Meaning and definition of industry analysis
Industry analysis can be delineated as a market assessment tool which is designed to provide a business with ideas of complexity in a specific industry. Putting it simple, the industry analysis is a report that guides companies on their business strategy. The concept of industry analysis includes reviewing the economic, political, and market factors influencing the manner in which the industry develops. Most important factors can involve the power exerted by the buyers and suppliers, the possibility of fresh market entrants, and the condition of competitors.
Benefits of industrial analysis
The key advantage of accomplishing an industry analysis is that the company managers obtain a better understanding about the position of their business in the respective sector. This allows the businesses to spot themselves vigilantly in the specific industry where they can serve a niche market or proffer a particular product/service that provides them a benefit over competitors. The analysis is also helpful to the companies respond in a better way to changes in the industry.
Importance of industry analysis
The industry analysis is an important element of a business plan. It is important for the business owners to understand the industries in which they operate to guarantee unrelenting success. The financial health of a company is generally an indication of the company’s health. Therefore, by carrying out an industry analysis, the business owners can form a strategy which is more likely to assist the business in growth and success. Moreover, industry analysis is helpful for the planners in positioning their business in the niche market for the products and services offered by them.
Another reason indicating the importance of industry analysis lies in the fact that it aids the companies in recognizing the potential opportunities for the business to develop, in addition to threats that could be an obstacle in the growth of the company. Being capable of congregating requirement of a consumer, which is else wise undeserved, may be an opportunity. Conversely, high capital costs or strict government rules on exports and imports can be considered as examples of probable threats in different industries.
- Debt ratios
- Liquidity ratios
- Profitability ratios
- Asset management ratios
- Cash Flow Indicator Ratios
- Market value ratios
- Financial analysis
- Business Terms
- Financial education
- International Financial Reporting Standards (EU)
- IFRS Interpretations (EU)
- Financial software
Most WantedFinancial Terms
- Most Important Financial Ratios
- Debt-to-Equity Ratio
- Financial Leverage
- Current Ratio
- Interest Coverage Ratio (ICR)
- Solvency Ratio
- Break-even Point
- Debt Service Coverage Ratio
- Receivable Turnover Ratio
- Return On Capital Employed (ROCE)
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