Monday, November 7, 2011

How to do an industry analysis.

Steps :
  1. Read the available industry reports and statistics, see whether it makes sense to dig deeper.
  2. There are sub-parts in industries. For example, if you look at chemical industry, you will find sub-industries like Fertilizers, Pesticides, Paints and Varnishes, Organic chemicals. It is important to focus on the relevant industry. Also look at the different market segments in a particular industry.
  3. Look at the demand-supply scenario for a particular product/ industry by studying the past trends and forecasting future outlook.
  4. Study the competitive scenario: Use the framework of industry analysis - Porter’s five forces model.  In this model, five parameters are analyzed to see the competitive landscape. This model is used extensively while analyzing any industry. They are (a) Barriers to entry, (b) Supplier Power, (c)Threat of substitutes, (d) Buyer power, and (e) Degree of rivalry
  5. Study and include recent developments, innovation in your industry analysis report.
  6. Look at sector valuations and global comparative valuations.
  7. The analysis should be specific to a particular industry and so it is important to focus and understand the industry dynamics.
  8. Your industry analysis should be in-depth and to-the-point. For example, if you are tracking aluminum industry, you should know per capita consumption in the country. In India, per capita consumption of aluminum is 1 kg, in US it is 25 to 30 kgs, in Japan it is 15 kgs, in Taiwan it is 10 kgs. Apart from the consumption, you should also know the production of aluminum worldwide.

No comments: