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How to Write a Market Analysis for a Business Plan

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A lot of preparation goes into starting a business before you can open your doors to the public or launch your online store. One of your first steps should be to write a business plan . A business plan will serve as your roadmap when building your business.

Within your business plan, there’s an important section you should pay careful attention to: your market analysis. Your market analysis helps you understand your target market and how you can thrive within it.

Simply put, your market analysis shows that you’ve done your research. It also contributes to your marketing strategy by defining your target customer and researching their buying habits. Overall, a market analysis will yield invaluable data if you have limited knowledge about your market, the market has fierce competition, and if you require a business loan. In this guide, we'll explore how to conduct your own market analysis.

How to conduct a market analysis: A step-by-step guide

In your market analysis, you can expect to cover the following:

Industry outlook

Target market

Market value

Competition

Barriers to entry

Let’s dive into an in-depth look into each section:

Step 1: Define your objective

Before you begin your market analysis, it’s important to define your objective for writing a market analysis. Are you writing it for internal purposes or for external purposes?

If you were doing a market analysis for internal purposes, you might be brainstorming new products to launch or adjusting your marketing tactics. An example of an external purpose might be that you need a market analysis to get approved for a business loan .

The comprehensiveness of your market analysis will depend on your objective. If you’re preparing for a new product launch, you might focus more heavily on researching the competition. A market analysis for a loan approval would require heavy data and research into market size and growth, share potential, and pricing.

Step 2: Provide an industry outlook

An industry outlook is a general direction of where your industry is heading. Lenders want to know whether you’re targeting a growing industry or declining industry. For example, if you’re looking to sell VCRs in 2020, it’s unlikely that your business will succeed.

Starting your market analysis with an industry outlook offers a preliminary view of the market and what to expect in your market analysis. When writing this section, you'll want to include:

Market size

Are you chasing big markets or are you targeting very niche markets? If you’re targeting a niche market, are there enough customers to support your business and buy your product?

Product life cycle

If you develop a product, what will its life cycle look like? Lenders want an overview of how your product will come into fruition after it’s developed and launched. In this section, you can discuss your product’s:

Research and development

Projected growth

How do you see your company performing over time? Calculating your year-over-year growth will help you and lenders see how your business has grown thus far. Calculating your projected growth shows how your business will fare in future projected market conditions.

Step 3: Determine your target market

This section of your market analysis is dedicated to your potential customer. Who is your ideal target customer? How can you cater your product to serve them specifically?

Don’t make the mistake of wanting to sell your product to everybody. Your target customer should be specific. For example, if you’re selling mittens, you wouldn’t want to market to warmer climates like Hawaii. You should target customers who live in colder regions. The more nuanced your target market is, the more information you’ll have to inform your business and marketing strategy.

With that in mind, your target market section should include the following points:

Demographics

This is where you leave nothing to mystery about your ideal customer. You want to know every aspect of your customer so you can best serve them. Dedicate time to researching the following demographics:

Income level

Create a customer persona

Creating a customer persona can help you better understand your customer. It can be easier to market to a person than data on paper. You can give this persona a name, background, and job. Mold this persona into your target customer.

What are your customer’s pain points? How do these pain points influence how they buy products? What matters most to them? Why do they choose one brand over another?

Research and supporting material

Information without data are just claims. To add credibility to your market analysis, you need to include data. Some methods for collecting data include:

Target group surveys

Focus groups

Reading reviews

Feedback surveys

You can also consult resources online. For example, the U.S. Census Bureau can help you find demographics in calculating your market share. The U.S. Department of Commerce and the U.S. Small Business Administration also offer general data that can help you research your target industry.

Step 4: Calculate market value

You can use either top-down analysis or bottom-up analysis to calculate an estimate of your market value.

A top-down analysis tends to be the easier option of the two. It requires for you to calculate the entire market and then estimate how much of a share you expect your business to get. For example, let’s assume your target market consists of 100,000 people. If you’re optimistic and manage to get 1% of that market, you can expect to make 1,000 sales.

A bottom-up analysis is more data-driven and requires more research. You calculate the individual factors of your business and then estimate how high you can scale them to arrive at a projected market share. Some factors to consider when doing a bottom-up analysis include:

Where products are sold

Who your competition is

The price per unit

How many consumers you expect to reach

The average amount a customer would buy over time

While a bottom-up analysis requires more data than a top-down analysis, you can usually arrive at a more accurate calculation.

