them

An industry analysis must be specific to the industry in which you are conducting or are planning to conduct business. With the information you obtain from the analysis, you can devise a long-term strategy to mitigate risks and take full advantage of growth opportunities.

It is important not to confuse an industry analysis with a competitor or market analysis. An industry analysis seeks to describe the products or services offered in a specific industry and the boundaries of the marketplace in relation to economic, political, and regulatory issues. In other words, it defines the scope of the marketplace. A market analysis , on the other hand, helps you determine whether or not a market within your industry will be profitable for your products or services.

Conducting an Industry Analysis

The most widely used method for evaluating any industry was devised by Michael E. Porter from Harvard University. This method can help you create an effective strategy for competing in your industry. According to Porter, all industries and markets are influenced by five forces, which include:

Ease of entry — Companies that are already operating in an industry will enjoy a competitive advantage over newcomers. However, their profits will be reduced unless they find a way to slow down or block the new entries. As for new businesses, they will face a variety of barriers, including government regulations, patents and copyrights, and customer loyalty.
Suppliers' power — Suppliers of materials, products, or services can have a significant impact on a business' ability to compete. In the event that there are few suppliers offering the products or materials or few alternative products, the suppliers have the power to dictate quantities, prices, and delivery times for companies that have no choice but to buy from them.
Buyers' power — In an industry where buyers can choose from many competing products, consumers will have strong bargaining power. This can affect the ability of a company to price its products or services without being afraid of losing customers.
Availability of alternative products — In the situation where two businesses with similar products are competing within an industry, both of them will benefit as their marketing efforts will generally increase demand for their products. However, their market share will be reduced if there is another company selling a different kind of products that can serve as a substitute for theirs.
Competitive rivalry — Competitive rivalry takes into account the number of competitors present in a particular industry, as well as their relative strength. In an industry where many companies are selling similar products, there is little opportunity for one company to control consumers' or suppliers' tendency to go elsewhere.

There are many free industry analysis tools and resources available to business owners who are preparing to create a business plan, such as:

Securities and Exchange Commission
U.S. Census Bureau
Hoover's Online
Thomas Register
Library of Congress Legislative Information
Websites of trade associations and companies

If you need help creating an industry analysis and trends business plan, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.

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Industry analysis: why it’s important & how to analyze an industry.

Conducting an industry analysis is the best way to understand your competition and any opportunities in the market.

Think about a time when you put all your energy and effort into something, only for someone else to do it better or do it first. It’s discouraging, isn’t it? You then think back through your process to identify where you went wrong.

Did you overlook some external factors? Were you not up-to-date with industry trends? The degree of competition is important to recognize when developing a competitive strategy.

It’s always easier to look back and see what went wrong. You could have missed technological factors or competitive factors. Or your business plan and competitive analysis might not have taken into account the market size.

So how do you figure out the degree of competition and use that information to set your business apart? You perform an industry analysis! Here’s everything you need to know.

Here’s What We’ll Cover:

What Is an Industry Analysis?

The importance of analyzing an industry in business, what you need for industry analysis , different methods to perform industry analysis, key takeaways .

There’s no difference if you have been in business for decades or you’re new to the market. Performing an industry analysis is important to better understand your niche. Essentially, industry analysis is a look into your market to see how your business compares to your competition.

An industry analysis looks into every element of your business and how it lines up with others. It’s important to fully understand your strengths and weaknesses to identify any opportunities or threats. When you know your market conditions and any financial factors, you get ahead of your competition.

By taking a look into what makes your industry tick you get a better sense of your company’s position. Industry analysis can assess demand and supply and technological changes. It can also find external factors that influence the competition.

You’re able to better forecast your growth rate and plan for evolving industry dynamics. The result is the best possible strategy to increase your market power. If you don’t take the steps to understand how you stack up compared to your competition and gain a competitive edge, they definitely will.

Conducting an industry analysis requires more than doing a simple search. You need to find and understand any competitive advantages, and there are a few different ways you can do it.

Some businesses hire outside firms to use mathematical forecasting for quantitative analysis. Others use qualitative analysis to come to make business decisions based on the information they gather. Whatever route you go, it will include specific market research and competitive analysis.

Here is everything you need to know to conduct your own in-depth industry analysis and get ahead of the competition!

Understand the competition:

When you know your competitor’s products and services, you know how you can differentiate
Are you targeting similar audiences?
What products and services are your competition offering?

Use market research:

Look into the demand of your market, the market size, and any economic indicators
Where do your customers live? How saturated is the market? What do your customers usually pay for similar products and services?

Analyze the data that you have collected:

Knowing your own strengths and weaknesses is important. But knowing the strengths and weaknesses of your competition is equally as important
Assess what your competition offers and compare it against your own
Are the features and benefits that you offer meeting the demands and needs of your consumer base?

Evaluate your position in the market:

What’s your market share compared to your competitors?
Understand if you need to adjust the price of your product or service
Find any advantages that you have and identify possible threats in the future
Similarly, find any weaknesses your company has and address how you can turn them into advantages

When you compile all of this information into an industry analysis, you can make better business decisions moving forward. You can identify any gaps in the market and how you can fill them. Plus, knowing what your competition is doing is the best way to know how to beat them.

The points outlined above are an excellent starting block to understand your business and where it stands in the market. But there are some industry research and analysis models designed to take it even further.

Competitive Forces Model (Porter’s 5 Forces)

The main purpose of using this model is to formulate a strategy and understand the competitive landscape. It consists of the Five Forces of Analysis.

Industry rivalry and the amount of competition in the market
The threat of new products or services entering the market
The bargaining power of buyers and how they can influence pricing
The bargaining power of suppliers and how they can limit your profit
The threat of new competition potentially entering the market

SWOT Analysis

The SWOT Analysis is commonly used across many different industries. It represents identifying and understanding any strengths, weaknesses, opportunities, and threats.

Identify the strengths of your business and what currently sets up apart from the competition
Recognize the weaknesses that may be present and where you have any disadvantages compared to your competitors
Find the opportunities that are available in the market and how you can develop a strategy to increase profitability
Determine any threats to your business, both internal and external. How could they affect the way you operate, your profits, or overall integrity?

It’s one thing to find information and conduct an industry analysis, but it’s another thing to understand the data you collect. Markets are constantly fluctuating and can change at the snap of a finger. It can be overwhelming!

But the power and influence that you can generate from understanding how your industry and competition work can set you apart. You will be more knowledgeable and better prepared to leverage opportunities and stop any threats in their tracks.

Find more relevant articles for your small business on our resource guide .

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What Are Porter's Five Forces?
Understanding Porter's Five Forces

Competitive Measures

Applying the model, critiques of the five forces, the bottom line.

Fundamental Analysis

Porter's Five Forces Explained and How to Use the Model

The fundamentals you need to analyze an industry's weaknesses and strengths

Gordon Scott has been an active investor and technical analyst or 20+ years. He is a Chartered Market Technician (CMT).

What Are Porter's Five Forces?

Michael Porter's five-force strategic analysis model, introduced in a 1979 article published in the Harvard Business Review , remains a fundamental tool for strategic analysts plotting the competitive landscape of an industry. In a bid to mirror the complexity real strategists would face while keeping their strategic analysis manageable, Porter set out five forces at play in a given industry: internal competition, the potential for new entrants, the negotiating power of suppliers, the negotiating power of customers, and the ability of customers to find substitutes. Below, we take you through each of Porter's five forces, detail the significant critiques of his approach, and show how to apply the model to specific markets.

Key Takeaways

Porter's five forces are used to identify and analyze an industry's competitive forces.
The five forces are competition, the threat of new entrants to the industry, supplier bargaining power, customer bargaining power, and the ability of customers to find substitutes for the sector's products.
The model guides businesses in determining the intensity of competition and potential profitability within their market, helping them better understand where power lies in their sector.
Porter's model was meant to critique "perfectly competitive" business models, unlike real-world markets where competitors aren't just rivals and firms in specific industries tend to rise and fall together.
Criticisms mounted against the model include that it's too static, doesn't speak to the advantages or problems of specific companies, doesn't account enough for collaborative business models, and doesn't apply as well to quick-changing markets.

Strategic analysis at the time of Porter's article tended not only to love acronyms (SWOT, PEST, PESTEL, BCG Matrix, ETPS, etc.) but also models focused on the internal dynamics of individual companies. While it would be unfair to suggest they ignored the competitive environment companies face, they were typically vague while doing so—e.g., the "opportunities" and "threats" of SWOT analysis were too "macro" for many dealing with the challenges of specific industries.

Porter's 1979 article was also a broadside against the theoretical models found in the curriculums of the major business schools, where future strategists dealt with a "perfectly competitive" market characterized by equilibrium and no specific firm influencing prices—a model they were unlikely to find in the real world.

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Understanding Porter's Five Forces

The first sentence of Porter's 1979 article could hardly be less controversial: "The essence of strategy formulation is coping with competition." It's the following sentence that, in its understated way, would prove far more consequential: "Yet it is easy to view competition too narrowly and too pessimistically." Rather than viewing competition narrowly as rivalry among existing competitors, his first force, Porter expanded the concept to include four others: the bargaining power of suppliers and buyers, the threat of new entrants, and the threat of substitute products or services. Let's take these in turn.

1. Competitive Rivals

Porter's first force is what we usually mean when discussing business competition. We think of Pepsi and Coca-Cola for soft drinks, Apple and Samsung for smartphones, Nike and Adidas for sneakers, and Ford and General Motors for autos. Indeed, some of these rivalries are so influential that consumers split almost culturally among those who have an iPhone, drive a Ford, or prefer Netflix to Hulu. Thus, it's no accident that we also consider business competition chiefly a war among rivals.

Such rivalries can lead to price wars, high-priced marketing battles, and races for slight advances that could mean a competitive advantage. These tactics can stimulate companies to make ever better products but also erode profits and market stability. Several factors contribute to the intensity of competitive rivalry in an industry:

The number of competitors : The more competitors in an industry, the more fierce the rivalry, each fighting for scraps of market share.
Industry growth : In an expanding industry, competition is usually less dramatic because the market is growing so fast that competitors have little need to fight for customers—think of the automobile industry of the early 20th century and the dot-com boom of the late 1990s. However, in a stagnant or declining industry, competition can be ferocious as firms fight for a larger piece of a shrinking pie, such as in the global coal mining or print media industries of today.
Similarities in what's offered : When the products or services in a market are awfully similar (think of the lower page of results in any Amazon product search), competition tends to be intense because customers can easily switch. However, if a company offers a unique product or service or has earned brand loyalty, this can reduce competitive rivalry. Apple, Inc. ( AAPL ) comes to mind in tech goods, just as Rao's Italian sauces or King Arthur flour do in your supermarket aisles, each charging a higher price given its style, taste, or whatever makes it unique.
Exit barriers : When it's difficult or costly for companies to leave the industry due to specialized assets, contractual obligations, or emotional attachment, they may choose to stay and compete, even if the market's prospects grow dimmer by the day. The airline industry is a classic example. Airlines have high costs for their assets, contractual obligations (leasing agreements and labor contracts), and regulatory requirements, which means that when airlines face a shrinking market—or even an unprofitable route—they can't retreat from the market quickly.
Fixed costs : Porter notes that if an industry has high fixed costs, companies have a "strong temptation" to cut prices rather than slow production when demand slackens. Paper and aluminum manufacturing are two good examples that Porter gives.

2. Potential for New Entrants in an Industry

Industries where new firms can enter more easily almost always have lower profit margins, and the firms involved each have less market share. The sector for local restaurants has relatively low entry requirements: there aren't significant investments or regulatory hurdles to surmount before opening to the public. Thus, it's also the case that your favorite restaurant may not stay open for long, given the hypercompetitive environment and constant entrance of new restaurants opening.

Here are factors in measuring how much new entrants threaten an industry:

Economies of scale : Industries where large-scale production leads to lower costs face less of a threat from new entrants. New firms would need to achieve a similar size to compete on price, which might be difficult or costly.
Product differentiation : When existing firms have strong brand identities or customer loyalty, it's harder for new entrants to gain market share, reducing the threat of entry.
Capital requirements : High startup costs for equipment, facilities, etc., can deter new entrants. For example, starting a car manufacturing business requires significant investment, so until Tesla Inc.'s ( TSLA ) growth in the early 2010s, Americans from the 1950s could have named the major U.S. car brands of the early 2000s.
Access to distribution channels : If existing firms control the distribution channels —retail stores, online platforms, cable infrastructure, etc.—then new entrants would need to find a way to replicate that structure while competing with the established firms on price, a tricky proposition.
Regulations : Licenses, safety standards, and other regulatory standards can create barriers, making it too ungainly or costly for new firms to enter the market. Examples would include those looking to build new hotels in downtown areas or supply power to a region.
Switching costs : If it's costly or difficult for customers to switch from existing firms to new entrants, the threat of entry is lower.

3. Supplier Power

Suppliers are powerful when they are the only source of something important that a firm needs, can differentiate their product, or have strong brands. When the power of suppliers in an industry is high, this raises costs or otherwise limits the resources a firm needs. Here are some factors used to measure the supplier power of an industry:

The number of suppliers : When few firms can give a company something it needs to stay in business, each has greater negotiating power. They can raise prices or reduce quality without fear of losing business.
Uniqueness : If a supplier provides a unique product or it's not easy to find a substitute, it is more dominant. Businesses can't easily switch to another supplier.
Switching costs : If it's costly or time-consuming to switch suppliers, then they have more power. Businesses are less likely to switch, even if prices increase.
Forward integration : If suppliers can move into the buyer's industry, they have more power. They already have access to the necessary supplies, making it difficult for their former buyers to compete once they decide to enter the market themselves.
Industry importance : Some sectors are tightly intertwined, such as automotive suppliers and the major auto companies or the semiconductor and tech industries, which can balance the power between the suppliers and those in the sector. This is because the supplier needs these buyers to do well so that it can, too. When a supplier can just as easily sell its products elsewhere, that gives it a great deal more power.

