Question

In 300 words or more, define Industry Analysis and outline the role the global & domestic economies, exchange rates; business cycles; industry analysis; the industry structure and performance; and the competitive strategies.

Please stick to the word limit

Answer 1

Industry analysis is a critical part of understanding the competitive position that a firm finds itself in or in trying to understand a market when a firm tries to enter a new market. It provides information on the existing players in the market and how competitive the market is and which entity in the whole landscape has the bigger bargaining and pricing power. Doing a proper industry analysis can reveal the profit margins that can be derived in the industry and whether strategies such as integration or differentiated products makes sense. It is a precursor to forming business strategy for success in the market.

In order to properly complete the industry analysis, it is essential to have a proper grasp of the extrinsic macro economic factors which comes into play. These include macro economic policies, interest rate regimes and trade facilitation agreements or barriers put up by governments. The currency exchange rate and its control also influences whether it is cheaper to manufacture a product domestically and market it or just import it and then market the product. It is also essential to understand the business cycle of the industry to ensure that the entry is done when the environment is favourable and one should not pay an extravagant price for any acquisitions. This also helps us to understand the various drivers that the industry have such as demand drivers, substitutes and whether industry is concentrated or fragmented.

All these are ultimately inputs to the business strategy which decides on the level of integration, the kind of alliances or joint ventures to be made and the product strategy to be followed – niche and differentiated or low cost and mass marketing. So a good industry analysis sets the stage for further strategic refinement in the direction that the business should take.