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 October 27, 2023

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

What’s your biggest business challenge right now?

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.

features

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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Content Author: Tim Berry

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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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.

Related Questions

What is the purpose of industry & market research and analysis.

The purpose of industry and market research and analysis is to qualitatively and quantitatively assess the environment of a business and to confirm that the market opportunity is sufficient for sustainable success of that business.

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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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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  • How to Make a Business Plan Format
  • Parts of Business Plan and Definition
  • Business Description Outline
  • Market Analysis: Everything You Need To Know
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  • IT Company Business Plan
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Industry analysis: why it’s important & how to analyze an industry.

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.

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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

briefly explain the industry analysis in your business plan

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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Industry Analysis

What is an industry analysis.

An industry analysis is a marketing process that provides statistics about the market potential of your business products and services. This section of your plan needs to have specific information about the current state of the industry, and its target markets. An industry analysis may contain reference materials such as spreadsheets, pie charts, and bar graphs in order to represent the data.

Navigation:

Step-by-step checklist.

  • Library Business Research Resources
  • Government Websites, Including Labour Market Information Sources

briefly explain the industry analysis in your business plan

Identify your industry and provide a brief overview. You may need to explore your industry on a local, regional, provincial, national, and/or global level. Be sure to define relevant industry codes. Provide statistics and historical data about the nature of the industry and growth potential for your business, based on economic factors and conditions.

briefly explain the industry analysis in your business plan

Summarize the nature of the industry. Include specific information about growth patterns, fluctuations related to the economy, and income projections. Be sure to document recent developments, news, and  innovations. Also, discuss marketing strategies, and the industry's prevalent operational and management trends.

briefly explain the industry analysis in your business plan

Provide a forecast for your industry. Compile economic data and industry predictions at different time intervals (5, 10, 20 years). Be sure to cite sources. Note: the type and size of the industry will determine how much information you will be able to find about a particular industry. Define if it is new and emerging, growing, maturing or declining.

briefly explain the industry analysis in your business plan

Identify government regulations that affect the industry. Include any recent laws pertaining to your industry, and any licenses or authorizations you would need to conduct business in your target market. This section may include information about fees and costs involved.

briefly explain the industry analysis in your business plan

Explain your unique position within the industry. Once you have completed your Competitive Analysis (in the next section) you can list the leading companies in the industry, and compile an overview of data of your direct and indirect competition. This will help you communicate your unique value proposition.

briefly explain the industry analysis in your business plan

List potential limitations and risks. Write about factors that might negatively impact your business and what you foresee in the short-term and long-term future.  Outline what you know about the driving forces: new regulations, technology, globalization, competitors, changing customer needs.

briefly explain the industry analysis in your business plan

Talk to people! Go to tradeshows, do cold calls, talk to people in relevant associations and go to business events.

Tip: How to generate keywords to search databases

Before you access the resources and databases below, it is best practice to consider the key words you can use as search terms to find information about your industry. Follow the steps below: 

  • Pinpoint the main words/phrases that describe your industry.  (i.e. "bar")
  • Brainstorm several alternative words/phrases that will bring you additional search results. These may be direct synonyms, or tangentially related.  (i.e. "pub," "nightclub," "drinking place," "tavern," "restaurant.")

Tip: How to use NAICS codes

At the start of your research, it may not be clear what specific industry you should be examining. A good strategy is to find out if your business idea is classified in an industrial classification system. These systems organize industries by assigning them a numeric code. The most commonly used system is the North American Industry Classification System (NAICS).  Once you know your Industry Classification Code you can use this number to :

  • Find industry-specific statistics on government websites or in library databases
  • Generate lists of competitors in company directories

Another common classification system is the Standard Industry Code (SIC). NAICS have most replaced the SIC, but the SIC is still used by some commercial databases. Finding and using these classification systems to effectively search can be tricky, so don't hesitate to ask a librarian for help.

You can keyword search for your industry NAICS code here:

Search or browse all NAICS or SIC codes on the  NAICS Association website . Some NAICS codes are different in Canada — you can search by keyword or browse Canadian NAICS codes at  Statistics Canada  or  Canadian Industry Statistics. To search for a SIC code using a NAICS code and vice versa, use the NAICS & SIC Crosswalks.   

For more information about planning your industry research, including identifying your industry codes, check out the video tutorial for  Module 3: Planning Your Industry Research .

Don't forget to take a look at our Industry Guides for detailed industry-specific market research resources!

Library Business Research Resources:

Business resources at academic libraries .

Colleges and Universities with business programs will have useful business collections you may be able to get access to through their academic library. Often these academic libraries can provide the general public with access to their collections, which include electronic resources like databases and e-books. For example, they could have alumni or community cards, and can provide temporary "guest" passes in certain situations. Contact your local college or university library to see what they can provide. Please note: you probably will not get access to their electronic resources with remote access.

UBC Library Business Databases

How to access: If you are a UBC student, staff, faculty or in-person library visitor you may have access to business databases through the David Lam Management Research Library and Canaccord Learning Commons through the links below.

Full Listing By Title or Full Listing By Subject

There are two different ways to identify databases: Use "by title" if you already know the name; otherwise you can search the list "by subject" to find starting places for undertaking market research, finding articles or researching companies. To learn more about how you can access library resources if you are a community user or temporary visitor, check out the UBC Library  Community Users & Visitors Guide . Community users and temporary visitors may have additional access restrictions to specific databases because of license agreements.

Discovering where you can access the information you need to complete your research can be tricky. Below, we have a few examples of potential sources that collect the type of information you will need.

Ibis World Industry Reports

Business Source Complete

Canadian Business and Current Affairs

Canadian Newsstream

Trade Publications, Journals, and Magazines:

Industry and trade associations work to keep people within an industry informed about the industry through newsletters, magazines, and trade fairs. The information can range from a detailed focus on a specific product line, to general coverage of an industry or key business risk and trends. Industry and professional association websites can be excellent sources of free information whether or not you are a member of that organization. In addition, you can find news about industries via government websites, news databases, as well as news directories and search engines.