4. Customer Power

When customers have more strength, they can exert pressure on businesses to provide better products or services at lower prices. This force intensifies under certain conditions:

The number of buyers : The fewer the buyers, the more they have power. In sectors like aerospace manufacturing, each major airline, the industry's customers, has significant leverage in negotiations and can demand favorable terms because the sellers depend on their business.
Purchase size : Just like you head off to the big box stores to buy in bulk for a cheaper per-unit cost on whatever now fills up your garage, major retail chains like Walmart Inc. ( WMT ) buy in large volumes and can negotiate better terms and discounts.
Switching costs : In industries like telecommunications, where it's easy for consumers to switch providers, companies such as Verizon Communications, Inc. ( VZ ) and AT&T Inc. ( T ) have to offer competitive terms.
Price sensitivity : In the fast-fashion industry, where customers are highly price-sensitive, brands must keep their prices low to attract cost-conscious consumers.
Informed buyers : In many sectors, the customers are savvy, know the competitive terrain well, and thus can negotiate better prices.

Porter chose the metaphor of forces because they aren't static, so business must constantly adjust their strategies as forces in an industry change.

5. Threat of Substitutes

When customers can find substitutes for a sector's services, that's a major threat to the companies in that industry. Here are some ways that this threat can be magnified:

Relative price performance : If the cost of a substitute is lower and its performance is comparable or better, customers are likely to switch to the substitute. For instance, streaming services like Netflix became a substitute for traditional cable TV, providing a lower price that soon threatened the cable industry.
Customer willingness to go elsewhere : The threat is high if buyers find it easy to switch to a substitute. For example, in the early 2010s, customers found switching from taxis to ride-sharing apps like Uber or Lyft cheaper and easier.
The sense that products are similar : If buyers perceive that there are few differences between your product and a substitute, even if there are, they may be more likely to switch.
Availability of close substitutes : Though this sounds the same as the last bullet point, you have to strategize differently around it. There are times when potential substitutes are very different from a company's products but consumers still treat them as the same. But in other cases, there are genuinely similar products in the market and the threat of substitutes is high, such as between brand-name and generic medications.

When published, Michael Porter's framework marked a departure from the then-dominant models of business strategy, steeped in classic competition theory. Those models, still echoed in Economics 101 textbooks, rested on several key, if questionable, assumptions: markets as arenas for many small firms with no significant market power, homogeneous products, perfect information symmetry, and no barriers to market entry or exit. While helpful for learning basic principles, this idealized view could be taken to an extreme when strategizing with neatly constructed supply and demand curves, assuming, for instance, new market entrants would stabilize rising prices by increasing supply.

Business strategists need to deal with sectors where information asymmetry, product differentiation, and significant entry and exit barriers are common. Firms do have some control over prices, contradicting classical assumptions. In short, where economists assumed most markets acted like the model, for Porter, most firms are in industries with entrenched interests and different supplier and customer relations. They need strategies for dealing with anything but perfect competition.

Mild-to-Intense Competition

Porter's five forces come together in different ways for any given sector. He labeled industry competition as ranging from "intense" to "mild," with profits harder to achieve as the intensity in a sector rises. In intensely competitive industries, all or most of the five forces have a strong influence.

The fast food industry is Porter's own example, which still remains the case. In this sector, there's a fierce rivalry among established players like McDonald's and Burger King, high bargaining power for suppliers and customers, and a relentless threat of new entrants and substitutes, all of which means profits are constantly getting squeezed for anyone in the sector.

Meanwhile, in "mild" industries, such as commercial aircraft manufacturing, there are weaker forces. Here, low supplier bargaining power, a minimal threat of new entrants, and a lack of direct substitutes (like commercial aircraft for long-distance travel) help form a sector more conducive to higher profits.

Since his 1979 Harvard Business Review article, Porter has published many books on strategic analysis, including works where he has expanded on his five-force model. He's also become very concise in providing the specific steps in performing an industry analysis:

Define the industry : The process begins with a clear description of the industry, helping you to focus your analysis.
Identify the key players : Specify and group the major actors in the sector into strategic categories based on relevant criteria.
Assess the strategic strengths : This means evaluating the firm and its industry to determine the better and worse strategies that can be applied.
Analyze the industry structure : This involves examining the overall structure of the industry, particularly the factors that influence how profitable it is.
Evaluating the competitive forces : Only once you've done the above does Porter advise doing a detailed analysis of the five competitive forces, assessing their positive and negative affects, and then looking forward to any changes in these forces ahead.
Identify the factors you have some control over : Here, you want to pinpoint aspects of the industry structure that could be influenced by competitors, new market entrants, or your firm. In sum, what can be changed?

Porter’s model helped reframe the understanding of competition. It wasn’t confined to direct rivals but extended to suppliers and customers—traditionally viewed in a transactional light. Suppliers, especially those with unique resources or enjoying a monopoly, could dictate terms, lower profits, or, in extreme cases, forward-integrate into the buyer’s industry. Customers, too, wield power, especially when buying in bulk or when they can just go elsewhere quickly or choose to bypass companies for in-house products.

But the model has its pitfalls . For example, many have critiqued the model’s emphasis on sector affiliation. Porter concentrates on industrywide forces, which can sideline an individual company’s unique strategies and advantages. This industry-centric view may not fully capture how distinct company characteristics can change the game, not just play within an industry’s preset rules.

The model assumes clear lines among sectors, which may not be tenable given the increasingly blurred lines in today’s business world, where companies are simultaneously in several sectors. Industries are no longer isolated silos; instead, they often intersect and interact, leading to a far more complex environment than the model suggests.

Porter’s five-force model has also been critiqued for not adequately addressing the role of partnerships and collaboration. While Porter certainly entertained a competitive model where rivalry wasn’t just a war to the death, the problem is that he didn’t go far enough. In an interconnected global economy, alliances and cooperative strategies are often as pivotal to success as having a competitive advantage, a factor that the model doesn’t explicitly consider.

Another critique that can be filed under “going in the right direction but not far enough” is that the model is too static and fails to account for industries with rapid changes in technology and consumer preferences. While effective in stable sectors, critics say it doesn’t apply well to industries marked by fast-paced innovation and shifting demand.

Most strikingly, Porter’s model generalizes competition, implying a seemingly uniform industry structure for every market. This might overlook the unique competitive scenarios in different sectors and the increasing importance of the nontraditional strategies involved in digital transformation and platform-based competition.

How Does Porter's Five Forces Differ from SWOT Analysis?

Both are strategic planning tools, but they serve different purposes. The five-force model analyzes the competitive environment of an industry, looking at its intensity and the bargaining power of suppliers and customers. SWOT analysis, meanwhile, is broader and assesses a company's internal strengths and weaknesses as well as its external opportunities and threats. It can assist in strategic planning by pinpointing areas where the company excels and faces obstacles, helping to align the company's strategy with its internal resources and prospects in the market while mitigating its vulnerabilities and external challenges.

How Can Porter's Five Forces Address the Affects of Globalization on an Industry?

Porter's model has been used to analyze how globalization affects industry competition. For instance, globalization lowers barriers to entry in specific industries, intensifying the threat of new entrants from different regions. It can also expand the pool of potential substitutes and alter the power dynamics with suppliers and customers worldwide. While Porter and others were doing this analysis for industries facing global competition decades ago, it's still applicable to sectors undergoing this process in the 2020s.

How Does Porter's Five-Force Model Apply to the AI Sector?

Using the model, we would begin by looking at the competitive rivalry. The AI sector is marked by high competition with key players ranging from tech giants to small startups. Rapid advances mean companies have to move quickly simply to maintain relevance. We would then need to gauge the power of suppliers of data sets and specialized hardware, which have ample power since AI firms rely heavily on these resources.

Moving to consumers, we would need to review the needs of individual consumers and whether larger companies can force AI firms to negotiate better services and prices for them. The field of AI has been attracting many new entrants, but there are significant barriers to entry, including high initial research and development costs. Lastly, the threat from the last force, the possibility of substitutes, depends on what a firm wants to do with its AI-based technology. The more complicated the tasks the AI is given, the more likely other goods and services can't substitute for it.

Porter's five-force model sets out essential criteria for considering a company's competitive landscape: the power of suppliers and buyers, the threat of new entrants and substitutes, and competitive rivalry. While the economic terrain has evolved significantly since the 1970s and Porter has updated his work ever since, the principles underlying Porter's model remain current. It's still the case that companies don't rise and fall on their portfolio of products alone but are jockeying with others in industries that have their own logic and structural forces at play. Today, while the five-force model may require adapting it to rapid technological change and the importance of collaboration across many industries, it's a reliable way to help guide companies needing to navigate industry-specific challenges in their competitive strategy.

Michael Porter. " How Competitive Forces Shape Strategy. " Harvard Business Review . March-April 1979. Pages 137-145.

J. Ateljević, et al. " Business Strategy and Competitive Advantage: A Reinterpretation of Michael Porter's Work ." Taylor & Francis Group, 2023. Pages 55-80.

Michael Porter. " On Competition: Updated and Expanded Edition ." Boston: Harvard Business Review Press, 2008.

M. Kunc. " Strategic Analytics: Integrating Management Science and Strategy ." Newark: John Wiley & Sons, 2018. Pages 80-85.

A. Aliekperov. " Creating Business and Corporate Strategy: An Integrated Strategic System ." Milton: Taylor & Francis Group, 2021. Pages 29-35.

J. Ateljević, et al. " Business Strategy and Competitive Advantage: A Reinterpretation of Michael Porter's Work ." Taylor & Francis Group, 2023. Pages 31-34.

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Monday, January 08, 2024

The essence of industry in a business plan.

When it comes to developing a comprehensive business plan, understanding the industry in which your business operates is of utmost importance. The industry analysis provides insights into the market dynamics, competition, trends, and growth opportunities. By delving into the industry details, you can make informed decisions, identify potential risks, and align your strategies effectively. This article sheds light on the significance of the industry component in a business plan.

Introduction, defining industry, why industry analysis matters, key components of industry analysis, gaining competitive insights, future industry trends, understanding growth opportunities.

In this section, we introduce the concept of industry analysis and explain why it is a critical aspect of a business plan.

Here, we define the term "industry" in the context of business plans and highlight its relevance.

An industry, within the context of a business plan, refers to a specific sector or segment of the economy in which a company operates or plans to operate. It encompasses all businesses involved in the production or delivery of similar goods or services.

Importance of Defining the Industry

Defining the industry is crucial in a business plan as it helps provide a clear understanding of the market dynamics, competitive landscape, and target customer base. It assists in analyzing market trends, identifying growth opportunities, and assessing potential risks and challenges that may impact the business.

Identifying the Industry

When defining the industry in a business plan, it is important to consider the following factors:

Product or Service: Determine the specific product or service your company offers and identify the industry associated with it.
Market Research: Conduct market research to gain insights into the target market, its size, growth potential, and customer needs.
Competition: Identify key competitors operating in the same industry and analyze their strengths, weaknesses, and market share.
Industry Analysis: Assess the overall industry trends, market conditions, regulations, and technological advancements that can impact your business.

Describing the Industry

In the business plan, provide a concise description of the industry by highlighting its characteristics, potential growth prospects, and key factors influencing its dynamics. This includes market size, industry growth rate, customer demographics, purchasing behavior, and any significant changes or innovations within the industry.

In conclusion, accurately defining the industry in a business plan helps to set the foundation for the business's overall strategy, market positioning, and growth objectives. It enables the entrepreneur and potential investors to better understand the competitive landscape and make informed decisions regarding business development and sustainability.

Understanding why industry analysis is crucial helps entrepreneurs identify its impact on decision-making processes.

In a business plan, industry analysis plays a crucial role in understanding the external factors that can impact a company's success. Industry analysis refers to the assessment of the overall business environment, market conditions, and competition that exist within a particular industry.

An industry, in the context of a business plan, is a group of companies or organizations that are involved in similar types of activities, offer similar products or services, and target similar customers. It represents a specific sector or market segment in the overall economy.

Industry analysis matters in a business plan for several reasons:

1. Identifying Market Trends

Industry analysis helps entrepreneurs identify the latest trends, innovations, and developments in their industry. This understanding allows businesses to adapt their strategies accordingly and stay ahead of the competition. By analyzing industry trends, companies can identify potential opportunities for growth and expansion.

2. Assessing Market Size and Potential

An industry analysis helps businesses evaluate the size of their target market and estimate its growth potential. Understanding the market size is crucial for determining the revenue potential and viability of a business idea. It also aids in setting realistic sales and growth targets.

3. Evaluating Competition

By conducting an industry analysis, businesses can gain insights into their competitors. This includes identifying direct and indirect competitors, understanding their strengths and weaknesses, and analyzing their market share. Understanding the competitive landscape is essential for developing effective marketing strategies and positioning the business to stand out in the market.

4. Assessing Risks and Opportunities

Industry analysis helps identify potential risks and opportunities within the business environment. It allows businesses to assess the factors that could impact their operations, such as regulatory changes, technological advancements, or shifts in consumer preferences. This awareness enables companies to develop strategies to mitigate risks and leverage opportunities.

In conclusion, industry analysis is a critical component of a business plan as it provides valuable insights into the external factors that can affect a company's success. By conducting a thorough industry analysis, businesses can make informed decisions, develop effective strategies, and position themselves for long-term success in their chosen industry.

In this section, we explore the vital components that make up an effective industry analysis, such as market size, growth rate, and customer demographics.

In a business plan, the industry refers to the sector or market in which a company operates. It provides an overview of the larger environment in which the business operates and highlights the key characteristics, trends, and competitive factors that impact the industry.

An industry analysis helps entrepreneurs understand the current state of the industry and its potential opportunities and challenges. By examining key components of industry analysis, businesses can gain insights into market conditions, customer behavior, and the competitive landscape. This information is crucial for making informed business decisions and developing effective strategies to succeed in the market.