Step 5: Get to know your competition

Before you start a business, you need to research the level of competition within your market. Are there certain companies getting the lion’s share of the market? How can you position yourself to stand out from the competition?

There are two types of competitors that you should be aware of: direct competitors and indirect competitors.

Direct competitors are other businesses who sell the same product as you. If you and the company across town both sell apples, you are direct competitors.

An indirect competitor sells a different but similar product to yours. If that company across town sells oranges instead, they are an indirect competitor. Apples and oranges are different but they still target a similar market: people who eat fruits.

Also, here are some questions you want to answer when writing this section of your market analysis:

What are your competitor’s strengths?

What are your competitor’s weaknesses?

How can you cover your competitor’s weaknesses in your own business?

How can you solve the same problems better or differently than your competitors?

How can you leverage technology to better serve your customers?

How big of a threat are your competitors if you open your business?

Step 6: Identify your barriers

Writing a market analysis can help you identify some glaring barriers to starting your business. Researching these barriers will help you avoid any costly legal or business mistakes down the line. Some entry barriers to address in your marketing analysis include:

Technology: How rapid is technology advancing and can it render your product obsolete within the next five years?

Branding: You need to establish your brand identity to stand out in a saturated market.

Cost of entry: Startup costs, like renting a space and hiring employees, are expensive. Also, specialty equipment often comes with hefty price tags. (Consider researching equipment financing to help finance these purchases.)

Location: You need to secure a prime location if you’re opening a physical store.

Competition: A market with fierce competition can be a steep uphill battle (like attempting to go toe-to-toe with Apple or Amazon).

Step 7: Know the regulations

When starting a business, it’s your responsibility to research governmental and state business regulations within your market. Some regulations to keep in mind include (but aren’t limited to):

Employment and labor laws

Advertising

Environmental regulations

If you’re a newer entrepreneur and this is your first business, this part can be daunting so you might want to consult with a business attorney. A legal professional will help you identify the legal requirements specific to your business. You can also check online legal help sites like LegalZoom or Rocket Lawyer.

Tips when writing your market analysis

We wouldn’t be surprised if you feel overwhelmed by the sheer volume of information needed in a market analysis. Keep in mind, though, this research is key to launching a successful business. You don’t want to cut corners, but here are a few tips to help you out when writing your market analysis:

Use visual aids

Nobody likes 30 pages of nothing but text. Using visual aids can break up those text blocks, making your market analysis more visually appealing. When discussing statistics and metrics, charts and graphs will help you better communicate your data.

Include a summary

If you’ve ever read an article from an academic journal, you’ll notice that writers include an abstract that offers the reader a preview.

Use this same tactic when writing your market analysis. It will prime the reader of your market highlights before they dive into the hard data.

Get to the point

It’s better to keep your market analysis concise than to stuff it with fluff and repetition. You’ll want to present your data, analyze it, and then tie it back into how your business can thrive within your target market.

Revisit your market analysis regularly

Markets are always changing and it's important that your business changes with your target market. Revisiting your market analysis ensures that your business operations align with changing market conditions. The best businesses are the ones that can adapt.

Why should you write a market analysis?

Your market analysis helps you look at factors within your market to determine if it’s a good fit for your business model. A market analysis will help you:

1. Learn how to analyze the market need

Markets are always shifting and it’s a good idea to identify current and projected market conditions. These trends will help you understand the size of your market and whether there are paying customers waiting for you. Doing a market analysis helps you confirm that your target market is a lucrative market.

2. Learn about your customers

The best way to serve your customer is to understand them. A market analysis will examine your customer’s buying habits, pain points, and desires. This information will aid you in developing a business that addresses those points.

3. Get approved for a business loan

Starting a business, especially if it’s your first one, requires startup funding. A good first step is to apply for a business loan with your bank or other financial institution.

A thorough market analysis shows that you’re professional, prepared, and worth the investment from lenders. This preparation inspires confidence within the lender that you can build a business and repay the loan.

