Industry analysis framework is a set of activities that allows an individual or business to review the factors and constructs that comprise an operating environment. Investors often conduct industry analysis to determine the best companies in which to invest funds. Businesses complete this activity to identify strengths, weaknesses and competitors in an industry. Choosing the best industry analysis framework comes down to a few basic choices. These include setting goals and objectives for the analysis, using an industry analysis process that measures internal and external factors, and creating usable reports for the final analysis.
No individual or business should simply start an activity without a goal or objective. Industry analysis, for example, can have multiple goals and objectives as its purpose. The most common reasons to engage in this activity is finding profitable businesses, learning about the competition in an environment, or determining if a niche exists, offering a potentially profitable market. Large analysis framework may have multiple goals and objectives; it is up to those individuals conducting the review to place them in order and ensure requisite information is gathered. More than one individual may be necessary to complete the entire review process using the analysis framework.
Using the proper industry analysis framework is crucial to gathering useful information. Both internal and external — from multiple sources — factors to the industry are important pieces of data that can influence decisions. A common industry analysis tool is Porter’s Five Forces, an intense activity that involves the review of multiple forces that shape a market or business environment. These include supplier and buyer power, threat of substitute products or entry, and industry competition. Each of these broad reviews includes individual aspects reviewers look at to create the appropriate framework for analysis.
Gathering data that does not wind up in useful or usable reports is no good to individuals and businesses. Whatever data a reviewer gleans from the market must go into a cogent report that a decision maker can use for a specific purpose. In some cases, the industry analysis framework may require specific sections filled out with gathered data. Other times, it is open-ended, meaning the reviewer is responsible for putting together an intelligent report. Either way, the type of report and its use should be decided upon before conducting the review so appropriate data comes out of the industry analysis framework.