Industry Insights

Industry Analysis

Industry Analysis
web Feb 04, 2022


Starting a venture that will succeed in the big scheme of things is a challenging task. It is crucial to be able to get the most out of this process in order to achieve the best possible result.

Having outlined the major points to keep in mind when starting a tech company in our previous blog, we now discuss how and why analysing the industry is one of the most important tasks at hand!

Statistically speaking, around 20% of all new business ventures will close their doors within 24 months. Out of those that remain active only 25% make it past a decade. The fundamental reason for this is that the project is not supported by a thorough industry analysis before it begins.

This suggests that the majority of the company ventures that fail are doomed from the beginning. Most people do not perform thorough research into the industry in which they intend to work. Clearly, this is a big mistake, and for this reason, business owners need to understand the importance of industry analysis.

 Tech opportunities in several industries

Every day, we witness how technology is transforming the world around us. From dating to grocery shopping, it's hard to imagine a facet of existence that isn't somehow impacted by technology. And that’s just another way of saying that you’d be equally well-served by exploring opportunities in modern healthcare, automobile, retail, agriculture or any other industry.

 Some examples of tech opportunities in these industries:

Automotive: Vehicle connectivity with artificial intelligence and augmented reality driving simulations.

Retail: Autonomous checkout systems in retail with artificial intelligence and augmented reality clothing stores.

Healthcare: Telemedicine with augmented and virtual reality features.

Agriculture: Farming software with optimized GPS technology and AI driven moisture and temperature sensors.

How to conduct industry analysis?

Once you've made a decision, there are numerous aspects to the process of performing industry analysis. You should start by conducting a detailed background search on the industry or just a sub-section of it and collect, analyze, and compare the data to help answer questions about the market.

Additionally, you should also perform the following commonly used and important methods essential for getting a reliable outcome.

Competitive analysis

Competition within any industry always plays a crucial part. Analysing the industry using one of the most famous models developed in 1980, also known as ‘Porter’s 5 forces’ first introduced in the book by Michael Porter “Competitive Strategy: Techniques for Analysing Industries and Competitors” provides an acute impression of the industry and makes performing the analysis easy.

These 5 steps are –

Intensity of industry rivalry – The number of industry participants and their respective market shares are a direct reflection of the industry's competitiveness. Lack of product differentiation tends to increase the intensity of competition. Costly exit costs, such as high fixed assets, government regulations, labour unions, and so on, make it more difficult for competitors to win.

Threat of potential entrants – This illustrates how easy it is for new businesses to enter a certain industry's market. Companies confront the ongoing threat of new competitors if it is easy to enter an industry. If entry is difficult, the company with the smallest competitive advantage benefits for a longer length of time. Companies also face a steady set of competitors when entering a difficult market.

Bargaining power of suppliers – This relates to a supplier's bargaining strength. When an industry relies on a small number of suppliers, the suppliers have a lot of negotiating power. This is especially problematic for small firms because it has a direct impact on the end product's quality and pricing.

Bargaining power of buyers – When clients have bargaining power, the result is the polar opposite. When consumers/buyers have market power, they can bargain for reduced pricing, higher quality, or extra services and discounts. This is the case in an industry with a larger number of competitors but a single buyer who accounts for a significant portion of the industry's revenues.

Threat of substitute goods/services – Every industry's products are competing with similar substitute products from other industries, so any firm within that industry will face competition from other industries, reducing its profitability since it is unable to charge excessive prices. It is possible to substitute two different types of products - those of similar quality/function, but at a lower price, as well as those of the same price, but of better quality.

PEST Analysis

Also known as the ‘Broad Factors Analysis’, the famous PEST analysis stands for Political, Economic, Social, and Technological. All these aspects need to be analysed separately to ensure that you obtain enough data. This is a useful framework for analysing the industry.

Political: Understanding the political environment in your area of business is crucial for your success. This means learning all about the legal policies and regulations that could affect your venture for e.g., taxes, labour laws, political stability etc.

Economic: Everything related to economic growth, inflation, unemployment rates, interest rates, etc. This is all going to influence your business, and you need to consider each factor.

Social: Factors related to the social impact on your business. This includes the cultural limitations, education level, customer demographics, behavioural trends, and the general lifestyle.

Technological: This one is also crucial, as you need to analyze how technology is going to affect your business. The effects could be negative and positive, depending on the advancements and developments which change the way a business operates, and ways people live their lives. Technology is most likely to be an advantage 99% of the time.

SWOT Analysis

Just like PEST, SWOT is also a very popular method of analysis. It stands for Strengths, Weaknesses, Opportunities, and Threats. The idea behind this analysis is to ensure that all your business decisions are calculated.

Strengths: You should consider what strengths your business possesses and how those strengths are perceived by third parties, as well as what you can do well and what makes your business distinctive.

Weaknesses: It is important to find out what your competitors are doing better and to match or surpass their performance. Understand what your competitors are doing well in your current business strategy.

Opportunities: Finding the market opportunities and leveraging your strengths as well as taking advantage of current trends are all equally important parts of your venture.

Threats: Aside from knowing how your competitors are affecting your business, you should also analyse the mistakes and threats that could have an adverse impact over time.

Technology rules the modern world!

We live in an age where technology is the most relevant and powerful tool available for business. It is vital that we learn to recognize this as the most relevant aspect of our strategies in the modern era.

Business solutions require the use of software solutions that can be applied to any business problem. A critical aspect of investing in useful technology is determining the best way to proceed in finding the appropriate solution to this problem. Competitive advantage within a business could be greatly affected by this.

Partnering with a reliable software development company

Choosing a trustworthy software development company is essential to getting your project off to a good start. It is important to be able to get the right kind of advice to help you fine-tune your efforts.

Ensure that the development team hiring for your project understands your industry. Additionally, they should have experience working with start-ups to assist you in making the right choice. Ideally, this type of project should be handled by a team with experience in the field.

Final thoughts on industry analysis

When you start any type of business, there are many factors you need to take into consideration. You should prioritize analysing the industry if you want your business to be successful over the long term.


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