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Industry Analysis

Simple Alliance, Kenya Limited


Definition

Your Industry section within the Business Description section is basically a summary of the industry your proposed business will operate in.  Within this industry analysis section, you review the political, market, and economic factors that could affect the development of your industry. This economic analysis exploration is part of market research. This market analysis summary gives your audiences an idea of how complex your industry is.     

Function

You use the Industry segment to undertake a number of significant functions. These include:  

  • Explaining the long-term prospects of your industry
  • Convincing  your audiences that your industry has a promising future 
  • Showing your business’ position within your target market 

Industry Determinants

Your industry analysis will derive from an exploration of five major factors, namely:  

  • Threat of alternatives
  • Purchaser power
  • Competitive rivalry
  • Threat of new entrants

Customer Power

The major factors that influence purchaser power include: 

  • Purchase volume
  • Brand identity
  • Bargaining influence  
  • Consumer data
  • Purchaser incentives
  • Available alternatives
  • price sensitivity Backward integration threat            
  • Product differentiation
  • Buyer concentration in relation to your industry  

Danger Posed by Alternatives

Key considerations in this area include:

  • Customers’ propensity to alternatives
  • Trade-off alternatives
  • Cost switching  
  • Price performance

Rivalry

Under rivalry, you consider issues such as:

  • Exit impediments
  • Business stakes
  • Brand identity
  • Product differentials
  • Competitor diversity
  • Cost swapping
  • Fixed expenses versus added value    
  • Industry development
  • Sporadic overproduction

Threat Posed by New Competitors

Within this area, you consider aspects like:

  • Absolute expense benefits
  • Access to raw material
  • Exclusive learning curve
  • Exclusive commodities
  • Anticipated retaliation
  • Swapping expenses
  • Government policy
  • Capital needs
  • Economies of scale

Supplier Might

Under supplier power, you look at issues like:

  • Significance of volume among suppliers
  • Supplier concentration
  • Input differentiation
  • Availability of alternative inputs
  • Forward integration prospects
  • Expense relative to total purchase within your industry
  • Switching business expenses within your industry    

Basic Principles

While drafting the Industry section of your Business description document, you need to observe certain recommended protocol. Some key principles include:

  • Using powerful, thrilling language that thrills your audiences’ attention
  • Convincing your readers about the viability of your proposed business
  • Clearly showing cause why your readers should support your planed business
  • Clearly showing your projected growth projectile for your envisaged business
  • Not deviating into a discussion about your competitors
  • Undertaking thorough studies about your industry
  • Consulting various information sources such as relevant trade associations, trade magazines and newspapers  
  • Identifying the information sources you use for your research
  • Stating solid facts about your industry and supporting these facts with enough evidence
  • Being sufficiently realistic and objective in your analysis by stating negative information about your industry

Within the industry analysis section, you describe your industry by summarising your industry aspects. Basically, you define the political, market, and economic factors that affect your industry. These activities constitute market research. This market analysis summary gives your audiences an idea of how complex your industry is. Your description of your industry serves three major purposes. It explains the long-term prospects of your industry. This description also helps you to convince your audiences that your industry has a promising future. Furthermore, your industry description helps you to define your proposed business’ position within your target market. It is essentially a function of economic analysis.

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