Key Components of Industry Analysis:

1. Market Size and Growth: Understanding the current and projected size of the market is essential. This includes examining the number of customers, potential revenue, and the rate at which the market is expected to grow.

2. Market Segmentation: Identifying different customer segments within the industry helps businesses tailor their products or services to specific target markets, leading to better customer satisfaction and competitive advantage.

3. Customer Behavior: Analyzing consumer preferences, needs, and purchasing patterns provides insights into what drives customers' buying decisions. This information helps businesses design effective marketing campaigns and develop products or services that align with customer demands.

4. Competitor Analysis: Assessing the competitive landscape allows businesses to identify direct and indirect competitors and understand their strengths, weaknesses, and market share. This knowledge helps businesses position themselves strategically and differentiate their offerings.

5. Regulatory Environment: Understanding industry regulations and compliance requirements is crucial for ensuring legal and ethical business operations. Compliance with regulations also helps maintain customer trust and avoid legal issues.

6. Technology and Innovation: Examining technological advancements and trends within the industry allows businesses to stay updated and adapt to changing consumer preferences and market demands. Adopting innovative technologies can provide a competitive edge.

By incorporating these key components into the industry analysis, businesses can effectively evaluate market opportunities, understand industry dynamics, and make informed decisions to enhance their chances of success in their business plans.

Discover how industry analysis assists businesses in gaining valuable insights into their competitors' strategies, strengths, and weaknesses.

In a business plan, understanding the competitive landscape of the industry is crucial for success. Gaining competitive insights allows businesses to identify their strengths and weaknesses, anticipate market trends, and develop effective strategies.

Why Are Competitive Insights Important?

Competitive insights help businesses make informed decisions. By analyzing the competition, companies can identify their unique selling points and position themselves in the market. This analysis also helps businesses to understand the current industry trends, customer preferences, and potential gaps in the market that can be capitalized on.

Methods to Gain Competitive Insights

Market Research: Conducting thorough market research is essential. This includes studying market trends, customer behavior, and analyzing competitors' products, pricing strategies, and marketing tactics.
SWOT Analysis: Performing a SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis enables businesses to identify their internal strengths and weaknesses, as well as external opportunities and threats posed by competitors.
Customer Feedback: Collecting feedback from existing and potential customers provides valuable insights into their needs, preferences, and satisfaction levels. This feedback helps in improving products and services, staying ahead of competitors, and enhancing customer loyalty.
Industry Networking: Building connections within the industry allows businesses to gather information on market trends, best practices, and potential collaborations. Networking also provides opportunities to benchmark against competitors and learn from their successes and failures.

Using Competitive Insights in a Business Plan

Integrating competitive insights into a business plan is crucial for strategic decision-making. It allows businesses to define their unique value proposition, target the right audience, and develop marketing strategies that differentiate them from competitors. Additionally, incorporating these insights helps in creating a sustainable business model, staying agile, and adapting to changes in the industry.

Gaining competitive insights in the business industry is an ongoing process. It enables businesses to stay ahead of the competition, identify opportunities, and adapt to market dynamics. By leveraging these insights, businesses can position themselves for growth and success in their respective industries.

Learn how analyzing industry trends can help businesses adapt to market changes, technological advancements, and shifting consumer preferences.

The industry in a business plan refers to the specific sector or market in which a company operates. Understanding the current and future trends within the industry is crucial for the success of any business. Here are some insights into the future industry trends:

1. Technological Advancements:

With rapid technological advancements, industries are continuously evolving. Businesses need to embrace emerging technologies such as artificial intelligence, Internet of Things (IoT), blockchain, and automation to stay competitive in the future. Implementing these technologies can enhance efficiency, productivity, and customer experience.

2. Sustainability and Green Practices:

The focus on sustainability and eco-friendly practices is expected to grow in the future. Businesses that adopt sustainable practices, reduce waste, and promote renewable energy sources are likely to gain a competitive edge. Customers are increasingly demanding environmentally conscious products and services.

3. Personalization and Customization:

Consumers are seeking personalized experiences and products tailored to their specific needs. The future industry trends indicate that businesses should leverage customer data and implement personalization strategies. This includes offering personalized recommendations, targeted marketing campaigns, and customizable products or services.

4. Remote Work and Digital Transformation:

The COVID-19 pandemic has accelerated the adoption of remote work and digital transformation. In the future, remote work is expected to become more common, allowing businesses to tap into a global talent pool and reduce operational costs. Companies should invest in digital infrastructure, collaborative tools, and cybersecurity measures to adapt to this trend.

5. E-commerce and Online Marketplaces:

E-commerce and online marketplaces have seen significant growth in recent years. The future industry trends suggest that businesses should establish a strong online presence and leverage digital platforms to reach a wider audience. This includes optimizing websites for mobile devices, providing seamless online shopping experiences, and integrating social media platforms.

These are just a few future industry trends that businesses should consider when developing a business plan. Adapting to these trends can help companies stay relevant, attract customers, and maintain a competitive advantage in the ever-evolving business landscape.

In this section, we delve into the importance of identifying growth opportunities within an industry and how it impacts a business's long-term success.

When developing a business plan, it is essential to thoroughly understand the growth opportunities within the industry. Identifying and capitalizing on these opportunities can greatly contribute to the success and sustainability of a business venture.

What is the Industry?

The industry refers to the specific sector or field in which a business operates. It can be any market segment such as technology, finance, retail, healthcare, or manufacturing, to name a few. Understanding the dynamics, trends, and challenges within the industry is crucial to devising a viable business plan.

Growth Opportunities

Growth opportunities within the industry can manifest in various forms. Some key areas to consider are:

Market Expansion: Analyze whether there is a potential to target new geographical regions or untapped customer segments within the existing market. This could involve exploring new demographics, consumer behaviors, or niche markets.
Product/Service Innovation: Assess if there is room for improvement or diversification of products or services. Conduct market research to identify customer needs, gaps in the market, or emerging trends that can be leveraged to create a competitive edge.
Technological Advancements: Keep an eye on technological advancements and how they impact the industry. Adapting or integrating innovative technologies can unlock new growth avenues, enhance efficiency, or disrupt traditional business models.
Strategic Partnerships: Explore potential partnerships or collaborations with complementary businesses within the industry. This can lead to mutually beneficial opportunities, shared resources, increased market reach, and access to new customer segments.
International Expansion: Evaluate if there are opportunities to enter international markets. Conduct thorough research on global demand, cultural differences, legal regulations, and competition to determine the feasibility and potential for growth in foreign markets.

The Importance of Understanding Growth Opportunities

Understanding growth opportunities within the industry is vital for several reasons:

Competitive Advantage: By identifying growth opportunities, a business can gain a competitive edge by offering unique products, targeting specific market segments, or leveraging emerging trends before competitors.
Sustainability: Pursuing growth opportunities helps to ensure the long-term sustainability and profitability of a business.
Attracting Investors: A solid understanding of growth opportunities makes the business plan more compelling and attractive to potential investors who seek profitable ventures.
Adaptability: Industries are dynamic, and understanding growth opportunities enables businesses to adapt and evolve, staying ahead of market shifts and disruptions.

In conclusion, understanding growth opportunities within the business plan industry is essential for crafting a successful and sustainable venture. It allows businesses to capitalize on emerging trends, expand into new markets, innovate products or services, form strategic partnerships, and ultimately achieve long-term growth and profitability.

Key Takeaways

Industry analysis is an essential component of a business plan, providing insights into the market dynamics and competition.
An effective industry analysis helps entrepreneurs make informed decisions and identify potential risks.
Gaining competitive insights allows businesses to develop strategies that set them apart from their rivals.
Analyzing industry trends helps companies adapt to changing market conditions and consumer preferences.
Identifying growth opportunities is crucial for long-term business success.

Frequently Asked Questions

Why is industry analysis important.

Industry analysis helps businesses understand the market dynamics, competition, and potential risks, enabling them to make informed decisions.

How can I perform an industry analysis?

An industry analysis can be conducted by researching market trends, competitors, customer demographics, and regulatory factors that influence the industry.

What are some examples of industry trends?

Industry trends could include technological advancements, shifting consumer preferences, changing regulations, or emerging market segments.

How can industry analysis help my business?

Industry analysis helps businesses develop effective strategies, gain competitive insights, and identify growth opportunities, enhancing their chances of success.

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What Is Competitive Intelligence?

The term competitive intelligence describes your capacity to collect, analyze, and leverage actionable data and insights on competitors, clients, and market forces or other business attributes that can help your company create competitive advantage. It’s a crucial compass to watch when making strategic decisions, as it provides you with details into competitive landscapes and analysis of industry trends, as well as rivals’ market shares, product features, and marketing strategies. The term "competitive intelligence" generally describes research done on the marketplace, competitors, industry dynamics, products, and other areas of interest with an eye towards boosting your ability to compete.

The Importance of Competitive Intelligence in Business

The practice of implementing a competitive intelligence strategy is important because, as you set about building your business , you aren’t doing so in a vacuum. Rather, a host of competitors, emerging trends and market conditions can impact your organizational effectiveness as well. That’s why gathering strategic competitive intelligence and collecting and analyzing data on rivals’ activities can be critical. Doing so not only allows you to better comprehend the market landscape in which you’re playing. It can also allow you to:

Understand market dynamics and trends
Identify emerging opportunities and challenges
Compare and contrast your efforts with those of competitors
Pinpoint new opportunities and new audiences to serve
Make more informed business decisions

“It pays to keep your eyes and ears open to see what’s going on out there,” notes Levetan, who says that doing so doesn’t have to necessarily be a difficult or time-consuming activity to pursue, either.

“From attending trade shows to see what products and solutions are on the rise to tuning into free online webinars that partners provide, it helps to always be learning. Even going to local networking events and discussing what marketing strategies are working with other small-business owners or polling customers to get their thoughts can provide helpful ideas and insights.”

Key Components of Competitive Insights

As part of your efforts to gather and analyze competitor intelligence, you’ll want to stay attuned to several variables. Doing so can not only help you better plan ahead and design winning business strategies. It can also help you maximize efforts to establish and maintain competitive advantage. For example, you’ll want to implement solutions such as:

Customer Analysis

Leveraging tools such as polls, surveys, and market research can help you better understand customers’ wants, needs, and pain points. So too can feedback and social media commentary help you better tune in to what’s driving clients’ business decisions. In effect, listening to your customers is a core aspect of the practice of gathering strategic competitive analysis. Insights gained through these efforts should inform the shape of products, services, and marketing campaigns to enhance targeting and client impressions.

Product Analysis

It’s not only important to monitor your present-day product development efforts to ensure that they’re aligned with current market conditions and customer needs. You’ll also want to gather competitive insights that can help you future-proof your company by offering a better understanding of where the market is trending. Performing a product analysis can give you a better sense of how your offerings stack up against the competition’s – and where room for improvement and innovation, or opportunity to target different audiences and markets, exists.

“As fast as things are changing out there, it helps to keep one eye out for how product and service trends are evolving. You also need to stay up to date on how customer preferences are changing, too, if you want to maximize your odds of staying a profitable business.” —Josh Levetan, co-founder, LV Pros

Industry Analysis

No effort at assembling competitor intelligence is complete without running a full industry analysis either. Doing so provides a comprehensive look at sector dynamics, key players in any given space, and the relationships and regulations that govern the market. Insights gained here should provide a better sense of where opportunities and challenges exist – and how to craft your business models, strategic investments, and operating plans accordingly.

Market Analysis

Running an analysis on the marketplace also helps you identify emerging market trends , better target customers, and make strategic decisions that support the growth of your business and its market share. As part of these efforts, you can gain deeper insights into how the industry may evolve going forward, and you can adapt your company’s strategies and solutions in turn to match.

Applying Competitive Intelligence in Business Planning

It’s one thing to institute a competitive intelligence strategy, another to bring all the research and analysis that you’ve been running together to create actionable impact. On the bright side, leveraging competitor intelligence to shape business, product, and marketing strategy doesn’t have to be difficult when you actively apply learnings in context. You can more effectively address complex competitive environments and future-proof against economic or geopolitical uncertainty when you incorporate research and analysis into your strategic planning process.

Developing Effective Marketing Strategies

Via a combination of surveys, polling, and both actively listening to customers and monitoring rivals’ promotional efforts, you can enhance your marketing strategies. Likewise, implementing an ever-growing suite of customer relationship management and data management tools and solutions can provide helpful learnings and insights that can better inform the shape of promotional programs. In other words, by applying market research and market intelligence to stay better attuned to industry trends and customer expectations, you can design marketing and advertising campaigns to better resonate and connect. The most successful firms seamlessly interweave market research and competitive intelligence programs with business processes to know what outreach strategies to deploy and when, as well as how to present and package them – and which specific channels through which to deliver them. A variety of free and paid online tools can help you gain and leverage deeper insights into the marketplace to create promotional programs that better resonate with target demographics.

Enhancing Sales Strategies and Performance

Armed with a competitive intelligence strategy, you’ll gain greater visibility into the shape of competitive environments and be able to make better strategic decisions about how to position and promote your offerings. In effect, selling solutions to your customers becomes much easier when you understand their wants and needs, and are more intimately aware of the day-to-day challenges they face. Competitor intelligence efforts, tools, and platforms of varying kinds (including both free and paid solutions) can give you clearer visibility into how to better target prospects and package your products and services to sell. Likewise, data management and predictive technology platforms can also provide you with a better sense as to what solutions your customers may be interested in going forward – even if customers aren’t actively aware of these needs currently themselves.

Supporting Strategic Decision-Making

Nowadays, it’s more important than ever to be gathering, analyzing, and distilling data-driven insights into actionable strategic solutions. That means having to institute data collection, analysis, and visualization tools into business processes up and down the board, with every customer or market interaction your business engages in a potential source of insight. Conducting regular analysis of competitor intelligence can help you distill information into actionable insights, and proactively adapt your business strategies. Engaging in these practices not only helps you become more agile in terms of planning for or responding to shifts in the marketplace, it can also enable you to more rapidly build a competitive edge.