Ulrichsweb Provides publisher information on more than 300,000 periodicals of all types. Use this to create a list of relevant ones to check out in your industry. Search by keyword, publisher or geographic location.

Trade Associations:

Trade associations often publish free industry newsletters that are excellent sources of information for your business plan. Such newsletters often have articles that cover in-depth topics on business management, manufacturing practices, how-tos, current industry news and much more. One good reason to create a list of relevant associations is to see if any of them publish a monthly industry newsletter on their website.

ASAE Gateway to Associations Directory Use this directory to search for an association by name, interest area, or international geographic location (including Canada and BC). You can also search using a combination of various fields.

Associations Canada This library database covers Canadian, as well as some international, industry, professional or special interest associations. Searchable by type or keyword. You can use this to  identify key associations' websites and search for freely available newsletters, blogs or reports they they may publish on your industry. Please contact your local public or research library for access. Use of your library card may be required for online access to this resource. Print copies may also be available for in-person users.

Web searching tip: Use Google or another search engine to search for industry associations relevant to your industry in your location. If you don't find a relevant industry association, try broadening your geographic area (e.g. from Vancouver to British Columbia, or from Canada to the U.S. or international). If your industry is very specialized or new, look for associations for broader or similar industries.

Government Websites, Including Labour Market Information Sources:

BC Stats |  Current reports and statistics from British Columbia's central statistical agency including labour market information, economic statistics and bankruptcies. Start by searching their Industry section  and narrowing by industry type or go to the Business, Industry & Trade page to skim all the different business-related topics.

WorkBC  |  Find current employment outlooks, labour market information, relevant links, and a geographic representation of the BC workforce. Start by searching your  Industry Profile .

Innovation, Science, and Economic Development Canada Provides market research, industry statistics, licensing information for intellectual property, and information about doing business internationally. The Industry Canada site features interactive applications such as customizable trade reports, cost calculators, and online business planning guides. You can also search broad Canadian industry statistics .

Entrepreneurship Indicators Database This database is intended to provide comprehensive business demography statistics and performance indicators for enterprises in Canada. This information is available upon request.

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How to Write the Market Analysis Section of a Business Plan

Written by Dave Lavinsky

industry description and target market analysis

What is the Market Analysis in a Business Plan?

The market analysis section of your business plan is where you discuss the size of the market in which you’re competing and market trends that might affect your future potential such as economic, political, social and/or technological shifts.

This helps you and readers understand if your market is big enough to support your business’ growth, and whether future conditions will help or hurt your business. For example, stating that your market size is $56 billion, has been growing by 10% for the last 10 years, and that trends are expected to further increase the market size bodes well for your company’s success.

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What Should a Market Analysis Include?

You’ll want to address these issues in your market analysis:

  • Size of Industry – How big is the overall industry?
  • Projected Growth Rate of Industry – Is the industry growing or shrinking? How fast?
  • Target Market – Who are you targeting with this product or service?
  • Competition – How many businesses are currently in the same industry?

Learn how to write the full market analysis below.

How to Write a Market Analysis

Here’s how to write the market analysis section of a business plan.

  • Describe each industry that you are competing in or will be targeting.
  • Identify direct competition, but don’t forget about indirect competition – this may include companies selling different products to the same potential customer segments.
  • Highlight strengths and weaknesses for both direct and indirect competitors, along with how your company stacks up against them based on what makes your company uniquely positioned to succeed.
  • Include specific data, statistics, graphs, or charts if possible to make the market analysis more convincing to investors or lenders.

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Industry overview.

In your industry overview, you will define the market in which you are competing (e.g., restaurant, medical devices, etc.).

You will then detail the sub-segment or niche of that market if applicable (e.g., within restaurants there are fast food restaurants, fine dining, etc.).

Next, you will describe the key characteristics of your industry. For example, discuss how big the market is in terms of units and revenues. Let the reader know if the market is growing or declining (and at what rate), and what key industry trends are facing your market.

Use third-party market research as much as possible to validate the discussion of your industry.

Here is a list of additional items you may analyze for a complete industry overview:

  • An overview of the current state of the industry . How big is it, how much does it produce or sell? What are its key differentiators from competitors? What is its target customer base like – demographic information and psychographics? How has the industry performed over time (global, domestic)?
  • Analyze the macro-economic factors impacting your industry . This includes items such as economic growth opportunities, inflation, exchange rates, interest rates, labor market trends, and technological improvements. You want to make sure that all of these are trending in a positive direction for you while also being realistic about them. For example, if the economy is in shambles you might want to wait before entering the particular market.
  • Analyze the political factors impacting your industry . This is an often-overlooked section of any business plan, but it can be important depending on what type of company you are starting. If you’re in a highly regulated industry (such as medical devices), this is something that you’ll want to include.
  • Analyze the social factors impacting your industry . This includes analyzing society’s interest in your product or service, historical trends in buying patterns in your industry, and any effects on the industry due to changes in culture. For example, if there is a growing counter-culture trend against big oil companies you might want to position yourself differently than a company in this industry.
  • Analyze the technological factors impacting your industry . This includes analyzing new technologies being developed in software, hardware, or applications that can be used to improve your product or service. It also includes emerging consumer trends and will be highly dependent on your business type. In a technology-related venture, you would analyze how these changes are impacting consumers. For an educational-related venture, you would analyze how these changes are impacting students, teachers, and/or administrators.

For each of these items, you want to provide some detail about them including their current state as well as what external factors have played a role in the recent past. You can also include many other important factors if they apply to your business including demographic trends, legal issues, environmental concerns, and sustainability issues.

When you are done analyzing all of these factors, wrap it up by summing them up in a statement that includes your view on the future of the industry. This should be positive to attract investors, potential customers, and partners.

If you’re having trouble thinking about all of these factors then it might be helpful to first develop a SWOT analysis for your business.

Once you have an understanding of the market, you’ll need to think about how you will position yourself within that potential market.