4. Beat the competition

Your research will offer valuable insight and certain advantages that the competition might not have. For example, thoroughly understanding your customer’s pain points and desires will help you develop a superior product or service than your competitors. If your business is already up and running, an updated market analysis can upgrade your marketing strategy or help you launch a new product.

Final thoughts

There is a saying that the first step to cutting down a tree is to sharpen an axe. In other words, preparation is the key to success. In business, preparation increases the chances that your business will succeed, even in a competitive market.

The market analysis section of your business plan separates the entrepreneurs who have done their homework from those who haven’t. Now that you’ve learned how to write a market analysis, it’s time for you to sharpen your axe and grow a successful business. And keep in mind, if you need help crafting your business plan, you can always turn to business plan software or a free template to help you stay organized.

This article originally appeared on JustBusiness, a subsidiary of NerdWallet.

On a similar note...

How to Write a Competitive Analysis for Your Business Plan

11 min. read

Updated January 3, 2024

Do you know who your competitors are? If you do, have you taken the time to conduct a thorough competitor analysis?

Knowing your competitors, how they operate, and the necessary benchmarks you need to hit are crucial to positioning your business for success. Investors will also want to see an analysis of the competition in your business plan.

In this guide, we’ll explore the significance of competitive analysis and guide you through the essential steps to conduct and write your own. 

You’ll learn how to identify and evaluate competitors to better understand the opportunities and threats to your business. And you’ll be given a four-step process to describe and visualize how your business fits within the competitive landscape.

• What is a competitive analysis?

A competitive analysis is the process of gathering information about your competitors and using it to identify their strengths and weaknesses. This information can then be used to develop strategies to improve your own business and gain a competitive advantage.

• How to conduct a competitive analysis

Before you start writing about the competition, you need to conduct your analysis. Here are the steps you need to take:

1. Identify your competitors

The first step in conducting a comprehensive competitive analysis is to identify your competitors. 

Start by creating a list of both direct and indirect competitors within your industry or market segment. Direct competitors offer similar products or services, while indirect competitors solve the same problems your company does, but with different products or services.

Keep in mind that this list may change over time. It’s crucial to revisit it regularly to keep track of any new entrants or changes to your current competitors. For instance, a new competitor may enter the market, or an existing competitor may change their product offerings.

2. Analyze the market

Once you’ve identified your competitors, you need to study the overall market. 

This includes the market size , growth rate, trends, and customer preferences. Be sure that you understand the key drivers of demand, demographic and psychographic profiles of your target audience , and any potential market gaps or opportunities.

Conducting a market analysis can require a significant amount of research and data collection. Luckily, if you’re writing a business plan you’ll follow this process to complete the market analysis section . So, doing this research has value for multiple parts of your plan.

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3. Create a competitive framework

You’ll need to establish criteria for comparing your business with competitors. You want the metrics and information you choose to provide answers to specific questions. (“Do we have the same customers?” “What features are offered?” “How many customers are being served?”)

Here are some common factors to consider including: 

• Market share
• Product/service offerings or features
• Distribution channels
• Target markets
• Marketing strategies
• Customer service

4. Research your competitors

You can now begin gathering information about your competitors. Because you spent the time to explore the market and set up a comparison framework—your research will be far more focused and easier to complete.

There’s no perfect research process, so start by exploring sources such as competitor websites, social media, customer reviews, industry reports, press releases, and public financial statements. You may also want to conduct primary research by interviewing customers, suppliers, or industry experts.

You can check out our full guide on conducting market research for more specific steps.

5. Assess their strengths and weaknesses

Evaluate each competitor based on the criteria you’ve established in the competitive framework. Identify their key strengths (competitive advantages) and weaknesses (areas where they underperform).

6. Identify opportunities and threats

Based on the strengths and weaknesses of your competitors, identify opportunities (areas where you can outperform them) and threats (areas where they may outperform you) for your business. 

You can check out our full guide to conducting a SWOT analysis for more specific questions that you should ask as part of each step. 

• How to write your competitive analysis

Once you’ve done your research, it’s time to present your findings in your business plan. Here are the steps you need to take:

1. Determine who your audience is

Who you are writing a business plan for (investors, partners, employees, etc.) may require you to format your competitive analysis differently. 