Challenges and Considerations in Competitive Intelligence

It’s critical that you leverage trusted, standardized, and accurate sources of data when making decisions. Likewise, it’s just as important that you make a point to boost your organization’s data literacy rates and learn to ask smarter questions, as information isn’t particularly useful from a strategic standpoint unless it’s applied in proper context. There are also legal and ethical concerns to be aware of, as well as privacy-related laws and issues. Overall, it pays to remember: details and fact-checking efforts matter when it comes to operating in a world of data-driven decision-making.

“You’ve got to get your facts straight and be sure you’re not operating off flawed data or assumptions,” says Levetan. “That typically means having to dig deeper into any given trend or theory to see if there’s a root cause or concern behind it. These days, it’s important to not take anything at face value without doing more research. Hopefully when you’re considering testing out a new marketing strategy or business theory, you’re starting out small and prototyping ideas cost-efficiently, too.”

Leveraging Competitive Insights for Market Fragmentation

Competing and winning in an increasingly more fragmented marketplace can require business owners and operators to think more strategically and stay better attuned to competitor intelligence. By designing and implementing a smart competitive intelligence strategy across your full range of operations, you can make your business more flexible and adaptable, and stay more in tune with changing times and trends.

“If there’s one constant in the world of business, it’s that things can and will change – and often change quite frequently,” says Levetan. “The more informed and aware you are, the better equipped to deal with whatever the future brings that you’ll typically be.”

Photo: Getty Images

Industrial Dynamics: The Journey and the Future

Case Western Reserve University and Lund University

Published: 14 February 2022
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Industrial Dynamics is a counterpoint to the dominance in economics of Industrial Organization (IO), which focuses on an industry’s market structure and performance. Industrial Dynamics (ID), in contrast, provides a framework for analyses of the dynamics and evolution of industries, particularly the role of entrepreneurial activity and technological and institutional change. ID asserts that industry transformation can only be understood by looking at processes both beyond and within specific industries, especially at changes in innovation systems that cut across industries and at firm-level innovative activities. Research themes in ID include the causes of industry transformation and economic growth, the nature of economic activity in the firm, firm boundaries and interdependence, technological change and its institutional framework, and related public policy. Since the 1980s, the dynamics of industry transformation has been established as a research domain, but institutionalizing Industrial Dynamics as a distinct and recognized subfield of economics remains an ongoing project.

1. Introduction

My interest in Industrial Dynamics began with my undergraduate honours thesis ( Carlsson, 1968 ) and has extended over the ensuing five decades. I became an advocate for recognizing Industrial Dynamics as a much-needed counterpoint to the dominance in economics of Industrial Organization (IO), which focuses on an industry’s market structure (in terms of the number of firms and how they compete for customers) and performance (in terms of profitability). Industrial Dynamics (ID), in contrast, focuses on industry transformation and asserts that change in industries can only be understood by looking beyond and within the specific industry level, especially at changes in technology systems that cut across industries at the macro level and at the innovative activities at the level of firms, especially entrepreneurial activities. IO is based on static equilibrium theory and focuses on structure, while ID is based on evolutionary theory and focuses on processes of transformation and growth. Both IO and ID share deep roots in microeconomic theory, but ID has drawn much more heavily on the work of Joseph Schumpeter and its further development by Erik Dahmén ( 1950 , 1970 , 1984 ) in Sweden as well as Nelson and Winter (1982) in the United States, and it has drawn much more broadly on interdisciplinary research and theorizing in other social sciences. Since the 1980s, the dynamics of industry transformation has become established as a research domain, but institutionalizing Industrial Dynamics as a distinct and recognized subfield of economics is an ongoing project.

Industrial Dynamics (ID) is a very broad domain drawing upon ideas from multiple sub-disciplines within economics as well as disciplines well beyond economics. It is an approach and framework for analysis, not a theory or set of theories. It often involves new combinations of ideas from a variety of research areas. An overview of Industrial Dynamics, its theoretical roots and how it differs from Industrial Organization, and a summary of ID research in the first twenty years since it emerged are provided in Carlsson (2016) . That survey is organized under the five main themes of ID:

causes of industrial transformation and economic growth,

the nature of economic activity in the firm,

boundaries and interdependence of firms,

technological change and institutions, and

public policy

This chapter is a personal reflection on how my thinking about economics and Industrial Dynamics emerged and evolved over time. I focus first on initial influences (both intellectual and empirical) that shaped how I thought about economics and analysis of industrial activity and how this led me to develop the Industrial Dynamics approach. I then move on to how my thinking has changed and deepened over time in subsequent work, how I enlisted colleagues and other scholars to join me in the enterprise, and what I see as current challenges in understanding industry dynamics in today’s context.

2. How It All Started: Undergraduate Thesis and PhD Dissertation

Although I did not understand it at the time, my journey into Industrial Dynamics began during my undergraduate studies at Harvard College and continued with my graduate work at Stanford University.

2.1. Harvard

Unusually for someone from Sweden, I wanted to go to college in the United States, because I wanted a college-level liberal arts education that does not exist in Europe (with the exception of the United Kingdom), and certainly not in Sweden. When I was admitted to Harvard College in 1965, I was given advanced standing because of previous work in Sweden in math, science, and languages, meaning that I started as a second-year student. I wanted to study economics, but in order to qualify for upper-level courses and the honours program, I needed to first take Economics 1, the introductory full-year course. That meant that I could take only one economics course in my first year—which freed up a lot of time to take advantage of the wonderful opportunities Harvard offered in courses in other disciplines that I might not otherwise have experienced: history, political science, art, and music history. I was exposed to the thinking of leading scholars in these disciplines, including Samuel Huntington in Political Science, J. K. Fairbank on East Asian civilization, and Abram Bergson on the Soviet economy. Later I took courses from Henry Kissinger on American foreign diplomacy since 1898, John Kenneth Galbraith (author of The New Industrial State ), Hollis B. Chenery on economic development, Dwight Perkins on China’s economic development, and Gottfried Haberler on international trade, among others. It was clear to me from the very beginning that even though economics offers a useful and often rigorous way to understand the world, it is only one perspective among many. I did not realize until much later that I was drawn to studying the broader historical and institutional context and underlying driving forces of economic transformation.

My interest in the dynamics of industries began with my undergraduate honours thesis ( Carlsson, 1968 ). Having taken courses in industrial organization as well as international trade, I was thinking of ways to combine the two. In an international trade course I came across the theory of effective protection (e.g., Balassa, 1965 ). The basic idea of effective protection was to use tariffs or other measures to protect domestic value added (and thereby employment) rather than sales in each industry. I realized that international trade and competition had limited impact on the US economy and therefore were not covered in the course materials in industrial organization. But wouldn’t it be different in a small, open economy like Sweden? I became aware that there had been discussions about the level and purpose of protection in Sweden a few years earlier, and I learned that Widener Library had copies of the Swedish parliamentary records. So, I went to the library and found the official documents pertaining to the work of the Swedish Tariff Commission that led to the Swedish Tariff Act of 1958. I studied the deliberations and examined the results and followed up with a regression analysis of the resulting tariff structure.

I learned two lessons from this exercise. One was, as expected, that in an era of economic integration, international competition cannot be ignored; industrial organization and international trade are related and complementary subfields. After all, this was the period of economic integration in Europe, manifested in the formation of the European Economic Community (EEC), the European Free Trade Area (EFTA), and so on. The other lesson was less expected. This is where I first learned that empirical observation and practice often precede theory. The charge of the Swedish Tariff Commission had been to find a way to transition from ad hoc specific (i.e., fixed tariff per unit) to ad valorem (percentage of the value per unit) tariffs while also reducing the overall level of protection. In pursuing its work, the commission had come up with a rationale for setting tariffs systematically rather than on an ad hoc basis. The commission formulated a theory to minimize trade distortion through protection. I learned subsequently that the term “effective protection” was coined by Harry Johnson at the London School of Economics and first appeared in the economics literature in 1964. Johnson (1969) had picked up the concept in conversations with the Swedish Tariff Commission. Thus, the commission had formulated the theory and applied it several years before it appeared in the academic literature. Empirical observation and practice led to new theory.

2.2. Stanford

I moved on to graduate study in economics at Stanford. I took the standard micro and macro theory courses, international trade theory, economic development, and history of economic thought. The courses that influenced me the most were industrial organization (taught by James Rosse, later provost at Stanford), where I came across the ideas of Joseph Schumpeter and Ronald Coase, and economic history (taught by Paul David and Alan Milward). In my first year I became research assistant to Moses Abramovitz and Paul David, who were engaged in a large study of the history of productivity and economic growth, finance, international trade, and new firm formation over a hundred years in several countries, including Sweden. I also worked as a research assistant for Don Keesing (later with the World Bank) on international trade. These experiences taught me a lot about working with large databases, connecting and understanding data from different sources, and applying various approaches to analyzing data. Going deep into the literature in each subject exposed me to many ideas that are part of the core of economic analysis, in addition to the perspectives of my teachers. Particularly instructive for me was a term paper I wrote in economic history on the role of agriculture in Sweden’s industrialization in the late 19th century (published much later in Carlsson, 1980e ). It made me aware of the role of institutional change (especially land reform) and international financial connections (trading houses) as facilitators of economic and industry transformation.

When I started working on my dissertation in 1970, I tried to apply ideas from my coursework in Industrial Organization (IO), international trade, and economic history. Realizing the largely normative, theoretically well-structured, but static (sometimes comparative static) nature of analysis in IO, I wanted to explore what insights could be gained by taking a more comprehensive and dynamic approach by combining the three subfields. There is no sense of history or technological and institutional change in IO. The unit of observation is the industry, not the firm. (The theory of the firm is a theory of groups of firms, not individual firms!) What happens inside the firm (management) is outside the purview of the analysis.

It was natural to me to analyze the impact on industrial structure and behaviour of the Swedish Tariff Act of 1958 that I had studied in my undergraduate honors thesis. Thus, I gathered data on all plants in 26 manufacturing industries in Sweden in 1959 and 1968. I spent several weeks in the archives of the Swedish Central Bureau of Statistics in Stockholm and recorded the data on adding machine tapes that I then took back to Stanford for key punching and subsequent data processing. When I realized how costly and time consuming the data preparation would be, I decided to start with the 1968 data, hoping to use the 1959 data later; it never happened. Using linear programming techniques, I calculated frontier production functions for each industry for 1968 and then examined the results through regression analysis with efficiency (measured as the average distance of each plant from the production frontier in each industry) as the dependent variable and various measures of the degree of competition as independent variables. The results showed that lack of foreign competition (in the form of high tariffs) does affect efficiency adversely, as expected. The results also indicated that in an open economy like Sweden, high degrees of concentration (a commonly used measure of insufficient competition) may reflect economies of scale and specialization rather than simply market power of large firms ( Carlsson, 1972a ).

However, this notion of efficiency is a static concept. I was reminded of this when I published an article based on the dissertation ( Carlsson, 1972b ). A critical review note pointed out that some degree of measured inefficiency could be due to technological change. An industry characterized by large capital investments but undergoing rapid technological change would exhibit measured (static) inefficiency as a result of investment in new best-practice technology that pushes out the technology frontier, leaving older plants further from the new frontier. Is it appropriate to refer to this as inefficiency in the industry? Inefficiency in this static sense may actually indicate a transition to dynamically more efficient industry. This made me begin to realize that static equilibrium theory is inappropriate for analyzing economic growth.

3. Learning by Doing: Research at the IUI/IFN

Issues of this sort lingered in my mind for a long time. While finishing my dissertation I became a research associate at the Industrial Institute for Economic and Social Research (Industriens Utredningsinstitut, IUI, later renamed the Institute of Industrial Economics, IFN) in Stockholm.

3.1. Industry Studies and Industry Contacts

My first project at IUI was a study of Swedish Imports of Manufactures from Low-Wage Countries ( Carlsson & Sundström, 1973 ). The results indicated that the competitive pressure from low-wage countries, especially in labor-intensive industries, was likely to continue, albeit growing at a lower rate, and that the scope for adjustment by domestic producers or public policy was limited.

In a series of studies of heavy-energy–intensive industries (mining industry, iron and steel, basic metals, pulp and paper, and cement), I studied the driving forces behind economic outcomes: especially technological change, global shifts in the locus of production, and changes over time in relative energy prices ( Carlsson & Josefsson, 1974 ; Carlsson, 1976a , b , c ; Carlsson & Ohlsson, 1976 ). I was asked by the Swedish Energy Commission to do an international comparison of relative energy prices and their effects on energy use, industrial structure, and choice of technology ( Carlsson, 1977a ). In studying the cement industry in the United States and Sweden, I learned that the location and choice of technology of each plant was determined by a combination of the nature and availability of raw materials, the type and price of fuel used, the vintage of the plant, the availability of water transport, and the education, culture, and mindset of the engineers (Carlsson, 1978a , b , c ). I found it necessary to understand each of these factors and how they interacted. I learned similar things in studying blast furnace and steelmaking technology as well as pulp and paper making (Carlsson, 1977b , 1980a ). An important lesson from all these studies was the necessity to understand the long-term factors (including historical and geographic) that determine economic structure and performance over time. It was also obvious that management practices and individual firm behavior play an important role.

In 1977 the IUI got a new director, Gunnar Eliasson, and shortly thereafter I became deputy director. This had two major consequences for my research. As deputy director I was secretary to the board of directors. The institute was privately held and funded by the Federation of Swedish Industries and the Swedish Employers’ Confederation. The board members were CEOs of major Swedish (multinational) companies. This created frequent opportunities for me to interact with top business leaders and gain access to their thinking and their organizations. As deputy director I was also supervisor of several research projects, which gave me insight into a wide range of topics.

