Industry analysis is one of the important ingredients of strategic marketing. By understanding the behavior of the industry, marketers try to anticipate change or identify opportunities and threats. It requires a thorough look at the customers and their needs, market segments, major players and competitors, market behavior like growth rates and the like, and the environment with its uncertainties.
This sort of analysis is not a historical narrative. You need to look for connections, triggers, discontinuities, inventions, new entrants, and other insights and all changes that will help us learn from what might have happened in an industry. This requires studying a time span no shorter than several years and preferably covers five to ten years. You need not have a day-to-day account of what has happened in that time frame since events of strategic importance does not happen every day. In a five year time span, you will probably find several events with significant strategic importance.
What is analysis
Although analysis requires a full understanding of factual information, this mere understanding is not analysis. It requires looking at what is being analyzed through a window of selected standards using appropriate tools. In marketing we use a variety of tools like market share behavior, product life cycle (PLC,) demand characteristics, break-even analysis, financial statement and ratio analysis and so on. They all have their application areas and you should learn when and how to use these tools.
As an example, let us consider the implicit and explicit analyses we may use when buying a new hat.
- Most of us do not know our hat size. Therefore, the best method of analysis is to try it on for size, first hand experience and actual product trial is necessary. This is explicit and very direct.
- We may not also know how we might look wearing a certain style of hats. Again a look in the mirror, or opinions from friends may be essential before the purchase.
- As we do this several times, we develop more convenient tools of analysis like hat sizes and styles. Now, we can look at a catalog and analyze the decision to purchase a hat simply from a photograph and a short description of it. When this happens, we will have detached the analysis from the object under consideration. Significant efficiencies and additional insights emerge as we leave an object-based, first hand experience analysis and start using tools that we have developed, and tested for this purpose.
What goes in to this report
You should try to have a similar (of course an appropriate) method of analysis and try to use the following as tools to crystallize your thought. These are areas of analysis, tools of analysis, approaches to analysis, that may or may not be useful in your case. Use them as seeds for your analytical thoughts.
- Decide on the level of analysis. Should you include electronic distribution of music as part of the entire music industry or study it as an emerging method of distribution by itself. Should it include digital music players or should it be limited to the music sales alone. The level of analysis will focus the attention sharply on what is important without leaving important parts out.
- Analyze customers, key market segments. Who are they, what are their characteristics, needs? How has the market been segmented, is there a better way of segmenting it?
- Analyze markets, market definition, demand trends, PLC and identification of key success factors. Consider the growth rate of the market, primary demand behavior, time and place affects on demand.
- Analyze major competitors, their strategy, weaknesses and problems if any, sustainable competitive advantages (SCA) that they may have and how they may have acquired it. Why?
- Look at the past strategies of a few important competitors, what worked and what did not. Why?
- Analyze major environmental changes, trends and opportunities and threats stemming from them. Are there any major changes pending that may affect the industry? How?
- How does the industry look from the viewpoint of GE industry attractiveness dimension, or BCG market growth dimension?
- If possible, interview a manager from the selected industry to get better insight into the above
- Assume that you are advising a client who wishes to enter this market? What strategy would you use and why is this strategy important?
When writing the report, if you try to be comprehensive you will lose sight of what is ahead in favor of what was behind. Your analysis of competitors, market trends and important environmental changes should help you and your client gain better insight to your current situation. You are writing a business report, not a marketing history book.
Remember to use the proper style and format as explained in the section of this syllabus about writing.