Picking Your Niche

You want to think about how large your market is for this venture. You also want to consider whether you’d like to pick a niche within the overall industry or launch yourself into the mainstream.

If you have an innovative product it can be easier to enter the mainstream market – but at the same time, you might face some additional competition if there are similar products available.

You can choose to specialize in a niche market where you’ll face less competition – but might be able to sell your services at a higher price point (this could make it easier for you to get potential customers).

Of course, if your product or service is unique then there should be no competition. But, what happens if it isn’t unique? Will you be able to differentiate yourself enough to create a competitive advantage or edge?

If you are planning on entering the mainstream market, think about whether there are different sub-niches within your specific market. For example, within the technology industry, you can choose to specialize in laptops or smartphones or tablets, or other categories. While it will be more difficult to be unique in a mainstream market, you will still be able to focus on one type or category of products.

How Will You Stand Out?

Many companies are able to stand out – whether by offering a product that is unique or by marketing their products in a way that consumers notice. For example, Steve Jobs was able to take a business idea like the iPhone and make it into something that people talked about (while competitors struggled to play catch up).

You want your venture to stand out – whether with an innovative product or service or through marketing strategies. This might include a unique brand, name, or logo. It might also include packaging that stands out from competitors.

Write down how you will achieve this goal of standing out in the marketplace. If it’s a product, then what features do you have that other products don’t? If it’s a service, then what is it about this service that will make people want to use your company rather than your competition?

You also need to think about marketing. How are you going to promote yourself or sell your product or service? You’ll need a marketing plan for this – which might include writing copy, creating an advertisement, setting up a website, and several other activities. This should include a description of each of these strategies.

If you’re struggling with the details of any of these sections, it might be helpful to research what other companies in your market are doing and how they’ve been successful. You can use this business information to inform your own strategies and plans.

Relevant Market Size & Competition

In the second stage of your analysis, you must determine the size and competition in your specific market.

Target Market Section

Your company’s relevant market size is the amount of money it could make each year if it owned a complete market share.

It’s simple.

To begin, estimate how many consumers you expect to be interested in purchasing your products or services each year.

To generate a more precise estimate, enter the monetary amount these potential customers may be ready to spend on your goods or services each year.

The size of your market is the product of these two figures. Calculate this market value here so that your readers can see how big your market opportunity is (particularly if you are seeking debt or equity funding).

You’ll also want to include an analysis of your market conditions. Is this a growing or declining market? How fast is it growing (or declining)? What are the general trends in the market? How has your market shifted over time?

Include all of this information in your own business plan to give your readers a clear understanding of the market landscape you’re competing in.

The Competition

Next, you’ll need to create a comprehensive list of the competitors in your market. This competitive analysis includes:

  • Direct Competitors – Companies that offer a similar product or service
  • Indirect Competitors – Companies that sell products or services that are complementary to yours but not directly related

To show how large each competitor is, you can use metrics such as revenue, employees, number of locations, etc. If you have limited information about the company on hand then you may want to do some additional research or contact them directly for more information. You should also include their website so readers can learn more if they desire (along with social media profiles).

Once you complete this list, take a step back and try to determine how much market share each competitor has. You can use different methods to do this such as market research, surveys, or conduct focus groups or interviews with target customers.

You should also take into account the barriers to entry that exist in your market. What would it take for a new company to enter the market and start competing with you? This could be anything from capital requirements to licensing and permits.

When you have all of this information, you’ll want to create a table like the one below:

Once you have this data, you can start developing strategies to compete with the other companies which will be used again later to help you develop your marketing strategy and plan. 

Writing a Market Analysis Tips

  • Include an explanation of how you determined the size of the market and how much share competitors have.
  • Include tables like the one above that show competitor size, barriers to entry, etc.
  • Decide where you’re going to place this section in your business plan – before or after your SWOT analysis. You can use other sections as well such as your company summary or product/service description. Make sure you consider which information should come first for the reader to make the most sense.
  • Brainstorm how you’re going to stand out in this competitive market.

Formatting the Market Analysis Section of Your Business Plan

Now that you understand the different components of the market analysis, let’s take a look at how you should structure this section in your business plan.

Your market analysis should be divided into two sections: the industry overview and market size & competition.

Each section should include detailed information about the topic and supporting evidence to back up your claims.

You’ll also want to make sure that all of your data is up-to-date. Be sure to include the date of the analysis in your business plan so readers know when it was conducted and if there have been any major changes since then.

In addition, you should also provide a short summary of what this section covers at the beginning of each paragraph or page. You can do this by using a title such as “Industry Overview” or another descriptive phrase that is easy to follow.

As with all sections in a business plan, make sure your market analysis is concise and includes only the most relevant information to keep your audience engaged until they reach your conclusion.

A strong market analysis can give your company a competitive edge over other businesses in its industry, which is why it’s essential to include this section in your business plan. By providing detailed information about the market you’re competing in, you can show your readers that you understand the industry and know how to capitalize on current and future trends.

Business Plan Market Analysis Examples

The following are examples of how to write the market analysis section of a business plan:

Business Plan Market Analysis Example #1 – Hosmer Sunglasses, a sunglasses manufacturer based in California

According to the Sunglass Association of America, the retail sales volume of Plano (non-prescription) sunglasses, clip-on sunglasses, and children’s sunglasses (hereinafter collectively referred to as “Sunwear”) totaled $2.9 billion last year. Premium-priced sunglasses are driving the Plano Sunwear market. Plano sunglasses priced at $100 or more accounted for more than 49% of all Sunwear sales among independent retail locations last year. 

The Sunglass Association of America has projected that the dollar volume for retail sales of Plano Sunwear will grow 1.7% next year. Plano sunglass vendors are also bullish about sales in this year and beyond as a result of the growth of technology, particularly the growth of laser surgery and e-commerce.