Working at Sweden’s largest economic research institute provided other benefits, too. Until the mid-1970s most research projects were initiated from within the institute and supported financially by our funding organizations. The criteria for funding were that projects should be of interest and practical relevance to Swedish industry and that the results should be published. (Practically all Swedish empirical research in economics was conducted at IUI.) No consulting projects were allowed. Most projects were multi-year studies. There were weekly research seminars, often with outside speakers. After the first Nobel Prize in Economics was awarded in 1969, it became a tradition to invite the recipient to give a seminar at the institute. All this exposed me to a great variety of topics and researchers. In the late 1970s we hired more people, formed several groups with different focus, and became involved in projects commissioned by government agencies or private foundations. For me, this meant extraordinary access to industrial and political leaders (small country effect!), many visits to industrial firms, and frequent contacts with managers, engineers, and politicians otherwise not often available to academic researchers.

3.2. The IVA Project

As secretary of the board, I was in frequent contact with the chairman, who also happened to be president of the Royal Swedish Academy of Engineering Sciences, IVA. In 1977 IVA launched a major investigation of the causes of the economic crisis confronting Sweden and other industrial countries in the wake of the oil crises of the 1970s. I was invited to be the secretary of a working group charged with investigating the historical role of technical change and its major components in economic growth in Sweden. Erik Dahmén, professor of economic history at the Stockholm School of Economics and the first Schumpeterian scholar in Sweden, and probably in Europe, was chairman. I had the privilege of working closely with him in the IVA project and then for many years afterwards. His dissertation, entitled “Entrepreneurial Activity and Development of Swedish Industry 1919–1939,” was published in 1950 ( Dahmén, 1950 ). In it, Dahmén introduced concepts such as development blocs and industrial transformation, causality, the role of entrepreneurial activity, the content and not just the volume of economic activity, and driving forces—essential components in my subsequent work on innovation systems and industrial dynamics ( Carlsson & Henriksson, 1991 ).

The title of the IVA project was “Sweden’s Techno-Industrial Competence and Future Competitiveness.” Our working group consisted of members of IVA, mostly CEOs of large companies, and representatives of Swedish technology policy agencies. The working group was charged with analyzing the economic crisis at the end of the 1970s, its causes, and how it differed from previous crises. We examined Swedish industrial development from the 1870s onward, competitiveness and specialization in Swedish industry during the postwar period, and the role of technology (total factor productivity) in economic growth. We conducted a survey of the rate of technological change in various industries in 1965–1975 compared to the previous decade. This was done through personal contacts and interviews with chief engineers and technical experts in many disciplines. Similarly, we studied the sources of new technology in several industries in Sweden. The results identified important Swedish contributions in a few areas (electric power generation, specialty steel, ship building) but only minor ones in most areas. Swedish firms were generally found to be advanced in international comparison in terms of application and use of new technology. Even though Sweden had the world’s highest R&D spending in relation to GDP and was at or close to the frontier in several fields, most new technology was actually acquired from abroad. We also interviewed the CEOs of the 12 largest Swedish firms to get their perspectives on their international competitive position and strategy. The main findings were published in Carlsson ( 1979a , b , c ).

One part of the IVA project involved a study trip to Japan, South Korea, and Singapore. The mission was to explore the reasons behind the rapid industrialization of these countries and apply the lessons to Sweden. A small delegation was put together under the leadership of the president of IVA, the president of Chalmers University of Technology, the head of the Swedish Defense Procurement Agency, the secretary of the Academy, and myself as ‘economist in residence.’ The Swedish embassy in each country was engaged to plan the itinerary. As a result, we were able to interview high-level officials of ministries, universities, and research institutes, industrial planners, and heads of major companies and keiretsu groups such as Honda, Mitsubishi, and Samsung. Besides all the information and knowledge we gained, perhaps the most important insight for me was that even though Folke Hjalmers (the IVA Secretary) and I conducted the same interviews jointly, there turned out to be very little overlap in the notes that we each took. What was new and interesting to an engineer with a specialization in technical physics was quite different from what I found useful and relevant from an economist’s point of view.

For me personally there were several important takeaways from this work, besides the broad exposure to the thinking of business leaders and policy makers and how their thinking was influenced by historical, institutional, and geographic circumstances. One insight was a better understanding of the connection between technical and structural change: my analysis showed that about one-third of total factor productivity growth at the aggregate manufacturing level as well as at the industry level was attributable to structural changes in output resulting from rapid technological change (especially, new products) in some sectors leading to shifts among sectors of productive resources. In measurement at the firm level and below, approximately one-half of total factor productivity change was found to be due to structural changes in the form of shifts of resources from less productive to more productive business sectors (Carlsson, 1980b , 1980d , 1981b ). Another finding was that routine, everyday, continuous improvements and applications of technology (rationalization) play a more important role over time than major technological breakthroughs. Innovation has both short-term and long-term consequences; it is a process, not an event. Without new products that create new business opportunities, there is less need for continuous improvement of existing products and for resources to be shifted to more productive businesses. Another important takeaway was a better understanding of micro-macro links: the importance of management and organization, systems thinking, and coherent strategies across all functions. This led eventually to integration of management into my formulation of Industrial Dynamics.

3.3. Micro-macro Analysis

Gunnar Eliasson, our new director, brought with him an early version of a micro-based macro model of the Swedish economy (MOSES, Mo del of the S wedish E conomic S ystem)—a dynamic, economy-wide, agent-based interactive simulation model (one of the first of its kind) supported by detailed quarterly data from Swedish companies. My initial contribution to the model was a study of investment in best-practice technology and the resulting technological change and productivity growth that we then built into the manufacturing module. This study was a byproduct of the IVA project on long-term technological change and productivity in Swedish industry. I examined the content and role of technical change in economic growth in Sweden over several decades (Carlsson, 1980d , 1981a ). The basic idea was to study the evolution of best-practice technology in each industry and introduce its productivity effects via investments by firms, thus making productivity growth endogenous in the model ( Carlsson & Olavi, 1978 ; Carlsson et al., 1978 ).

The micro-macro model was, and still is, a unique and superb tool to analyze questions that cannot be addressed in conventional static general equilibrium macro models. For example, in conventional macroeconomic models, the effects of productivity change on the economy can be analyzed only by assumption. In the micro-based model, as just indicated, productivity change is endogenous. Another advantage of a micro-based simulation model is that one can introduce various policy measures affecting individual firms rather than industries and analyze the macroeconomic effects. I took advantage of this feature in a study of industrial subsidies in Sweden (Carlsson, 1980c , 1983b —the first empirical application of the model). In more traditional macro models, one is usually forced to make assumptions regarding the resource allocation effects, that is, one has to assume a large portion of the results. The Swedish subsidy program was extremely large in comparison with other countries. I was able to show that the particular policy chosen by the government (direct wage subsidies to firms in the most affected industries) would not only have a strongly negative impact on the economy for many years but would also be more harmful than alternative policies, including laissez-faire (for a review of this analysis, see Carlsson, Eliasson, & Sjöö, 2018 ). I later followed up in a study commissioned by the World Bank on state ownership of firms in several developed economies ( Carlsson, 1984a ).

One of the important lessons from the micro-macro model was the importance of entry and exit of firms. We demonstrated that without introduction of new ideas through entrepreneurial activity, and without allowing failing firms to exit, the economy stagnates over the long term. Both are needed for sustainable growth. Much of the work on long-term economic growth, productivity and technological change was applied in an assessment of the economic prospects for Swedish industry at the beginning of the 1980s ( Carlsson & Eliasson, 1979 ; Carlsson & Josefsson, 1979 ; Carlsson, 1981a , 1981c , 1983a ; Eliasson et al., 1986 ).

3.4. Back to the USA: MIT and CWRU

In conjunction with my work on the IVA project, I met Jim Utterback at the Center for Policy Alternatives at the Massachusetts Institute of Technology (MIT). Jim invited me to visit there, and as a result, I spent a sabbatical year in 1982 as a visiting scientist at MIT. Having studied the long-term connections among technological change, industry structure, and economic transformation in Sweden, I was ready to take a break, to re-tool by going more deeply into the literature upon which my work was built and by thinking more broadly and deeply about what to do next, and to make new connections. I was intrigued by the apparent relative decline of the manufacturing sector in the United States and wondered what the causes might be. I got a clue as to what was going on when I attended a seminar at MIT on productivity and quality management by W. E. Deming, who introduced modern management methods in Japan in the country’s postwar reconstruction and was well known in Japan—and found myself the only non-Asian in the room.

Among many other works I read were Marshall’s Principles of Economics (1920) and Industry and Trade (1923) , Schumpeter’s (1939) Business Cycles , Kranzberg & Pursell’s (1967) Technology in Western Civilization , and Rosenberg’s (1963) article on technological change in the machine tool industry. I began to understand the central role of machine tools—the machines used to build other tools as well as many other products—in the Industrial Revolution starting in the late 18th century. I became aware of the links between the Industrial Revolution in Britain, the rise of the “American System of Manufactures” in the early 19th century—which led eventually to the introduction of mass production techniques—and the role of lead users (including the military) in mass production in the automobile industry, aircraft, and other engineering industries. Much of this is summarized in Carlsson (1984b) . I visited the annual international machine tool show in Chicago and got first-hand impressions of where the technological frontier lay and who the major producers were. I conducted in-depth interviews with machine tool companies and major users in both the United States and Sweden. While at MIT I met and had long discussions with Burton Klein, who was visiting from Cal Tech. I also had a chance to visit Richard Nelson at Yale just before his 1982 book with Sidney Winter, An Evolutionary Theory of Economic Change , was published. He let me read several chapters in the manuscript before it was published. That was my first exposure to dynamic economics and evolutionary thinking in economics; it influenced me deeply.

Among the things I learned from all this was a deeper appreciation for the influence of history and technology on economic development: path dependence. I was exposed to broader and deeper thinking about the nature of economic transformation and about economics as a social science rooted in the often unpredictable activities of human beings, particularly entrepreneurs, engineers, capitalists, and managers. I also learned about the interaction between technological and institutional change and the role of historical events such as major wars. I came to appreciate more than earlier the power of theory building through exploratory analysis and empirical observation and to understand more clearly the difference between theory, sometimes referred to as appreciative theorizing, and formal modeling. All these insights became valuable building blocks in developing the framework of Industrial Dynamics.

In 1984 I received an offer of an endowed chair in the Department of Economics at Case Western Reserve University, which I accepted. Among the attractions was that through my research on the steel industry I was familiar with CWRU’s Research Program in Industrial Economics, one of the few academic empirically oriented industry-focused research programs in the United States. When Bela Gold, the founder and leader of the program, left in 1983, I was invited to take his place.

4. The Emergence of Industrial Dynamics as a Subfield

4.1. earie and developing a research community in industrial dynamics.

In 1973 a former fellow PhD student at Stanford, Jürgen Müller, had taken the initiative to organize a conference for European scholars of industrial economics. Jürgen was a researcher at the Deutsches Institut für Wirtschaftsforschung (DIW) in Berlin. He asked me who my European contacts were. We discovered that neither one of us was well connected beyond our own countries, so we turned to Mike Scherer, author of Industrial Market Structure and Economic Performance (1970) , who happened to be visiting DIW at the time and was well connected with European IO scholars. Jürgen organized a couple of conferences, and a few years later the group was organized formally as the European Association for Research in Industrial Economics (EARIE). In naming the new organization, it was important to me that the name include “Industrial Economics” in order to differentiate the association from mainstream US Industrial Organization with its narrow focus on competition policy and regulation that was becoming dominant in Europe. I was pleased to see a broad definition of the domain, including technological and institutional change, in line with the older European tradition.

I became EARIE’s second president, in 1983. When I gave my presidential address at the end of my term in 1985, I took advantage of the opportunity to summarize my thinking about what industrial economics and EARIE should be all about. The title of my talk was “Reflections on ‘Industrial Dynamics:’ The Challenges Ahead” ( Carlsson, 1987 ). I chose the title Industrial Dynamics to distinguish it from the more static and largely normative Industrial Organization tradition. As I stated in my talk,

From the point of view of this paper, one unfortunate aspect has been that in the last twenty to thirty years, the focus of European economists in the field of industrial economics has shifted away from traditional issues of a dynamic nature—problems of international competitiveness, changes in the composition of output, the rate and direction of technological innovation, etc.—into the relatively static issues of mainstream industrial organization. ( Carlsson, 1987 , p. 137)

I tried to weave together the threads I had picked up from reading Alfred Marshall, Joseph Schumpeter, Erik Dahmén, Richard Nelson and Sidney Winter, Burton Klein ( Klein, 1977 ), Gunnar Eliasson, and others—ideas that I had come across and worked with in my own research. Some of the key ideas were that “We need to have a substantially improved understanding of the structural changes in the economy and their driving forces … and to develop a suitable micro-macro framework for addressing macro-questions” ( Carlsson, 1987 , p. 141). We need to focus on transformation rather than growth and better understand historical developments, focusing on the causal links, not just on the chronology of events, and study processes of transformation, not just the resulting outcomes (p. 142):

General history (social, political, and cultural), economic history, and more particularly industrial history are not only indispensable but really the most important contributors to the understanding of our problem. All other materials and methods, statistical and theoretical, are only subservient to them and worse than useless without them. ( Schumpeter, 1939 , p. 131)

Operationalizing historical visions in the Schumpeterian tradition involves first and foremost not relying solely on traditional deductive analytic tools but also taking a more inductive approach: use of case studies and grounded theory methods, collecting new data rather than simply using data collected by others for purposes different from the specific purpose at hand, and generalizing from such case studies. This was a key idea behind the micro-based modeling effort, later articulated by Eisenhardt (1989) .

In 1987 I organized a conference on “New Issues in Industrial Economics” to which I invited like-minded scholars from around the world. The resulting conference volume was entitled Industrial Dynamics: Technological, Organizational, and Structural Changes in Industries and Firms ( Carlsson, 1989 ). In the introductory chapter I tried to develop my ideas about Industrial Dynamics further by more clearly articulating the research agenda:

the nature of economic activity in the firm and its connection to the dynamics of supply and therefore economic growth, particularly the role of knowledge,

how the boundaries of the firm (degree of vertical integration) and the degree of interdependence among firms change over time and what role this interdependence plays in economic growth,

the role of technological change and the institutional framework conducive to technological progress at both the macro and micro levels, and

the role of economic policy in facilitating or obstructing adjustment of the economy to changing circumstances, domestically as well as internationally, at both micro and macro levels— industrial policy .