For an internal business plan you’ll use with your team, the competition section should help them better understand the competition. You and your team will use it to look at comparative strengths and weaknesses to help you develop strategies to gain a competitive advantage.

For fundraising, your plan will be shared with potential investors or as part of a bank loan. In this case, you’re describing the competition to reassure your target reader. You are showing awareness and a firm understanding of the competition, and are positioned to take advantage of opportunities while avoiding the pitfalls.

2. Describe your competitive position

You need to know how your business stacks up, based on the values it offers to your chosen target market. To run this comparison, you’ll be using the same criteria from the competitive framework you completed earlier. You need to identify your competitive advantages and weaknesses, and any areas where you can improve.

The goal is positioning (setting your business up against the background of other offerings), and making that position clear to the target market. Here are a few questions to ask yourself in order to define your competitive position:

• How are you going to take advantage of your distinctive differences, in your customers’ eyes? 
• What are you doing better? 
• How do you work toward strengths and away from weaknesses?
• What do you want the world to think and say about you and how you compare to others?

3. Visualize your competitive position

There are a few different ways to present your competitive framework in your business plan. The first is a “positioning map” and the second is a “competitive matrix”. Depending on your needs, you can use one or both of these to communicate the information that you gathered during your competitive analysis:

Positioning map

The positioning map plots two product or business benefits across a horizontal and vertical axis. The furthest points of each represent opposite extremes (Hot and cold for example) that intersect in the middle. With this simple chart, you can drop your own business and the competition into the zone that best represents the combination of both factors.

I often refer to marketing expert Philip Kohler’s simple strategic positioning map of breakfast, shown here. You can easily draw your own map with any two factors of competition to see how a market stacks up.

It’s quite common to see the price on one axis and some important qualitative factor on the other, with the assumption that there should be a rough relationship between price and quality.

Competitive matrix

It’s pretty common for most business plans to also include a competitive matrix. It shows how different competitors stack up according to the factors identified in your competitive framework. 

How do you stack up against the others? Here’s what a typical competitive matrix looks like:

For the record, I’ve seen dozens of competitive matrices in plans and pitches. I’ve never seen a single one that didn’t show that this company does more of what the market wants than all others. So maybe that tells you something about credibility and how to increase it. Still, the ones I see are all in the context of seeking investment, so maybe that’s the nature of the game.

4. Explain your strategies for gaining a competitive edge

Your business plan should also explain the strategies your business will use to capitalize on the opportunities you’ve identified while mitigating any threats from competition. This may involve improving your product/service offerings, targeting underserved market segments, offering more attractive price points, focusing on better customer service, or developing innovative marketing strategies.

While you should cover these strategies in the competition section, this information should be expanded on further in other areas of your business plan. 

For example, based on your competitive analysis you show that most competitors have the same feature set. As part of your strategy, you see a few obvious ways to better serve your target market with additional product features. This information should be referenced within your products and services section to back up your problem and solution statement. 

• Why competition is a good thing

Business owners often wish that they had no competition. They think that with no competition, the entire market for their product or service will be theirs. That is simply not the case—especially for new startups that have truly innovative products and services. Here’s why:

Competition validates your idea

You know you have a good idea when other people are coming up with similar products or services. Competition validates the market and the fact that there are most likely customers for your new product. This also means that the costs of marketing and educating your market go down (see my next point).

Competition helps educate your target market

Being first-to-market can be a huge advantage. It also means that you will have to spend way more than the next player to educate customers about your new widget, your new solution to a problem, and your new approach to services. 

This is especially true for businesses that are extremely innovative. These first-to-market businesses will be facing customers that didn’t know that there was a solution to their problem . These potential customers might not even know that they have a problem that can be solved in a better way. 

If you’re a first-to-market company, you will have an uphill battle to educate consumers—an often expensive and time-consuming process. The 2nd-to-market will enjoy all the benefits of an educated marketplace without the large marketing expense.

Competition pushes you

Businesses that have little or no competition become stagnant. Customers have few alternatives to choose from, so there is no incentive to innovate. Constant competition ensures that your marketplace continues to evolve and that your product offering continues to evolve with it.

Competition forces focus & differentiation

Without competition, it’s easy to lose focus on your core business and your core customers and start expanding into areas that don’t serve your best customers. Competition forces you and your business to figure out how to be different than your competition while focusing on your customers. In the long term, competition will help you build a better business.

