What is meant by industry analysis? How does industry analysis help an individual in the strategy process?
What will be an ideal response?
Industry analysis (IA) is a research process that provides the entrepreneur with key information about the industry, such as its current situation and trends. Most entrepreneurs initially do an IA to find out what the profits are in an industry in order to better estimate possible financial returns. Taking this one step further, finding out how those profits are generated often makes the difference between success and failure. Armed with this information, the entrepreneur can tell if the industry is growing, stable, or in decline and what the degree of competition is.
The basics of industry analysis (IA) consist of knowing seven pieces of information: SIC/NAICS number and description (online), industry size over time (online), profitability, how profits are made (interview or articles), target market competitor concentration (directory checking), analysis, and sources.
Armed with the information from the industry analysis, entrepreneurs are in a better position to decide if the industry meets their needs for income (which comes from profits and operating revenues), financial growth (depending on the trend of the industry as a whole), and competitive challenge (depending on the number and concentration of competitors). It can also help them determine if they have or can get the expertise needed to run a profitable business (comparing how profits are made to how they would run their business if they started now).
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