Industry Analysis: Importance, Types and Example

Understanding the forces shaping a particular industry is vital for making informed business and investment decisions. That’s where industry analysis comes into play. Whether you’re an entrepreneur, investor or policymaker, knowing how to evaluate an industry’s structure, trends and competitive dynamics can give you a clear strategic advantage.

In this blog, we’ll explore the meaning, significance, different types, and methods of conducting industry analysis, along with practical examples and key resources tailored for the Indian context.

What is Industry Analysis?

Industry analysis is a research process that examines the economic, competitive and market factors affecting a specific industry. It involves evaluating everything from market size and growth potential to customer behaviour, regulatory environment, and key players.

The goal is to understand how external and internal elements influence the profitability and risks associated with operating in a particular sector.

Importance of Industry Analysis

Industry analysis plays a crucial role in business strategy, investment planning and risk management.

Here’s why it matters:

• Strategic Planning: Helps businesses identify opportunities and threats in their environment.

• Investment Decisions: Guides investors in selecting industries with strong growth prospects.

• Benchmarking Performance: Offers insights for comparing a company’s performance with industry standards.

• Market Entry: Assists startups and new entrants in understanding the competitive landscape before entering a sector.

• Policy Formation: Enables policymakers to assess the economic contribution and challenges of different sectors.

Types of Industry Analysis

There are several frameworks to conduct an industry analysis. Each provides a unique lens to examine industry dynamics.

How to Conduct Industry Analysis?

Here’s a step-by-step guide to performing a robust industry analysis:

1. Define the Industry: Clearly establish the scope of the industry you are analysing.

2. Gather Data: Use reports, databases, government publications and market research firms.

3. Evaluate Market Structure: Assess factors like market size, segmentation, demand-supply trends, and entry barriers.

4. Analyse Competition: Identify key players, market share, pricing strategies and product differentiation.

5. Study Trends & Regulations: Examine technological changes, policy developments, and macroeconomic conditions.

6. Draw Insights: Interpret findings to make informed strategic or investment decisions.

Who Can Benefit From an Industry Analysis?

Industry analysis is valuable to a wide range of stakeholders:

• Entrepreneurs: To validate business ideas and market feasibility.

• Investors: To choose sectors with strong growth potential and understand risks.

• Corporates: To benchmark performance and refine business strategy.

• Consultants: To advise clients with data-backed recommendations.

• Government & Policymakers: To draft informed sectoral policies.

Example of Industry Analysis in India

Let’s take the Indian Electric Vehicle (EV) industry as an example:

• Market Overview: The EV sector in India is witnessing rapid growth, driven by rising fuel costs, environmental concerns and government subsidies.

• Key Players: Tata Motors, Ather Energy, Ola Electric, Mahindra Electric.

• Opportunities: Increasing urbanisation, push for green mobility, and expanding charging infrastructure.

• Challenges: High upfront costs, range anxiety, and dependency on imported batteries.

• Regulatory Environment: Government schemes like FAME II and state-level EV policies are accelerating growth.

This kind of sectoral evaluation can help investors decide if the EV space aligns with their goals or help startups assess entry opportunities.

Resources for Industry Analysis in India

Here are some reliable sources to conduct industry research in the Indian context:

• IBEF (India Brand Equity Foundation) – Sector reports and insights on Indian industries.

• CMIE (Centre for Monitoring Indian Economy) – Provides economic and business data.

• Statista India – Global and Indian market statistics and projections.

• Ministry Websites – Industry-specific data from government portals (e.g., Ministry of Commerce & Industry).

• NSE/BSE – Stock exchange data and sectoral indices.

• CRISIL & ICRA Reports – Sectoral credit ratings and performance reviews.

Conclusion

Industry analysis isn’t just a one-time exercise; it’s an essential ongoing process for anyone involved in business or investing. It equips you with the insights needed to navigate market complexities, anticipate trends, and make strategic decisions. With frameworks like PESTLE and Porter’s Five Forces, and a structured approach to research, you can unlock a deeper understanding of any industry, especially in a dynamic economy like India’s.