Being in a business, every businessman and entrepreneur must not only know what is going on in the business but also know the industry well. To be able to analyse an industry well along with the business is a trademark of a successful business plan.
The factors that impact businesses of the same industry will be generally same. And hence knowing these factors helps in analyzing these factors that are beneficial and those that are not very beneficial. Even though some external factors affecting the business are not in control, one can always control the way businesses react to them, by being proactive. This gives a great competitive advantage to the business implementing this.
And hence a business plan is very important for a business. This plan not only should contain research on the business industry, it also should contain a perspective of how the firm’s products and services fit into the industry.
An analysis of an industry is a vital tool that enables to understand a business’s/company’s position in the industry, relative to the other competing companies. This will eventually lead to effective strategic plans being implemented. Overall, it is a very beneficial process for many businesses, especially for small business owners. In order to get a competitive advantage, companies should develop unique capabilities and focus completely on their resources.
One great tool for doing an industry analysis or business analysis is the PEST analysis. This analysis comprises of analyzing things in the following directions – Political factors, Economic factors, Social factors and Technological factors. The PEST analysis looks into the role that the government plays in the industry/business; the current state of the economy at all levels; the relevant trends in buying patterns, consumer attitudes, demographics etc.; and last but not the least the changing dynamics of technology in the industry.