Every business owner has the capability to create an effective business plan. It is right after when he or she has identified all the factors in the business that impact the ability of the business to generate the number of sales and to acquire positive cash flow. Business policies and procedures are both under the management of the company itself. However, there are some who do not belong under the control of a company that affects the overall performance of a business. Both the industry and market are factors that influence financial and commercial performance of a certain company.
Industries are composed of several business that offers production and supply of products and services. Not just that, this is where some distributors and manufacturers belong. Industry analysis has something to do with identifying and describing characteristics of every business’s customers and competitors. This analysis includes the strategic opportunities consisted in every companies.
The purpose of industry analysis is to achieve objectives in terms of profit potential. It influences the the profit potential which in turn would also influence the company’s advantage. Industry analysis is considered to be a critical element in the strategic planning process because it will reveal the company’s secret to achieving success. This type of analysis will help in the completion of company’s financial, operating and marketing strategy.
1. Ease of entry – this refers to how easy or difficult for every business to compete in the industry. It determines how likely it is for a company to face different competitors.
2. Power of suppliers – they are going to make use of your ability to develop supplier relationship that will help in establishing advantages with the customers.
3. Power of buyers – buyers have the ability to exert pressure especially if you are new into the business industry. You will usually find them demand for lower prices, higher quality, or even additional services.
4. Availability of Substitutes – substitution occurs whenever a customer starts to believe that a similar product will give the same function at a better price.
5. Competitors – this will usually take in the form of price wars, new product introductions, service offerings and marketing strategies.
A market analysis is designed to describe the market, target market and market competition as well as how a particular firm is going to position itself to gain benefits from the market opportunities. This type of analysis will refer to market boundaries and competitive factors that influence the market activity. This will also help in stating the potential sales volume or value with which the company would compete for the sake of profit.
Market analysis is also an essential of a business plan. It helps in giving confirmation of the feasibility of a company or business. This means that it confirms the existence of the profitable market that are made only for the company’s products and services. It also serves as the basis in sales forecast which confirms the production and operational targets of the activities provided by the company.
The common types of market research analysis include surveys, interviews, focus groups and customer observation.
The six components include industry description and outlook, target market, target customer characteristics, market size, market share percentage, pricing and gross margin targets, competitive analysis and regulatory restrictions.
The industry analysis has 3 components namely the underlying forces at work, overall attractiveness in the industry and the critical factors that determine the company’s success.
Whichever we focus whether it is under the industry or market analysis, the point there is to be able to make an effective business plan that would help boost the growth of the company. Industry analysis and market analysis are considered to be one of the essential processes that makes up a successful business. You just have to pick the appropriate method on how to conduct the analysis.