Business Plan Market Analysis Example #2 – Nailed It!, a family-owned restaurant in Omaha, NE

According to the Nebraska Restaurant Association, last year total restaurant sales in Nebraska grew by 4.3%, reaching a record high of $2.8 billion. Sales at full-service restaurants were particularly strong, growing 7% over 2012 figures. This steady increase is being driven by population growth throughout the state. The Average Annual Growth Rate (AGR) since 2009 is 2.89%.

This fast growth has also encouraged the opening of new restaurants, with 3,035 operating statewide as of this year. The restaurant industry employs more than 41,000 workers in Nebraska and contributes nearly $3 billion to the state economy every year.

Nebraska’s population continues to increase – reaching 1.9 million in 2012, a 1.5% growth rate. In addition to population, the state has experienced record low unemployment every year since 2009 – with an average of 4.7% in 2013 and 2014.

Business Plan Market Analysis Example #3 – American Insurance Company (AIC), a chain of insurance agencies in Maine

American Insurance Company (AIC) offers high-quality insurance at low prices through its chain of retail outlets in the state of Maine. Since its inception, AIC has created an extensive network of agents and brokers across the country with expanding online, call center and retail business operations.

AIC is entering a market that will more than double in size over the next 50 years according to some industry forecasts. The insurance industry is enjoying low inflation rates, steady income growth, and improving standards of living for most Americans during what has been a difficult period for much of American business. This makes this a good time to enter the insurance industry as it enjoys higher margins because customers are purchasing more coverage due to increased costs from medical care and higher liability claims.

American Insurance Company provides affordable homeowners, auto, and business insurance through high-quality fulfillment centers across America that have earned a reputation for top-notch customer service.

AIC will face significant competition from both direct and indirect competitors. The indirect competition will come from a variety of businesses, including banks, other insurance companies, and online retailers. The direct competition will come from other well-funded start-ups as well as incumbents in the industry. AIC’s competitive advantages include its low prices, high quality, and excellent customer service.

AIC plans to grow at a rate that is above average for the industry as a whole. The company has identified a market that is expected to grow by more than 100% in the next decade. This growth is due to several factors: the increase in the number of two-income households, the aging population, and the impending retirement of many baby boomers will lead to an increase in the number of people who are purchasing insurance.

AIC projects revenues of $20M in year one, which is equivalent to 100% growth over the previous year. AIC forecasts revenue growth of 40%-60% each year on average for 10 years. After that, revenue growth is expected to slow down significantly due to market saturation.

The following table illustrates these projections:

Competitive Landscape

Direct Competition: P&C Insurance Market Leaders

Indirect Competition: Banks, Other Insurance Companies, Retailers

Market Analysis Conclusion

When writing the market analysis section, it is important to provide specific data and forecasts about the industry that your company operates in. This information can help make your business plan more convincing to potential investors.

If it’s helpful, you should also discuss how your company stacks up against its competitors based on what makes it unique. In addition, you can identify any strengths or weaknesses that your company has compared to its competitors.

Based on this data, provide projections for how much revenue your company expects to generate over the next few years. Providing this information early on in the business plan will help convince investors that you know what you are talking about and your company is well-positioned to succeed.  

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Other Resources for Writing Your Business Plan

How to Write a Great Business Plan Executive Summary How to Expertly Write the Company Description in Your Business Plan The Customer Analysis Section of Your Business Plan Completing the Competitive Analysis Section of Your Business Plan The Management Team Section of Your Business Plan Financial Assumptions and Your Business Plan How to Create Financial Projections for Your Business Plan Everything You Need to Know about the Business Plan Appendix Best Business Plan Software Business Plan Conclusion: Summary & Recap  

Other Helpful Business Planning Articles & Templates

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Industry Analysis – Definition, Types, Examples & How-to Guide

Studying the market trends and the competition level is important for businesses because it helps them to lay out their future strategies. Therefore, they use various tools and methods to achieve their goals. Industry analysis is the same process. Today, we’ll discuss industry analysis, its types, examples, and guide. 

Table of Contents

What is Industry Analysis?

Industry analysis is a market evaluation tool that businesses and companies use to comprehend and analyze the degree of competition in a certain industry. It helps you to understand the market position of the industry. Like the external factors impacting the industry, credit system, technological changes and how shaping the future, other competitive developing industries, competition level within the industry, and statistics of supply and demand.

Industry analysis helps an entrepreneur or a startup company to comprehend the position of a business relevant to the other competitive businesses in the industry. Most importantly, it helps you to recognize the upcoming threats and opportunities and how you can handle them with your strong points. The only way to survive in today’s business environment is to distinguish yourself from the competitors within the industry. 

Types of Industry Analysis

Businesses and companies use three main tools and methods to perform industry analysis, and they’re as follows; 

Competitive Force Model (Porter’s Five Forces)

Michael Porter introduced this model in the 1980s and it goes by the name of Porter’s 5 Forces. It analyzes the five forces impacting the industry. They are as follows; 

  • The intensity of Industry Rivals. The businesses operating in the same industry and their market share makes them industry rivals. Some of the factors that make the competition intense are; increasing fixed cost, lower differentiation, and high exit cost. 
  • The threat of Potential Entrants. The entrance of the new business in the industry makes the business environment competitive. If the entrance is easier, then it makes the business environment risky. If the entrance is difficult, then they could enjoy benefits for a long time. 
  • Bargaining Power of Supplier. If a business depends on the supplies of suppliers, then they would have a significant influence over your businesses. It could directly impact the price and quality of your product. 
  • Bargaining Power of Buyer. Here the customers have more negotiating power over the business. They would demand discounts, better quality, and economical price. It usually happens when there are more competitors in the industry. 
  • Threats of Substitute Products. It’s when competitive businesses are offering similar substitute products of the other industry. A business usually has to face competitors from various industries and they impact your revenue stream. However, the substitute’s products are of two types; same product features with the higher price and same product features with lower price. 