• What if there is no competition?

One mistake many new businesses make is thinking that just because nobody else is doing exactly what they’re doing, their business is a sure thing. If you’re struggling to find competitors, ask yourself these questions.

Is there a good reason why no one else is doing it?

The smart thing to do is ask yourself,  “Why isn’t anyone else doing it?”

It’s possible that nobody’s selling cod-liver frozen yogurt in your area because there’s simply no market for it. Ask around, talk to people, and do your market research. If you determine that you’ve got customers out there, you’re in good shape.

But that still doesn’t mean there’s no competition.

How are customers getting their needs met?

There may not be another cod-liver frozen yogurt shop within 500 miles. But maybe an online distributor sells cod-liver oil to do-it-yourselfers who make their own fro-yo at home. Or maybe your potential customers are eating frozen salmon pops right now. 

Are there any businesses that are indirect competitors?

Don’t think of competition as only other businesses that do exactly what you do. Think about what currently exists on the market that your product would displace.

It’s the difference between direct competition and indirect competition. When Henry Ford started successfully mass-producing automobiles in the U.S., he didn’t have other automakers to compete with. His competition was horse-and-buggy makers, bicycles, and railroads.

Do a competitive analysis, but don’t let it derail your planning

While it’s important that you know the competition, don’t get too caught up in the research. 

If all you do is track your competition and do endless competitive analyses, you won’t be able to come up with original ideas. You will end up looking and acting just like your competition. Instead, make a habit of NOT visiting your competition’s website, NOT going into their store, and NOT calling their sales office. 

Focus instead on how you can provide the best service possible and spend your time talking to your customers. Figure out how you can better serve the next person that walks in the door so that they become a lifetime customer, a reference, or a referral source.

If you focus too much on the competition, you will become a copycat. When that happens, it won’t matter to a customer if they walk into your store or the competition’s because you will both be the same.

See why 1.2 million entrepreneurs have written their business plans with LivePlan

Tim Berry is the founder and chairman of Palo Alto Software , a co-founder of Borland International, and a recognized expert in business planning. He has an MBA from Stanford and degrees with honors from the University of Oregon and the University of Notre Dame. Today, Tim dedicates most of his time to blogging, teaching and evangelizing for business planning.

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How to create a competitive analysis (with examples)

Competitive analysis involves identifying your direct and indirect competitors using research to reveal their strengths and weaknesses in relation to your own. In this guide, we’ll outline how to do a competitive analysis and explain how you can use this marketing strategy to improve your business.

Whether you’re running a business or playing in a football game, understanding your competition is crucial for success. While you may not be scoring touchdowns in the office, your goal is to score business deals with clients or win customers with your products. The method of preparation for athletes and business owners is similar—once you understand your strengths and weaknesses versus your competitors’, you can level up. 

What is a competitive analysis?

Competitive analysis involves identifying your direct and indirect competitors using research to reveal their strengths and weaknesses in relation to your own. 

Direct competitors market the same product to the same audience as you, while indirect competitors market the same product to a different audience. After identifying your competitors, you can use the information you gather to see where you stand in the market landscape. 

What to include in a competitive analysis

The purpose of this type of analysis is to get a competitive advantage in the market and improve your business strategy. Without a competitive analysis, it’s difficult to know what others are doing to win clients or customers in your target market. A competitive analysis report may include:

A description of your company’s target market

Details about your product or service versus the competitors’

Current and projected market share, sales, and revenues

Pricing comparison

Marketing and social media strategy analysis

Differences in customer ratings

You’ll compare each detail of your product or service versus the competition to assess strategy efficacy. By comparing success metrics across companies, you can make data-driven decisions.

How to do a competitive analysis

Follow these five steps to create your competitive analysis report and get a broad view of where you fit in the market. This process can help you analyze a handful of competitors at one time and better approach your target customers.

1. Create a competitor overview

In step one, select between five and 10 competitors to compare against your company. The competitors you choose should have similar product or service offerings and a similar business model to you. You should also choose a mix of both direct and indirect competitors so you can see how new markets might affect your company. Choosing both startup and seasoned competitors will further diversify your analysis.