4.2. Developing the Institutions of Industrial Dynamics Analysis

Shortly after the conference I was invited by Göran Friborg, a research director at STU, the Swedish National Board for Technical Development, to head up a new research project on Sweden’s Technological Systems and Future Development Potential. I had come to know Göran as a member of the working group at IVA a decade earlier. A comprehensive, interdisciplinary multi-year study was envisioned, expected to yield not only useful insight but also a permanent competence base for future analyses of technological innovation systems and technology policy in Sweden. Göran had picked up the innovation systems idea from a presentation at the OECD by Chris Freeman. We invited leading scholars from various disciplines at several Swedish universities to participate.

Thus began my interest in research on innovation systems. It so happened that I was asked by the International Joseph A. Schumpeter Society (formed in 1986) to join the committee to select the winner of the first Schumpeter Prize, presented at the 1988 conference. The committee reviewed many manuscripts and selected Chris Freeman’s 1987 book Technology Policy and Economic Performance: Lessons from Japan for the prize. The book was essentially about Japan’s national innovation system (although the term was not explicitly used). It inspired much research along the same theme around the world.

In the Swedish research project that was getting started at the same time, we decided at our first project meeting that it would be useful to apply the innovation system concept at the technology level rather than at the national level. Taking a micro approach would allow us to take a more dynamic view and to better understand the role of individual actors (especially entrepreneurs), knowledge creation, and knowledge flows, as well as interactions among these in different configurations of infrastructure and in different time periods. The Swedish research project continued for many years and resulted in many publications (e.g., Carlsson & Stankiewicz, 1991 ; Carlsson & Eliasson, 1994 ; Carlsson, 1995 , 1997 ; Carlsson & Jacobsson, 1997 ; and Carlsson, 2002 ).

For me, this work represented a way to directly apply and further develop many of the key concepts of Industrial Dynamics. It was also a way to begin to institutionalize ID research. Among the invited scholars was Staffan Jacobsson at Chalmers University, who was the leading advocate of changing the name of the Department of Industrial Organization at Chalmers to the Department of Industrial Dynamics. That was the first academic institution to adopt the name. In 2001 our sponsoring agency changed its name and focus from Nutek (the Swedish National Board for Industrial and Technical Development) to VINNOVA (Swedish Governmental Agency for Innovation Systems).

In 1995 I was approached by Bengt-Åke Lundvall at Aalborg University. He asked me to become chairman of the scientific advisory board of the newly established Danish Research Unit for Industrial Dynamics (DRUID). I served in that capacity for 12 years. The idea was to stimulate global research in Industrial Dynamics and to build competence for the future in both government and academia by educating PhD students. The international conferences organized annually by DRUID since 1996 quickly became the leading venue—rivaled only by the biannual International J. A. Schumpeter Society conferences—for presentation and discussion of Industrial Dynamics research. Each year DRUID also organizes a conference for doctoral students in Industrial Dynamics from around Europe where they can interact with leading scholars from around the world. My involvement with DRUID and the Schumpeter Society put me in frequent contact with the leading scholars around the world at the frontier of ID research. These organizations, along with the Freeman Centre at Sussex University, are the most prominent platforms where ID research is presented and discussed.

Every year I presented papers at the DRUID conferences. In 1998 Bengt-Åke Lundvall and I presented a joint paper entitled “Industrial Dynamics Revisited: What Have We Learned?” ( Carlsson & Lundvall, 1978 ). It was a review of the developments in the field since my original papers published in 1987 and 1989. This stimulated me to initiate a more systematic review of all the publications in the field. I gathered together a group of PhD students and visiting scientists at CWRU and launched a comprehensive review of published articles in Industrial Dynamics after 1990. The first task was to discuss the definition of the field and what publications to include. We started with the definition in my 1987 article and added a broader, somewhat more macro-oriented theme to capture the broader issues (“Causes of Industrial Development and Economic Growth”) that differentiate ID from IO and that tie together the interaction among the four other themes. This resulted in the five themes mentioned in the introduction to this paper, specified in more detail in the classification system presented in Carlsson (2016) . This classification was the basis for a review of the literature I published in 1990–1999 ( Carlsson, 2008 ), which I then extended to cover the entire 1990–2009 period ( Carlsson, 2016 ).

For the literature review, we selected twelve journals where we expected to find ID articles published, making sure to include both IO journals and others. We reviewed nearly 8,000 abstracts and classified 3,445 of these as belonging in the ID domain. We found only 173 ID articles in IO journals; all the other ID articles were published in other journals, none of which, except Research Policy , existed in 1985. I was disappointed to find so few articles in IO journals but realized that disciplinary boundaries are rigid and strictly enforced by referees and editors. New ideas need new outlets—hence the proliferation of new journals focused largely on Industrial Dynamics. The survey clearly showed tremendous growth of published research in Industrial Dynamics over the two decades reviewed. We found 535 articles published in the 1990s and 2,710 in the 2000s that we classified as ID articles, mostly in journals that did not even exist in 1985. The content and findings of this research are summarized in the 2016 paper and will not be repeated here.

The literature review covered the period 1999–2009. It showed not only that research in the ID domain increased rapidly since I first formulated the core ideas in the late 1980s but also that the research evolved in all dimensions. I think it is fair to say that ID was firmly established as a research domain during that period. The research in the domain has deepened and continued to evolve. For example, in my own research the work I had begun at MIT in 1982 led to a historical review of the development and use of machine tools ( Carlsson, 1984b ) and to subsequent papers on how technology (especially in manufacturing) has evolved—becoming more flexible through digitization and automation, giving rise to small business and innovation, thus influencing industry structure in terms of firm size distribution and more importantly, in terms of new industries and economic transformation.

In the 1990s most of my research focused on innovation systems, prompted not only by the invitation to lead the Swedish project on technological innovation systems but also by the insights of my continuing research on the broader context of innovation and how that context differs among sectors and over time. Approaching innovation systems from a micro perspective rather than a macro (national or regional) perspective was crucial. It made it possible to integrate entrepreneurs and interaction among system elements (institutions, organizations, and knowledge base) into the analysis, thereby making it dynamic. In the late 1990s and early 2000s, my research shifted even more toward analysis of the linkages between Industrial Dynamics and endogenous growth through the analysis of entrepreneurship, knowledge creation, and knowledge spillovers as drivers of shifting industry structure (particularly the role of SMEs) and economic transformation at the macro level ( Carlsson & Eliasson, 2003 ).

5. Where Do We Go Next?

As I stated in 2016,

[T]he main challenge in ID is to shift the analysis of industrial transformation and economic growth from a static to a dynamic frame of reference. The main contribution of ID is the understanding of the economy as a complex and dynamic system consisting of many diverse and autonomous but interrelated and interdependent parts, capable of generating transformation and growth from within. The system is multidimensional and multilevel; it cannot be reduced to a few equations. There is a micro- to macro-perspective throughout; the industrial transformation process takes place in a larger context that influences, and is influenced by, the elements within the system. It is the evolutionary process and its driving forces that are in focus, not just the outcomes. The primary driving forces are technological and institutional change. Economic growth is the result of co-evolution of technology, industrial structure, and supporting institutions coordinated by markets. ( Carlsson, 2016 , p. 48)

While the research domain of ID (including each of its main themes) has been firmly established in the literature, there are many important questions under each theme yet to be addressed and explored in greater depth:

Causes of industrial development and economic growth:

The causal links between entrepreneurship and economic transformation and growth are still poorly explored and represent a major challenge for future research. Further integration of institutional economics and economic geography into ID looks promising. Modeling the economic system as a dynamic (evolving) and complex system remains a huge challenge.

Economic activity in the firm:

The analysis of firm strategy is well represented in the management literature but needs to be brought more fully into the analysis of industrial transformation and economic growth. Financing of innovation, particularly that of innovative small firms, needs to be further integrated. The role of technological diversification and of management capabilities across organizational boundaries seems to be a particularly promising topic.

Firm boundaries and interdependence:

Outsourcing, vertical integration, diversification, and refocusing involve reconfigurations of firm boundaries and are important elements of industrial transformation. More systematic analysis is desirable. Given the role of knowledge creation and dissemination in industrial transformation, there is a need to clarify and deepen the analysis of the mechanisms involved. There is also a need for more analysis of new forms of interaction among firms (large and small), as well as the role of technology and institutional change in industrial transformation.

Technological change and its institutions:

Almost half of the ID literature focuses on technological change. The analysis of innovation systems/industry clusters and of cooperation/alliances/networking constitutes the two largest segments of the ID literature, jointly representing about one-quarter of the ID literature. However, as I noted in my 2016 review of the literature:

If the concept of innovation systems is to live up to its potential as a useful tool for the analysis of industrial development and economic growth, much more needs to be done. There needs to be much deeper analysis of the dynamic properties of complex systems, particularly knowledge creation and knowledge flows and the interaction among actors and other components. An issue that arises when the system is not defined geographically is how to determine the relevant population, i.e. delineate the system and identify the actors and/or components. What are the key relationships that need to be captured so that the important interaction takes place within the system rather than outside? Another (but seldom discussed) issue is how to measure the performance of the system. What is to be measured, and how can performance be measured at the system level rather than at component level? There is plenty of room for further research in this domain. ( Carlsson, 2016 , p. 52)

The role of institutions in innovation is a promising area for further research.

Role of public policy:

Given the explorative, inductive nature of research in many areas of Industrial Dynamics, it is not surprising that the discussion of public policy is still in an early phase in the ID literature. There is still much to be learned and many hypotheses to be tested before theory can be established to support discussion of policy implications. One of the biggest challenges is to shift from a static to a dynamic view of the economy. In the domain of competition policy, this means focusing on processes of transformation, innovation, and growth rather than the size structure of firms in any given industry at a particular moment in time. In the area of innovation policy, the literature is still heavily influenced by the conventional approach, which is basically to correct market failures arising from insufficient incentives. This is the domain of science and technology policy. The policy discussion needs to move to a broader domain; what is needed is an evolutionary- cum -systematic approach to innovation. Whereas traditional science and technology policy focuses on promoting specific innovation events or outcomes, the ID domain of innovation policy is oriented to setting the framework conditions in which innovation systems can better self-organize across the range of activities in an economy. Innovation is deeply embedded in competitive processes and interacts with many other policy areas such as competition policy, financial policy, international trade policy, and regional development policy. It needs to be integrated and coordinated across government ministries and agencies—an extremely challenging task. In addition, theory building, policy formulation, and practical learning (implementation) should be seen as integrated, co-evolving, iterative, and interactive processes: learning-by-doing.

While Industrial Dynamics has been firmly established as a research domain, the label “Industrial Dynamics” has not. Does that matter? 1 The widespread use of a particular label may lag the emergence of a phenomenon. I am reminded that while the “Silicon Valley” phenomenon may be traced to the activities of Frederick Terman, William Hewlett, and David Packard in Palo Alto in the late 1930s, it took more than four decades before the term was widely used. Nevertheless, while it should be expected that it would take time for the term to be accepted, I do believe that broader recognition of Industrial Dynamics as a field of study in the economics discipline matters. In order to shift the focus of economic inquiry from static to dynamic analysis, from outcomes (industry structure and specific innovation events) to processes (transformation and growth) and their driving forces (technological and institutional change), it would be helpful to establish Industrial Dynamics as an academic sub-discipline similar to industrial organization, behavioral economics, institutional economics, and others. There needs to be a better understanding of the complex, systemic nature of industrial transformation. This requires a solid foundation in the form of a coherent theoretical framework. That is an important and challenging task for bright young minds. The existence of several well-established academic journals in the ID domain makes the challenge somewhat less daunting than it was 30 years ago. Until Industrial Dynamics is recognized as an important area of economic analysis, it cannot fully penetrate the academic curriculum and attract young scholars. Although there are numerous courses that touch on various ID topics within courses in industrial organization, entrepreneurship, technological change, and so on, I am not aware of any undergraduate or graduate courses offered in the broader field of Industrial Dynamics at US universities.

Although I have not done any systematic follow-up on the ID literature after 2009, it is my impression that the original research agenda is still valid, with lots of work being published. Two areas stand out: a great deal of work is being done on innovation systems, particularly in the public policy dimension. Also, it seems to me that research on entrepreneurship increasingly involves the role of entrepreneurial activity in economic transformation rather than as a stand-alone activity. In my own work I have focused recently on theory building based on case studies in three areas: comprehensive longitudinal studies of industrial dynamics in various industries (particularly life science industry), entrepreneurial experimentation in various entrepreneurial ecosystems, and the experimentally organized economy. Overall, the Industrial Dynamics research agenda remains crucially important to our understanding of how industries—and societies—change.

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Building Your Business
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Business Plans

Business Plan Example: The Industry Overview

Susan Ward wrote about small businesses for The Balance for 18 years. She has run an IT consulting firm and designed and presented courses on how to promote small businesses.

Wondering how to approach the industry overview section of your business plan? Having an example might help. Let's look at the industry overview for Pet Grandma, a fictional pet-based business invented for this business plan sample.

The Pet Industry

According to the American Pet Products Association, pet expenditures in the U.S. totaled slightly over $72.5 billion in 2018, up from $48 billion in 2010, an increase of 51% in eight years. This includes:

Food: $30.32 billion
Supplies/OTC Medicine: $16.01 billion
Vet Care: $18.11 billion
Live animal purchases: $2.01 billion
Pet Services: grooming & boarding: $6.11 billion

These figures reflect the increasing humanization of pets, a trend that is showing no signs of waning. More and more people consider their pets to be people too and treat them accordingly. Karen McCullough, then director of marketing (2000-2010) for Winnipeg-based Petland Canada, which operates both company-owned and franchise stores across the country, says, "People are looking for more these days—absolutely. We see a lot now in higher-end products, people are demanding more for their pets, from treats to grooming supplies to brand-name toys and even clothing."