SWOT Analysis

SWOT analysis comprises strengths, weaknesses, opportunities, and threats, and its analysis studies the impact on the business. It further consists of two parts; 

  • Internal Factors. The strengths and weaknesses fall under the category of internal factors. They exist within any business and continue to play their role. 
  • External Factors. The opportunities and threats are the external factors. They tell us the impact of potential happenings and how the company should react. Now it depends on the management whether it has the ability to exploit the opportunities and ignore threats. 

PESTLE Analysis

PESTLE analysis comprises six macro-environmental factors like political, economical, social, technological, legal, and environmental factors. 

  • Political. Political factors mean government regulations, trade policies, tariffs, and the country’s overall stable environment. 
  • Economical. Economical factors include revenue, GDP, net income, import and exports, taxation, unemployment, growth rate, interest rate, and many other factors. 
  • Social. The social factor comprises fashion, trends, shopping, attitude and behavior, demography, healthy standards, and cultures. 
  • Technological. Technological factors consist of research and development, latest innovation and creativity, internet, and digital tech trends. 
  • Legal. Legal factors comprise labor laws, regulations, minimum wage, employment contracts, paychecks, leaves, and other issues. 
  • Environmental. The environmental factor comprises environmental issues like deforestation, pollution, carbon emission, soil degradation, and others.

Reasons to Perform an Industry Analysis

Industry analysis allows you to have an insight into the competitive business environment. The weaknesses of your competitors would be your strong suits. You can integrate such information to make the marketing plan to grow your business. 

The result of industry analysis provides you an insight into the future growth of your business. If the report tells you upcoming threats, then you can take preventive measures to avoid them. 

The analysis confirms and ensures the credibility of your business, and it would help you attract investors. It means that you’re familiar with competitors and knows what your customers want. 

How to Perform Industry Analysis Effectively

Review available documented/reports.

You should take some time to find and study already published reports relevant to your industry. You would probably find a well-detailed report, and studying it would answer your questions. It doesn’t mean that you should completely rely on such published reports. 

Therefore, you should choose the most report of your industry. It’s because trends and statistics change over time. If you rely on the old report, it won’t give you conclusive results. 

Carefully Choose the Industry You Analyze

You must select the most relevant industry for your business. It’s because every industry has got many sub-categories. For instance, a chemical industry would have sub-categories of pesticides, organic, inorganic, and so on. 

Come up with the Supply and Demand of Industry

Supply and demand play a significant role in controlling the market. You should study the past trends and product and product scenarios, and the findings would help you to predict the future. 

Know Your Competitors

You should consider studying your competitors and their expectations and plans from the market. Porter’s 5 forces model would help you in this regard. 

Follow Recent Developments in the Industry

Most importantly, you should study the macro-environmental factors that could impact your industry. Like the technological development, the latest tech trends, and technology innovation would impact many businesses worldwide. 

Focus on dynamics of the Industry

The industry analysis should focus on the particular industry in question and understand the various dynamics of the industry. It should be direct, to the point, and in-depth. For instance, if your focus industry is aluminum, then you should be aware of the per capita consumption within the industry along with production and total consumption. 

Examples and Templates of Industry Analysis

If you want to study the industry analysis of other businesses relevant to the industry as an example, it’s because it helps business owners to understand the position of their business. It answers them that how they can get a competitive edge over competitors.

  • Industry Analysis Example, Templates, and Reports

Advantages of Industry Analysis

  • It helps you to touch the unexplored opportunities
  • It helps startup companies to know the position of their business relevant to the competitors
  • Its focus is to point out the opportunities and threats 
  • It helps you to find out those points that could provide you the best results 
  • It helps you to develop a competitive strategy that would defend you in the competition
  • It helps you to evaluate the profitability of the relevant industries

Disadvantages of Industry Analysis

  • Misinterpretation of the statistics and data could lead you to make the wrong decision 
  • It’s a one-sided approach and it doesn’t guarantee success 
  • If inflation decreases the sale and company’s revenue stream, it would badly impact the report 
  • Season factors usually have a good and bad impact on the business, if the interpreter doesn’t consider these factors, it would impact the conclusions. 

About The Author

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Ahsan Ali Shaw

ProfitableVenture

How to Write a Business Plan Industry Analysis

By: Author Tony Martins Ajaero

Home » Business Plans

How do you conduct industry analysis for a business plan? Do you need help conducting market research and industry analysis for your business plan? Then I advice you read on. So you have a great business idea, you have refined and fine-tuned it, and you are ready to launch. You are going to offer a product or service with a clearly defined customer base, and you are confident that you will be successful in the long term.

Well, if the above applies perfectly to you, then you have not completed your assignment. What happens when you enter an examination hall without having studied for the exam at all? You’d spend all your time in the hall blaming yourself for being silly, right? Now, starting a business is even much more important because there’s a lot more at stake than passing or failing a grade. So, you must not leave out any aspect of research undone.

In this section of your business plan, you will demonstrate that the industry’s market size is worth going after, who your main competitors will be if you decide to take a plunge, and how you will be able to carve out a niche for yourself and give your competitors a run for their money. Planning a business goes beyond analyzing the potential of your offer. You must analyze the following three factors as well:

  • The strengths and weaknesses of your business
  • The competition
  • Who your customers are, what they want, and how they want it

These are the major components of a business plan’s market or industrial analysis and it is also known as a SWOT (Strength, Weaknesses, Opportunities and Threats) analysis. This section of your business plan reveals the chances of your business to achieve success with its offers. And that’s why the industry analysis is a very important section of your business plan, which must be carefully conducted and documented.

So in this article, we will be looking at how to conduct industry analysis for a business plan. If you are a budding entrepreneur, or you are planning to start a new business; then below are the exact steps to follow when conducting an industry analysis for a new business:

How to Conduct Industry Analysis for a Business Plan

1.  analyze the competition.

Of the three factors listed above, the competition may prove the most difficult to analyze, especially if you are new to the industry. But there are ways to simplify the task. You can start by looking at your direct competitors. If you are planning to start a new restaurant in an area, your direct competitors are other restaurants within that locality, while your indirect competitors are those that are slightly remote but still around.

