The Industry Analysis section of a business plan compares and contrast industry elements in a certain type of business to showcase the profit potential and the potential to compete for the business outlined in the business plan.
Industry analysis is a tool that facilitates a company's understanding of its position relative to other companies that produce similar products or services. Understanding the forces at work in the overall industry is an important component of effective strategic planning. Industry analysis enables small business owners to identify the threats and opportunities facing their businesses, and to focus their resources on developing unique capabilities that could lead to a competitive advantage.
There are many models for analyzing an industry. One premier model for analyzing the structure of industries is Porter’s 5 Forces. Porter's model shows that rivalry among firms in industry depends upon five forces: 1) the potential for new competitors to enter the market; 2) the bargaining power of buyers; 3) the bargaining power of suppliers; 4) the availability of substitute goods; and 5) the competitors and nature of competition.
While these factors can be outlined in a variety of ways, many business plans simply put enough statistical or informative data to prove their position. By following Porter’s 5 forces it allows anyone compiling a business plan to outline to core industry factors important to a business analysis. This includes how many competitors, their proximity and how closely related the competitors are to the business in the business plan. It also includes a survey of the suppliers in the business and comparable businesses that may compete for the same dollar. For example, although a fancy restaurant and fast food chain are not exact competitors, they do compete for the same food dollar if they are close in vicinity and thus must be compared in a business analysis.
It should be noted that most sections of the industry analysis should have footnotes with where you got the information. This is to allow the reader to go back and look up the data and assure its accuracy.
While all business plans are written depending on the audience and the purpose, here is an example of an industry analysis section of a business plan for an online radio station…..
Industry Threats & Opportunities
- The industry will continue to grow rapidly, albeit at a decelerated rate
- While the number of industry operators has increased, Pandora has remained dominant
- Consumers will continue using mobile devices to access internet radio, boosting revenue
- The auto industry is implementing internet components in their autos and soon every car on the road will have access to internet radio
- The growing number of online radio stations will saturate the market and make it harder to compete effectively
- The number of live streaming services will make marketing more cost effective and efficient
Monthly Online Radio Listeners Have Doubled Since 2010
Online radio listening in cars by cellphone owners
Half of Americans Listen to Online Radio Weekly; Podcast Consumption Surges
Powered in part by the ever-expanding proliferation of smartphones, digital audio behaviors such as listening to online radio and podcasts are achieving significant mass usage, according to the Infinite Dial 2016, the latest in a long-running series of studies on consumer adoption of digital media from Edison Research and Triton Digital.
The study, a nationally representative telephone survey performed to the highest research standards, finds that 50% of respondents age 12 and older listened to some sort of online radio in the last week, a rise from 44% last year. With 57% of Americans using online radio monthly, the conversion of monthly to weekly users is now 88%.
Infinite Dial 2016, released today, is the latest report in a series dating back to 1998 that uses the “gold standard” of survey research—a random probability telephone sample, comprising both cellphones and landlines, of all Americans ages 12 or older. The study has become the report card on digital audio and other digital media, and is widely used and quoted by broadcasters, Internet radio, ad agencies, and the financial community.
The highlights include:
- Podcast Listening showed sharp gains on both a monthly basis (17% to 21%) and weekly (10% to 13%). Those who consume podcasts on a weekly basis listened to an average of five podcasts per week.
- In-home Ownership of Over-The-Air Radio receivers has dropped, with 79% of respondents saying they have a radio at home. That number was 96% in 2008. Among 18-34-year-olds, that number is down from 94% to 68% over the same time period.
- Pandora remains the most-known online audio brand with 82% awareness, followed by the retooled Apple Music (67%), iHeart Radio (65%) and Spotify (52%). For listening in the past week, Pandora (32%) has a large advantage over Spotify (13%), but Spotify has narrowed that gap over 2015. Among 12-to-24s, 43% listened to Pandora last month and 30% listened to Spotify.
- Spotify also posted a gain as “Audio Brand Used Most Often,” up 10% to 14%, while Pandora, however, leads strongly with 48%.
- Broadcast Radio is tied for the lead among all sources used for keeping up-to-date with new music. “AM/FM Radio” is used for that purpose by 68% of respondents, the same number that rely on “friends and family.” You Tube is next with 66%. Among 12-to-24s, however, broadcast radio falls to third (58%), behind You Tube (86%) and friends/family (74%). Smartphone Ownership has increased from 71% to 76% of all respondents. Among 12-24-year-olds, smartphone ownership rose to 93%, while even respondents age 55 and older cracked the “more than half” barrier, up 45 to 51%
- On demand video-subscriptions are at 51% of the population; 43% of all respondents subscribe to Netflix.
- Facebook remains the most-used social media brand among all-ages with 64%. But among 12-24s, it has been overtaken by Snapchat (72% to 68%) with Instagram close behind (66%).
“Media consumption is showing signs of being dramatically changed by both technology and by new paradigms,” noted Tom Webster, Edison’s Vice President of Strategy. “Mobile’s increasing utility as ‘the first screen,’ as well as the rise of alternative content forms, such as podcasts and ‘bingeable’ content from on-demand video services is subverting the myth that our attention spans are shorter.“
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