And, because people want the best for their pets, there is also an increasing demand for pet-care services. Across North America, the pet care business has seen an explosion of growth over the last ten years.

Our Position in the Industry

West Vancouver is an affluent area with a high pet density, an ideal market for a pet-sitting business such as Pet Grandma. People in this area not only have pets but can afford to spend money on them and are willing to do so.

Our market research has shown that nine out of 10 pet owners polled in West Vancouver would prefer to have their pets cared for in their own homes when they travel rather than be kenneled, and six out of 10 would consider having a pet sitter provide company for their dog when they were at work.

The Competition

While there are currently eight businesses offering pet sitting in West Vancouver, only three of these offer on-site pet care and none offers pet visit services for working pet owners.

Currently, there is no single company dominating the market. This may be because all of the pet-sitting businesses are relatively new; the oldest, Paula's Pet Sitting, has only been in business five years. However, half of the existing pet-sitting businesses control the majority of the market—Paula's Pet Sitting, Doggie Care Services Inc., Pet Petters, and Pet Sitters on Demand together make up 65% of the market.

Save your full competitive analysis for section four of your business plan , but briefly share competitor insights here as it relates to your industry and your unique position in it.

What Makes Pet Grandma Unique

Pet Grandma's marketing strategy is to emphasize the quality of pet care we provide. As our slogan, "A Grandma for your pet!" says, we treat people's pets as family members and strive to give them the same loving, personal care that their owners would give. In our marketing , we will be emphasizing the quality and personalized service we provide.

We will also offer some services that are currently unique, such as our pet visit services, where one of our trained staff will go to a person's home while they're at work and feed, exercise, and play with their pet, allowing dog owners who work to come home to happy, friendly companions rather than demanding, whiny animals.

Your Business Plan

That's a basic example of an industry overview for your business plan. It provides an look at your business's industry and highlights your place within it. Your plan should present well-researched information to display that you understand the industry well.

Once you have yours written, you can move on to the next section of the business plan, the market analysis .

American Pet Products Association. " Pet Industry Market Size & Ownership Statistics ." Accessed Jan. 8, 2020.

Industry Dynamics

First Online: 22 November 2019

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David Walters 3 &
Deborah Helman 4

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Beginning with the notion that is underlying competencies rather than their current manifestation in the latest product that is important, it is proposed that survival be replaced with sustainable future competitiveness ; it is also proposed that a broader, macro, framework is becoming necessary to structure the identification of capability factors rather than simply a list of the latest industry or marketplace drivers. It is suggested that such a framework revolves around six generic focused characteristics of industry dynamics : knowledge management, technology management, process management, relationship management, regulatory compliance, and managing geopolitical events. The established notion that industry dynamics and value builders indicated “pathways” to success for organizations, and that vendor value propositions should reflect these expectations, is explored. This chapter develops an argument around the notion that industries should respond to industry dynamics and organizations seek to develop related capabilities and that the successful organizations are those that identify the characteristics that are essential for creating value advantage. The increasing presence of value chain networks emphasizes the need, and the available facility, to develop customer-centric solutions. We will provide examples of organizations that have identified industry dynamics, capabilities, and support capabilities in other industries and have imported them with considerable success.

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Developing a Flexible and Dynamic Business Plan

Finding Opportunity Amidst the Headlines: The Case for Long-Term Investing

Does your personality influence the sale, active etf growth continues to amaze, treasury cash soars providing a liquidity reprieve, bridging marketing and customer experience: 16 conversation starters, the power of sales scripts in a rainmaker’s succession plan, how advisors can improve communication with clients, tying the knot a second time talk to your advisor.

Creating a business plan is a lot like forecasting the weather… those who are in charge of predicting a storm get blamed if they are not 100% accurate. The same logic applies to business planning in terms of timing, expediency, and execution. This can lead many business owners to abandon ship, rather than seeing it as an opportunity to change course. Always remember, business planning is a process.

Carl Schram, former head of the Kauffman Foundation for Entrepreneurship, recently wrote Burn the Business Plan , which echoes a similar strategy for a streamlining the planning process. Reis and Schram are mostly right to criticize excessively lengthy business plans. At Startup Connection , we argue that business plans are necessary, but that they need to flexible and dynamic (and meant primarily for yourself, not others.) As the saying goes, “If you don’t know where you are going, any road will get you there.” Making plans for others (especially venture capital firms) and following specific rules almost guarantees the process will not be useful to you. In addition, venture capital firms account for a very small segment of business financing, especially in the beginning. A business plan is not just a document to be stored on a shelf; it should establish parameters and be developed, tested, and be continuously revised. Even with a “perfect” business plan, there will be failures along the way. In particular, failing and learning from failure are critical components of the ongoing planning process. Business planning is a process.

Some Planning Suggestions

There is no cookie-cutter approach to writing a business plan. Get your ideas on paper before stressing about the organization of information. Don’t stifle yourself. Write it in your own words, as simply and concisely as possible.

Focus on your passion. A successful business plan should express why you think your business is a good idea and why you will succeed. If you need to dress it up in a suit and tie to show to investors, do that later. A business plan should be YOUR vision.

Common Parts of a Business Plan

Every business plan is different because every business is different. However, there are some common elements to consider, such as:

Mission statement
A description of products and services
Ideal customer
Analysis of the industry and your competitors
Marketing and sales tactics
Operational plans
Manufacturing and delivery logistics
Resources necessary (this includes labor, equipment, and facilities)
Financial budget

Also, focus on the components that are most important and challenging, rather than worrying about making every section perfect.

Some Further Tips

Don’t be too verbose: A formal business plan must focus on the needs of the audience and the entrepreneur. Business plans must be on point and clear. Typically, plans should be 15-30 pages. If additional details are required, put them in a short appendix.
Think it through: You might have a great idea, but have you carefully mapped out the steps you’ll need to make the business a reality? It’s worth investing your time in the planning phase to ensure you might make money in the long run.
Do your research: Investigate everything you can about your proposed business. Google and Amazon are great and easy tools to understand the market and your competition.
Be realistic about your competition: Is your product or service something people really want or need, or is it just “cool?” Why do you think people will buy your product or service?
Get feedback: Obtain as much feedback as you can from trusted friends, colleagues, nonprofit organizations, and potential investors or lenders. You’ll know when you’re done when you’ve heard the same questions and criticisms again and again. The goal is to have a good answer to almost everything that can be thrown at you.

Related: Don’t Let Technology Hinder Your Bottom Line

Completing the business planning process can be challenging, but it should also be interesting, productive, and satisfying. The hardest part is developing a clear picture of the business that makes sense, is appealing to others, and provides a reasonable road map for the future. Another challenging aspect is integrating your products, services, customers, marketing, operations, management, and financial projections seamlessly together. However, these pieces should not dilute your enthusiasm to succeed.

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Wave of Amicus Briefs Back Drug Price Plan at Trial Court Stage

By Nyah Phengsitthy

The Biden administration’s efforts to fend off legal challenges from the pharmaceutical industry battling Medicare drug price negotiations has drawn reinforcements from officials and academics defending the program.

Former government officials, legal and economic scholars, and patient advocacy groups have become “friends of the court” in lawsuits by pharmaceutical giants and industry groups fighting the constitutionality of the Medicare Drug Price Negotiation Program. The plan, which is considered one of President Joe Biden ’s signature health initiatives under the Inflation Reduction Act, is expected to slash the costs of 10 Medicare Part D drugs beginning in 2026.

The pharmaceutical industry has yet to win a court decision, and has seen several amicus briefs filed in favor of the government. Though the filers aren’t considered parties in the suits, they provide advocate or expert perspective that could factor in or influence the courts’ decisions.

“When you start seeing an amicus brief or multiple amicus briefs filed over a particular case, that kind of clues you into the fact that this might be an important one that you really want to focus on,” said Tom Pryor, a staff attorney with the Public Health Law Center at the Mitchell Hamline School of Law, who has analyzed and drafted various briefs.

Most amicus briefs are also filed in the Supreme Court and federal courts of appeals, said Lawrence Ebner, executive vice president and general counsel of the Atlantic Legal Foundation, a nonprofit, free-enterprise advocacy organization that is a frequent filer of amicus briefs.

“District court amicus briefs are becoming more common,” said Ebner, who is also a fellow of the American Academy of Appellate Lawyers.

Among the seven pending drug pricing trial court cases, over a dozen amicus briefs support the Department of Health and Human Services, and at least two are in favor of the pharmaceutical industry.

Lots of Claims

The Department of Justice, which represents the Medicare agency, has been wrestling with a wide spectrum of claims from the pharmaceutical industry. The plaintiffs allege the program violates compelled speech under the First Amendment, the Fifth Amendment takings clause and due process, and excessive fines under the Eighth Amendment. Plaintiffs also claim Congress delegated too much power to Medicare to administer the program.

One case so far has been decided on the merits. Chief Judge Colm F. Connolly of the US District Court for the District of Delaware in March ruled that AstraZeneca PLC ‘s due process claims failed “as a matter of law,” and the manufacturer had not “identified a property interest protected by the Constitution that is put in jeopardy by the Program.”

Though the decision only applied to AstraZeneca, the ruling referenced key cases that were also cited by amicus briefs in other drug pricing suits.

Some of the cases included: Clapper v. Amnesty Int’ USA (2013) to support that “a plaintiff cannot manufacture standing merely by inflicting harm on [itself] based on [its] fears of hypothetical future harm that is not certainly impending"; Coyne-Delany Co. v. Cap. Dev. Bd (7th Cir. 1980) to cite “no one has a ‘right’ to sell to the government that which the government does not wish to buy"; and Perkins v. Lukens Steel Co (1940), which ruled “the Government enjoys the unrestricted power to produce its own supplies, to determine those with whom it will deal, and to fix the terms and conditions upon which it will make needed purchases.”

Amicus briefs have also tackled a primary argument among the lawsuits, which is that the program violates the Fifth Amendment takings clause because it seizes their property without paying just compensation and forces them to sell their property at a government-dictated price.

“These cases are creative and I give some kind of credit—like in a backhanded way—to the very high-paid and very smart lawyers representing these companies,” said Christopher Morten, an associate clinical professor of law at Columbia Law School who specializes in patent law and is a scholar in several amicus briefs .

“But they had to bend over backwards to come up with constitutional arguments against what is a price negotiation procedure. For decades, courts have held that price negotiation and price controls are constitutional. If a court sides with drug companies on these constitutional challenges, I think there’s profound harm that will flow,” Morten said.

Nationally recognized health-care and Medicare experts, including a former administrator for the Centers for Medicare & Medicaid Services, have also explained how the price-setting program is consistent with the government’s power.

Legal scholars also point out how industry arguments have been rejected by other courts.

The First Amendment claim, for example, “hasn’t been adopted or accepted in the past,” said David Schulz, director of the Media Freedom & Information Access Clinic at Yale Law School.

“If the courts adopted that reading of the First Amendment, it would have a tremendously adverse impact and could subject a whole host of regulations to First Amendment challenges,” he said.

Judge Zahid N. Quraishi of the US District Court for the District of New Jersey was skeptical of the First Amendment claim during a March oral argument —pressing the manufacturers on what makes the price-setting agreement “unique.”

“What’s your response to the fact they said you can say whatever you want?,” he asked the drugmakers. “Nobody is compelling you to make any statement that this is fair or that you agree with it or that you even like it.”

Quraishi also pressed the government on why there needs to be disclaimer in the contract template.

Pharma Support

Amici in favor of the industry include the Biosimilars Forum and Fresenius Kabi USA . While their filings didn’t focus on legal arguments as much, they pressed on concerns about the program’s consequences on drug innovation.

The Inflation Reduction Act “threatens to squeeze out competition from biosimilars,” the Biosimilars Forum said in its brief. “When a product is selected for price controls under the IRA, the statute requires CMS to reduce the product’s price by at least 25 to 60 percent.”

Fresenius Kabi, a health-care company that specializes in bringing affordable medicines to patients with critical and chronic conditions, also called attention to taxes companies will face if they decline to participate in the program or don’t comply with the maximum fair price ultimately set by Medicare. The manufacturer will be required to pay taxes that start at 65% of the US sales of a product and the fines would increase by 10% every quarter, with a maximum of 95%.

Manufacturers facing less support through amicus briefs could also influence a district court judge’s decision in the case.

“Generally,” Ebner said, “because far fewer amicus briefs are filed at the district court level, there is a better chance that an amicus brief will get read by a district judge and have impact on legal rulings.”

“A lot of work goes into a well-written and persuasive amicus brief,” he said.

The pharmaceutical industry, though, has signaled it intends to take its cases to the nation’s top court, which is expected to open the door to another slew of briefs filed at the appellate and Supreme Court level.

To contact the reporter on this story: Nyah Phengsitthy in Washington at [email protected]

To contact the editors responsible for this story: Zachary Sherwood at [email protected] ; Karl Hardy at [email protected]

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Southern California city council gives a key approval for Disneyland expansion plan

FILE - Visitors pass through Disneyland in Anaheim, Calif., April 30, 2021. (AP Photo/Jae C. Hong, File)

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ANAHEIM, Calif. (AP) — Visitors to Disney’s California parks could one day walk through the snow-covered hamlet of Arendelle from “Frozen” or the bustling, critter-filled metropolis of “Zootopia” under a park expansion plan approved by the Anaheim City Council.

Disney would spend at least $1.9 billion over the next decade to transform its 490-acre (488-hectare) campus in densely-populated Southern California. It would be the biggest expansion of Disney’s Southern California theme parks in decades, aiming to create more immersive experiences for guests. Disney would also be required to spend tens of millions of dollars on street improvements, affordable housing and other infrastructure in the city.

The council unanimously approved the project early Wednesday at the end of an hourslong meeting that began Tuesday evening. A second council vote for final approval of Disney’s plan is required in May.