Now, you are not just counting the number of rivals you have. You are trying to see how you can push ahead of them by filling a loophole they never noticed all these while. Some people find it hard to leave their workplace for the restaurant at lunchtime, but it’s either they do it or go hungry. You can disrupt the market’s status quo by offering to deliver lunch to people right in their workplaces. Filling loopholes like this one should be your goal.

If you don’t device strategies for pushing ahead of the competition, you will just enter the industry and join the survival race that you may never win. So, you need to introduce an innovation that will threaten your rivals. Remember, it’s either you differentiate or you fizzle out fast!

2.  Assess the industry / market size

After analyzing your direct and indirect competitors, you will need to analyze your chances of standing firm even in the face of stiffer competition. Your first step in market research is to get an idea of how big the opportunity is and why it’s worth going after.

This means finding out how many customers you are catering to and much revenue you are likely to make. This is a convincing first step to lure in whoever is reading your business plan to become intrigued and dig further into your findings. Here are some factors you should consider:

  • The individual strengths and weaknesses of your competitors.
  • The rate at which new competitors enter the market or the rate at which old competitors are leaving the market.
  • The products or services that fetch most revenue for your competitors.
  • How you will overcome the threat of substitute goods.

You can get lots of helpful information about your market from government sources, trade associations, financial services firms, online data providers, and free resources on the web.

3. Analyze industry forces and trends

You will need to outline what’s happening in the industry from many perspectives that would help the reader get the full gist on whether the market is lucrative or not. A great general-purpose tool for doing just that is the PEST Analysis. Here’s what it stands for and what you should consider:

  • P – Political factors ( the role government plays in your industry )
  • E – Economic factors ( the state of the economy on both local and national level )
  • S – Social factors ( relevant changes in matters like lifestyle trends, demographics, consumer attitudes, buying patterns and opinions )
  • T – Technological factors ( the impact of changing technological trends on your industry )

4.  Develop your marketing plan

Developing your marketing plan entails answering the following questions:

  • What products or services are you offering?
  • How much will you charge for your offers?
  • Where will you sell your product, and who are your target customers?
  • What special incentives would you use to encourage customers to buy your product?

In short, this section of your industry analysis outlines how you will deliver your product to the customers and how you will win customers to your side.

5.  Craft your growth plan

While some entrepreneurs are of the opinion that this step should come only after you have established your business, crafting your market development plan helps you envision your company growing in a few years. Your growth plan should address the following questions:

  • According to recent data, is the market for your product growing or dwindling?
  • Do you plan to introduce new products or line extensions in the next few years?
  • If you plan to introduce new offers, would they be closely related to your current offers or within another niche entirely?
  • Are there strategies for giving your business the competitive advantage in the industry?
  • Are there plans to handle increasing demand?

6.  Fine-tune your analysis

After the steps discussed above, cross check your analyses to ensure that your findings are factual and your figures are accurate. Another handy tool to have in your arsenal when conducting industry research is the almighty Porter’s 5 Forces Analysis . ( Don’t worry if you’ve never attended a business strategy class in your life, it’s actually quite straightforward ). Here’s the breakdown:

Threat of new entrants

How difficult ( or easy ) is it for someone to enter your specific vertical? If it’s very easy then most likely the space will be crowded with competitors fighting for margins. Conversely, if it’s very difficult, that that in itself can become a competitive advantage.

Threat of substitute products or services

How likely is it that another product or service could decrease demand or displace you and potentially the entire industry all together?

Bargaining power of customers

When it comes to pricing and terms, how much power does your customer have? Are they organized enough to exercise their purchase power, or is there so much competition that they have their pick resulting in pricing wars amongst providers?

Bargaining power of suppliers

This refers to how dependent you are on a given supplier to operate your business. If it’s difficult or near impossible for you to switch, that means they have the upper hand, whereas, if the switching costs are low, you can negotiate better terms for yourself.

Competitive rivalry of the market

Factoring in the first four forces, you can arrive at a good understanding of the playing field and whether it’s in your favor if you enter it, how long you’ll be able to last, through what means you’ll carve a space for yourself, and what you’re up against.

As a final note, you must never forget that the industry analysis is a vital part of your business plan and it will probably be the most extensive portion of it. So, take your time to conduct extensive research on your competitors and market trends over the recent years.

  • Go to Chapter 9 Part B: Writing a Business Plan Competitive Market Analysis
  • Go Back to Chapter 8: Writing your Company’s Profile
  • Go Back to Introduction and Table of Content

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First Steps: Writing the Industry Section of Your Business Plan This quick guide offers tips that will help you create the industry section for your business plan.

By The Staff of Entrepreneur Media, Inc. • Jan 4, 2015

In their book Write Your Business Plan , the staff of Entrepreneur Media, Inc. offer an in-depth understanding of what's essential to any business plan, what's appropriate for your venture, and what it takes to ensure success. In this edited excerpt, the authors outline what type of details you should include in the industry section of your business plan.

It isn't enough to just work hard. If you're in the wrong industry at the wrong time, making your business grow is going to be difficult. The investment community tends to believe that any business can be buoyed by an industry on the rise and that the opposite is true in an industry whose tide is ebbing. This means it's important for you to include an industry analysis in your business plan.

Readers of your business plan may want to see an industry on a fast-growth track with few established competitors and great potential. Or they may be more interested in a big, if somewhat slower-growing, market with competitors who have lost touch with the market, leaving the door open for rivals.

Whatever the facts are, you'll need to support them with a snapshot analysis of the state of your industry and any trends taking place. This can't be mere off-the-cuff thinking. You need to support your opinions with market research that identifies specific competitors and outlines their weaknesses and strengths and any barriers to entry into the market. You need to describe why your industry is valuable and how it will continue to be important. Finally, and perhaps most important, you'll have to convincingly describe what makes you better and destined to succeed.

When preparing the state of the industry section, instead of looking at your business as a self-contained system, you'll describe the whole industry in which you operate and point to your position in that universe. You then zero in on your country, your state and your local community, deepening on how far your business stretches.

This part of your plan may take a little more legwork than other sections because you'll be drawing together information from a number of outside sources. You may also be reporting on or even conducting your own original research into industry affairs.

To start preparing your industry analysis and outlook, dig up the following facts about your field:

1. What is your total industry-wide sales volume? In dollars? In units?

2. What are the trends in sales volumes within your industry?

3. Who are the major players and your key competitors? What are they like?

4. What does it take to compete? What are the barriers to entry?

5. What technological trends affect your industry?

6. What are the main modes of marketing?

7. How does government regulation affect the industry?

8. In what ways are changing consumer tastes affecting your industry?

9. Identify recent demographic trends affecting the industry.

10. How sensitive is the industry to seasons and economic cycles?

11. What are key financial measures in your industry (average profit margins, sales commissions, etc.)?

If your business addresses a trend before it's been widely recognized, you need to include this information in your business plan. Providing some statistics in the trends section of your plan can make it more convincing.

Barriers to Entry

If you want to become a semiconductor manufacturer, you'll need a billion-dollar factory or two. If you want to have a TV network, you'll need programming and cable carriage in the major markets. These problems are called barriers to entry, and they exist to some extent in all industries. The barriers may be monetary, technological, distribution or market-related, or they may simply be a matter of ownership of prime real estate.

An important part of analyzing your market is determining what the barriers to entry are and how high they stretch. If the barriers are high, as is the case with automobile manufacturing, you can be assured new competitors are likely to be slow in springing up. If the barriers are low, such as opening a nail salon, which doesn't have a huge overhead, you have more opportunity to get into the game.

Be alert for innovative competitors when writing the section of your plan in which you analyze barriers to entry. Clearly some markets are also more saturated than others, and today some are dominated by the McDonald's of their industry. For example, it's hard to open a bookstore today with Amazon changing the way people buy books. In that industry, you need to be creative and explore entry into specialty books, mystery books or another niche within the larger market. Exploring entry points in the marketplace carefully will save you from a disastrous error and will certainly demonstrate to investors that you've thought your plan through and aren't jumping to conclusions.

Identifying Competitors

You're not alone, even if you have a one-person business. You also have your competition to worry about, and your backers will worry about competition, too. Even if you're truly in the rare position of addressing a brand-new market where no competition exists, most experienced people reading your plan will have questions about companies they suspect may be competitors. For these reasons, you should devote a special section of your plan to identifying competitors.

If you had to name two competitors in the athletic shoe market, you'd quickly come up with Nike and Reebok. But these by far aren't the only competitors in the sneaker business. They're just two of the main ones, and depending on the business you're in, the other ones may be more important. If you sell soccer shoes, for instance, Adidas is a bigger player than either of the two American firms. And smaller firms such as Etonic, New Balance and Saucony also have niches where they are comparatively powerful.

You can develop a list of competitors by talking to customers and suppliers, checking with industry groups, and reading trade journals. But it's not enough to simply name your competitors. You need to know their manner of operation, how they compete.

Does a competitor stress a selective, low-volume, high-margin business, or does she emphasize sales growth at any cost, taking every job that comes along, whether or not it fits any coherent scheme or offers an attractive profit? Knowing this kind of information about competitors can help you identify their weaknesses as well as their names.

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BUS101: Introduction to Business

briefly explain the industry analysis in your business plan

The Business Plan

Read this section to see why business plans are essential and what sections should be included.

Industry Analysis

This section provides a brief introduction to the industry in which you propose to operate. It describes both the current situation and the future possibilities, and it addresses such questions as the following:

  • How large is the industry? What are total sales for the industry, in volume and dollars?
  • Is the industry mature or are new companies successfully entering it?
  • What opportunities exist in the industry? What threats exist?
  • What factors will influence future expansion or contraction of the industry?
  • What is the overall outlook for the industry?
  • Who are your major competitors in the industry?
  • How does your product differ from those of your competitors?
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  • Building Your Business
  • Becoming an Owner
  • Business Plans

How to Write the Market Analysis Section of a Business Plan

Alyssa Gregory is an entrepreneur, writer, and marketer with 20 years of experience in the business world. She is the founder of the Small Business Bonfire, a community for entrepreneurs, and has authored more than 2,500 articles for The Balance and other popular small business websites.

briefly explain the industry analysis in your business plan

The market analysis section of your business plan comes after the products or services section and should provide a detailed overview of the industry you intend to sell your product or service in, including statistics to support your claims.

In general, the market analysis section should include information about the industry, your target market, your competition, and how you intend to make a place for your own product and service. Extensive data for this section should be added to the end of the business plan as appendices, with only the most important statistics included in the market analysis section itself.

What Should a Market Analysis Include?

The market analysis section of your small business plan should include the following:

  • Industry Description and Outlook : Describe your industry both qualitatively and quantitatively by laying out the factors that make your industry an attractive place to start and grow a business. Be sure to include detailed statistics that define the industry including size, growth rate , trends, and outlook.
  • Target Market : Who is your ideal client/customer? This data should include demographics on the group you are targeting including age, gender, income level, and lifestyle preferences. This section should also include data on the size of the target market, the purchase potential and motivations of the audience, and how you intend to reach the market.
  • Market Test Results : This is where you include the results of the market research you conducted as part of your initial investigation into the market. Details about your testing process and supporting statistics should be included in the appendix.
  • Lead Time : Lead time is the amount of time it takes for an order to be fulfilled once a customer makes a purchase. This is where you provide information on the research you've completed on how long it will take to handle individual orders and large volume purchases, if applicable.
  • Competitive Analysis : Who is your competition? What are the strengths and weaknesses of the competition? What are the potential roadblocks preventing you from entering the market?

7 Tips for Writing a Market Analysis

Here is a collection of tips to help you write an effective and well-rounded market analysis for your small business plan.