The plan wouldn’t expand Disney’s footprint in tourism-dependent Anaheim but would help it add rides and entertainment by letting the company relocate parking to a new multi-story structure and redevelop the massive lot, as well as make other changes to how it uses its properties.

A family visiting from Sarasota watches the solar eclipse at the Magic Kingdom at Walt Disney World, in Lake Buena Vista, Fla., Monday, April 8, 2024. (Joe Burbank/Orlando Sentinel via AP)

Disneyland, Disney California Adventure and the Downtown Disney shopping area are surrounded by freeways and residential areas in the city 30 miles (48 kilometers) southeast of Los Angeles, so the company sees the plan as vital to creating to continue to create sizable new attractions.

“We are thrilled that the City of Anaheim has agreed to work together on this legacy project,” Disneyland Resort President Ken Potrock said in a statement, adding the company awaits the final vote in May. “We look forward to our bright future together!”

A significant share of public testimony to the city council focused on Disney’s plans to buy a public street near the theme park and turn it into a pedestrian walkway and its intention to add a crosswalk on another neighboring street.

Resident Cassandra Taylor said she looks forward to the new rides the expansion will bring but is concerned about Disney’s plans to privatize a city street, adding she first heard of the idea last month in a newspaper article even though she had attended two informational presentations.

“They might have a pedestrian walkway planned now, but once it is theirs, they could just as easily remove it,” Taylor said. “It will be theirs and theirs entirely. Voters will have no say in its future use.”

Over the last two decades, Disney investments have included Cars Land, Pixar Pier, Star Wars Galaxy’s Edge and Avengers Campus in Southern California. The company has not committed to which stories it plans to feature given that the new development will take years.

It’s the first time Disney has sought a major change to its California theme parks since the 1990s, when the company obtained approvals to turn Disneyland, its original theme park dubbed “the happiest place on Earth” and built in 1955, into a resort hub. It later built the Disney California Adventure theme park and the Downtown Disney shopping and entertainment area.

Disneyland was the second-most visited theme park in the world in 2022 with 16.8 million people coming through the gates, according to a report by the Themed Entertainment Association and AECOM.

Anaheim is Orange County’s most populous city and home to 345,000 people, a major league baseball team and a national hockey league team. Hotel revenue typically makes up about half of the city’s revenue and is expected to climb to $236 million this year, according to city estimates.

California Gov. Gavin Newsom welcomed the vote as a way to create more jobs in the state of 39 million people.

“We look forward to cultivating more Disney magic and building opportunities for all as this investment drives billions of dollars in revenue for our state and local communities,” Newsom said in a statement.

For Anaheim, the plan would translate directly into much-needed cash for police, fire, libraries and other community services, said Mike Lyster, a city spokesman.

“Whenever Disney invests in Anaheim, we see city revenue grow and our economy expand,” Lyster said. “This is a milestone vote for our city.”

US has no immediate plan to sanction Chinese banks over Russia, source says

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COMMENTS

Industry Analysis in a Business Plan
An example of the industry analysis in a business plan of an Indian soap company: Market overview: The market is estimated to be at INR 195 billion in 2020 and is expected to grow at 7% annually ...
Industry Analysis In A Business Plan
Industry analysis in a business plan is a tool that enables a company to understand its position relative to other companies that produce similar products or services like it. While considering the strategic planning process, a company must understand the overall industry's forces. Thus, industry analysis techniques in a business plan enable ...
Industry and Market Analysis: Complete Guide for Business Planning
7 TOP TIPS For Writing Market Analysis. 1. Realistic Projections. Above all, make sure that you are realistic in your projections about how your product or service is going to be accepted in the market, otherwise you are going to seriously undermine the credibility of your entire business case. 2.
How to Conduct an Industry Analysis? Steps, Template, Examples
Industry analysis serves several critical objectives for businesses and decision-makers: Understanding Market Dynamics: The primary objective is to gain a comprehensive understanding of the industry's dynamics, including its size, growth prospects, and competitive landscape. This knowledge forms the basis for strategic planning.
How to Write the Industry Profile Section of a Business Plan
Choose the location you want data from then choose 'total revenue' and 'percentage' and 'search for an industry' as your other options. Then type your NAICS code that you discovered under 'Search for an industry' and click on 'search'. Your options will come up below. Choose the appropriate option and 'create report'.
How to Write The Industry Section of a Business Plan
Writing a Business Plan: Section 2. When writing a business plan, the Industry section is best organized as two parts: an overview of the industry and a summary of your business's position within the overall industry. Before writing this section of the business plan, use these questions to focus your research: What is the size of your industry ...
Industry Analysis
Industry analysis is a market assessment tool used by businesses and analysts to understand the competitive dynamics of an industry. ... Learn more in CFI's Corporate & Business Strategy Course. Types of industry analysis. There are three commonly used and important methods of performing industry analysis. The three methods are:
How to Conduct an Industry Analysis
Whether you write it all out in a formal business plan or not, when you're doing your industry analysis, you're looking at the following: Industry participants. Distribution patterns. Competition and buying patterns. Everything in your industry that happens outside of your business will affect your company.
What Is an Industry Analysis and Trends Business Plan?
An industry analysis enables you to gain a better understanding of the industry and market in which you will be conducting business. By conducting an industry analysis before you start writing your business plan, you will be able to: Identify industry trends, such as potentially problematic aspects of the industry.
Industry Analysis: Why It's Important & How to Analyze an Industry
The Importance of Analyzing an Industry in Business. By taking a look into what makes your industry tick you get a better sense of your company's position. Industry analysis can assess demand and supply and technological changes. ... You're able to better forecast your growth rate and plan for evolving industry dynamics. The result is the ...
Industry Analysis
Industry Analysis Explained. The term industry analysis in strategic management explains the procedure followed to evaluate or analyse the general market environment in which the business is operating. It is necessary for every business to understand the industry dynamics by studying the trends, level of competition, potential growth opportunities and resistances that it may face during ...
Porter's Five Forces Explained and How to Use the Model
Porter's 5 Forces: Porter's Five Forces is a model that identifies and analyzes five competitive forces that shape every industry, and helps determine an industry's weaknesses and strengths ...
The Essence of Industry in a Business Plan
The industry analysis provides insights into the market dynamics, competition, trends, and growth opportunities. By delving into the industry details, you can make informed decisions, identify potential risks, and align your strategies effectively. This article sheds light on the significance of the industry component in a business plan.
How to Write & Present an Industry Analysis
It helps business owners to devise strategies and formulate a business plan best suited according to the industry analysis. Here are a few merits of creating an industry analysis presentation for every new business: ... The analysis helps businesses to keep up with innovation & the ever-changing dynamics of the industry.
Industry Dynamics: Navigating the Changing Tides of Business
Industry dynamics refer to the continuous changes and movements within a specific sector that influence its overall structure, performance, and growth trajectory. These dynamics are driven by ...
Unlocking the Value of Competitive Intelligence in Your Business Plan
Doing so provides a comprehensive look at sector dynamics, key players in any given space, and the relationships and regulations that govern the market. Insights gained here should provide a better sense of where opportunities and challenges exist - and how to craft your business models, strategic investments, and operating plans accordingly.
The Oxford Handbook of Industry Dynamics
Matthias Kipping is Professor of Strategic Management and Chair in Business History at the Schulich School of Business, York University in Toronto, Canada. ... Emergence and Dynamics of a Knowledge Industry (OUP, 2002). Takafumi Kurosawa (ed.), Takafumi Kurosawa (ed.) Economics, Kyoto University. Find on Oxford Academic. Google Scholar. ...
PDF Firm and Industry Dynamics
beginning of an industry, there are often many -rms, but later there may be relatively few. Klepper (1993, and other papers with coauthors) Jovanic and McDonald (1995) Also related are the Schumpeterian growth models: Aghion-Howitt (1992) and others. Jonathan Levin Firm and Industry Dynamics Fall 2009 16 / 84 (Economics 257 Stanford University)
Reflections on Firm and Industry Dynamics
Over time, the understanding of industry dynamics deepened in the emerging field that Keith Pavitt called "innovation studies" ... GSIA was a small business school created in 1949 to add rigour to the relevance of business education and to look inside the economist's "black box" conception of the business enterprise.
Industrial Dynamics: The Journey and the Future
My interest in Industrial Dynamics began with my undergraduate honours thesis (Carlsson, 1968) and has extended over the ensuing five decades.I became an advocate for recognizing Industrial Dynamics as a much-needed counterpoint to the dominance in economics of Industrial Organization (IO), which focuses on an industry's market structure (in terms of the number of firms and how they compete ...
Industry Overview—Business Plan Example
Let's look at the industry overview for Pet Grandma, a fictional pet-based business invented for this business plan sample. The Pet Industry According to the American Pet Products Association, pet expenditures in the U.S. totaled slightly over $72.5 billion in 2018, up from $48 billion in 2010, an increase of 51% in eight years.
Industry Dynamics
It is suggested that such a framework revolves around six generic focused characteristics of industry dynamics: knowledge management, technology management, process management, relationship management, regulatory compliance, and managing geopolitical events. But much has changed …. To create competitive advantage, or perhaps, a value ...
Developing a Flexible and Dynamic Business Plan
Dr. Bert Shlensky. Developing a Flexible and Dynamic Business Plan. May 03, 2018. Creating a business plan is a lot like forecasting the weather… those who are in charge of predicting a storm get blamed if they are not 100% accurate. The same logic applies to business planning in terms of timing, expediency, and execution.
Banking & Capital Markets
Our worldwide team of industry-focused assurance, tax, transaction and consulting professionals integrates sector knowledge and technical experience. We work with clients to navigate digital innovation, new business models and ecosystem partnerships, helping banks become the nimble, responsive organizations that customers demand.
Verizon begins 2024 with strong wireless service revenue growth, solid
Business reported 151,000 fixed wireless net additions in first-quarter 2024, representing a 10.2 percent increase from first-quarter 2023. This marked their best quarterly result to date. In first-quarter 2024, Verizon Business operating income was $399 million, a decrease of 27.6 percent year over year, and segment operating income margin was ...
California Sees Two More Property Insurers Exit From Market
California's already strained property insurance market is facing a new challenge as two more insurers, Tokio Marine America Insurance Co. and Trans Pacific Insurance Co., plan to withdraw from ...
Google (GOOGL) Delays Plan to Phase Out of Cookies in Chrome Browser
Google delayed its plan to phase out cookies, software that lets marketers track users, in its Chrome browser this year, pushing to 2025 a move that will ultimately transform how advertisements ...
Wave of Amicus Briefs Back Drug Price Plan at Trial Court Stage
The Biden administration's efforts to fend off legal challenges from the pharmaceutical industry battling Medicare drug price negotiations has drawn reinforcements from officials and academics defending the program. Former government officials, legal and economic scholars, and patient advocacy ...
Anaheim City Council gives key approval for Disneyland expansion plan
For Anaheim, the plan would translate directly into much-needed cash for police, fire, libraries and other community services, said Mike Lyster, a city spokesman. "Whenever Disney invests in Anaheim, we see city revenue grow and our economy expand," Lyster said. "This is a milestone vote for our city."
US has no immediate plan to sanction Chinese banks over Russia, source
Blinken on Friday criticized Chinese support for Russia's defense industry, saying Beijing was the key contributor to Moscow's war in Ukraine through its provision of critical components for weaponry.

WHAT is Market Analysis?

WHY Should You Do Market Analysis?

External Support

HOW To Do Market Analysis: Step-by-Step

Step 1: Industry Analysis

How Do You Analyze an Industry?

1.1. Economic Conditions

1.2. Industry Description

1.3. Industry Size and Growth

1.4. Industry Trends

Step 2: Target Customer Identification

How Do You Identify an Ideal Target Customer?

2.2. Demographics

2.3. Geographic Location

2.4 Purchasing Patterns

2.5. Psychographics

Step 3: Target Market Analysis

How Do You Analyze a Target Market?

3.1. Target Market Description

3.2. Market Size and Share

3.3. Market Trends

3.4. Demand Growth Opportunity

How Big Should My Target Market Be?

What If My Stats Look Bad?

Step 4: Industry and Market Analysis Research

What is Primary and Secondary Market Research?

Why Do You Need To Do Primary & Secondary Market Research?

7 TOP TIPS For Writing Market Analysis

2. Laser Focus

3. Target Audience

4. Story Time

6. Information Overload

7. Marketing Plan

Final Thoughts

Related Questions

Why are Industry & Market Research and Analysis IMPORTANT?

How Can Industry & Market Research and Analysis BENEFIT a Business?

How to Conduct an Industry Analysis? Steps, Template, Examples

What is Industry Analysis?

Objectives of Industry Analysis

Importance of Industry Analysis in Business

How to Prepare for Industry Analysis?

1. Data Collection and Research

2. Identifying Relevant Industry Metrics

3. Gathering Competitive Intelligence

Industry Analysis Frameworks and Models

Porter's Five Forces Model

SWOT Analysis

PESTEL Analysis

Industry Life Cycle Analysis

Value Chain Analysis

Data Interpretation and Analysis

1. Analyze Market Size and Growth

2. Assess Market Trends

3. Evaluate Competitive Landscape

4. Identify Key Success Factors

5. Analyze Customer Behavior and Preferences

How to Conduct Competitor Analysis?

1. Identify Competitors

2. Analyze Competitor Strengths and Weaknesses

3. Competitive Positioning

4. Benchmarking and Gap Analysis

Market Entry and Expansion Strategies

Market Segmentation and Targeting

Market Entry Modes

Competitive Strategy Formulation

International Expansion Considerations

Risk Assessment and Mitigation

1. Identify Industry Risks

2. Assess Business Vulnerabilities

3. Risk Management Strategies

4. Contingency Planning

Industry Analysis Template

Industry Overview

Competitive Analysis

Market Analysis

Technological Analysis

Financial Analysis

Consumer Insights

SWOT Analysis for Your Business