  • Use the Internet : Since much of the market analysis section relies on raw data, the Internet is a great place to start. Demographic data can be gathered from the U.S. Census Bureau. A series of searches can uncover information on your competition, and you can conduct a portion of your market research online.
  • Be the Customer : One of the most effective ways to gauge opportunity among your target market is to look at your products and services through the eyes of a purchaser. What is the problem that needs to be solved? How does the competition solve that problem? How will you solve the problem better or differently?
  • Cut to the Chase : It can be helpful to your business plan audience if you include a summary of the market analysis section before diving into the details. This gives the reader an idea about what's to come and helps them zero in on the most important details quickly.
  • Conduct Thorough Market Research : Put in the necessary time during the initial exploration phase to research the market and gather as much information as you can. Send out surveys, conduct focus groups, and ask for feedback when you have an opportunity. Then use the data gathered as supporting materials for your market analysis.
  • Use Visual Aids : Information that is highly number-driven, such as statistics and metrics included in the market analysis, is typically easier to grasp when it's presented visually. Use charts and graphs to illustrate the most important numbers.
  • Be Concise : In most cases, those reading your business plan already have some understanding of the market. Include the most important data and results in the market analysis section and move the support documentation and statistics to the appendix.
  • Relate Back to Your Business : All of the statistics and data you incorporate in your market analysis should be related back to your company and your products and services. When you outline the target market's needs, put the focus on how you are uniquely positioned to fulfill those needs.

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  3. Industry Analysis In A Business Plan

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  4. Strategic Guide on How to Conduct an Industry Analysis

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COMMENTS

  1. Industry Analysis in a Business Plan

    Industry analysis is an assessment tool that is used to understand the different dynamics of a certain market or industry. In other words, conducting an industry analysis enables...

  2. How to Conduct an Industry Analysis

    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.

  3. 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 ...

  4. Industry and Market Analysis: Complete Guide for Business Planning

    Step 1: Industry Analysis How Do You Define an Industry? Industry consists of all businesses offering a similar product or service, other businesses closely related to that product or service, and supply and distribution systems supporting such companies.

  5. Industry Analysis In A Business Plan

    Industry Analysis In A Business Plan - Some decisions require a lot of thinking. You cannot just adopt "Rocks, Scissors, and Paper" to decide in such cases. Many reviews, analyses, and debates are behind such vital decisions. The same is the situation of Luke and his wife, Daisy. They have made this big decision to buy a new home.

  6. What Is an Industry Analysis and Trends Business Plan?

    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.

  7. Industry Analysis

    Industry analysis, for an entrepreneur or a company, is a method that helps to understand a company's position relative to other participants in the industry. It helps them to identify both the opportunities and threats coming their way and gives them a strong idea of the present and future scenario of the industry.

  8. 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. It can also find external factors that influence the competition. You're able to better forecast your growth ...

  9. Industry Analysis

    An industry analysis is a marketing process that provides statistics about the market potential of your business products and services. This section of your plan needs to have specific information about the current state of the industry, and its target markets.

  10. How to Write the Market Analysis Section of a Business Plan

    Writing a Market Analysis Tips. Include an explanation of how you determined the size of the market and how much share competitors have. Include tables like the one above that show competitor size, barriers to entry, etc. Decide where you're going to place this section in your business plan - before or after your SWOT analysis.

  11. Industry analysis

    This part of your business plan will be full of detail, and you should include charts, graphs, and references to support your business and its penetration into the market. This will take some real ...

  12. Industry Analysis

    Industry analysis helps an entrepreneur or a startup company to comprehend the position of a business relevant to the other competitive businesses in the industry. Most importantly, it helps you to recognize the upcoming threats and opportunities and how you can handle them with your strong points. The only way to survive in today's business ...

  13. How to Write a Business Plan Industry Analysis

    1. Analyze the competition Of the three factors listed above, the competition may prove the most difficult to analyze, especially if you are new to the industry. But there are ways to simplify the task. You can start by looking at your direct competitors.

  14. Introduction to Industry and Company Analysis

    Company and industry analysis together can provide insight into sources of industry revenue growth and competitors' market shares and thus the future of an individual company's top-line growth and bottom-line profitability. Industry analysis is useful for: understanding a company's business and business environment; identifying active ...

  15. How to Write The Industry Section of a Business Plan

    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?

  16. How To Conduct an Industry Analysis

    Decide what questions you want your analysis to answer, such as behaviors of your competitors, market growth or industry standards. Compile a list of your competitors and look for ways you can access research about them. 2. Collect your data. Collect data that helps answer questions about the market and your competitors.

  17. How to do a market analysis for your business plan

    Industry analysis. The industry analysis is the section of your business plan where you demonstrate your knowledge about the general characteristics of the type of business you're in. You should be able to present statistics about the size of the industry, such as total U.S. sales in the last year and industry growth rate over the last few years.

  18. First Steps: Writing the Industry Section of Your Business Plan

    1. What is your total industry-wide sales volume? In dollars? In units? 2. What are the trends in sales volumes within your industry? 3. Who are the major players and your key...

  19. The Business Plan: Industry Analysis

    Industry Analysis. This section provides a brief introduction to the industry in which you propose to operate. It describes both the current situation and the future possibilities, and it addresses such questions as the following: How large is the industry?

  20. Industry Overview—Business Plan Example

    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.

  21. How to Write the Market Analysis in a Business Plan

    The market analysis section of your small business plan should include the following: Industry Description and Outlook: Describe your industry both qualitatively and quantitatively by laying out the factors that make your industry an attractive place to start and grow a business. Be sure to include detailed statistics that define the industry ...

  22. How To Do a Business Plan Analysis

    A good business plan analysis includes the following: Investigation of internal finance. The investors will want to know what the company's financial structure looks like, including outstanding debts and potential profits. The analysis will determine if the information is accurate or realistic.

  23. Top 10 Components of a Business Plan

    Your market analysis should also help visualize your target customers. This includes how much money they make, what their buying habits are, which services they want and need, among other target customer preferences. Above all, the numbers should help answer why your business can do it better.