Tip: To find competitors in your industry, use Google or Amazon to search for your product or service. The top results that emerge are likely your competitors. If you’re a startup or you serve a niche market, you may need to dive deeper into the rankings to find your direct competitors.

2. Conduct market research

Once you know the competitors you want to analyze, you’ll begin in-depth market research. This will be a mixture of primary and secondary research. Primary research comes directly from customers or the product itself, while secondary research is information that’s already compiled. Then, keep track of the data you collect in a user research template .

Primary market research may include: 

Purchasing competitors’ products or services

Interviewing customers

Conducting online surveys of customers 

Holding in-person focus groups

Secondary market research may include:

Examining competitors’ websites

Assessing the current economic situation

Identifying technological developments 

Reading company records

Tip: Search engine analysis tools like Ahrefs and SEMrush can help you examine competitors’ websites and obtain crucial SEO information such as the keywords they’re targeting, the number of backlinks they have, and the overall health of their website. 

3. Compare product features

The next step in your analysis involves a comparison of your product to your competitors’ products. This comparison should break down the products feature by feature. While every product has its own unique features, most products will likely include:

Service offered

Age of audience served

Number of features

Style and design

Ease of use

Type and number of warranties

Customer support offered

Product quality

Tip: If your features table gets too long, abbreviate this step by listing the features you believe are of most importance to your analysis. Important features may include cost, product benefits, and ease of use.

4. Compare product marketing

The next step in your analysis will look similar to the one before, except you’ll compare the marketing efforts of your competitors instead of the product features. Unlike the product features matrix you created, you’ll need to go deeper to unveil each company’s marketing plan . 

Areas you’ll want to analyze include:

Social media

Website copy

Press releases

Product copy

As you analyze the above, ask questions to dig deeper into each company’s marketing strategies. The questions you should ask will vary by industry, but may include:

What story are they trying to tell?

What value do they bring to their customers?

What’s their company mission?

What’s their brand voice?

Tip: You can identify your competitors’ target demographic in this step by referencing their customer base, either from their website or from testimonials. This information can help you build customer personas. When you can picture who your competitor actively targets, you can better understand their marketing tactics. 

5. Use a SWOT analysis

Competitive intelligence will make up a significant part of your competitor analysis framework, but once you’ve gathered your information, you can turn the focus back to your company. A SWOT analysis helps you identify your company’s strengths and weaknesses. It also helps turn weaknesses into opportunities and assess threats you face based on your competition.

During a SWOT analysis, ask yourself:

What do we do well?

What could we improve?

Are there market gaps in our services?

What new market trends are on the horizon?

Tip: Your research from the previous steps in the competitive analysis will help you answer these questions and fill in your SWOT analysis. You can visually present your findings in a SWOT matrix, which is a four-box chart divided by category.

6. Identify your place in the market landscape

The last step in your competitive analysis is to understand where you stand in the market landscape. To do this, you’ll create a graph with an X and Y axis. The two axes should represent the most important factors for being competitive in your market. 

For example, the X-axis may represent customer satisfaction, while the Y-axis may represent presence in the market. You’ll then plot each competitor on the graph according to their (x,y) coordinates. You’ll also plot your company on this chart, which will give you an idea of where you stand in relation to your competitors. 

This graph is included for informational purposes and does not represent Asana’s market landscape or any specific industry’s market landscape. 

Tip: In this example, you’ll see three companies that have a greater market presence and greater customer satisfaction than yours, while two companies have a similar market presence but higher customer satisfaction. This data should jumpstart the problem-solving process because you now know which competitors are the biggest threats and you can see where you fall short. 

Competitive analysis example

Imagine you work at a marketing startup that provides SEO for dentists, which is a niche industry and only has a few competitors. You decide to conduct a market analysis for your business. To do so, you would:

Step 1: Use Google to compile a list of your competitors. 

Steps 2, 3, and 4: Use your competitors’ websites, as well as SEO analysis tools like Ahrefs, to deep-dive into the service offerings and marketing strategies of each company. 

Step 5: Focusing back on your own company, you conduct a SWOT analysis to assess your own strategic goals and get a visual of your strengths and weaknesses. 

Step 6: Finally, you create a graph of the market landscape and conclude that there are two companies beating your company in customer satisfaction and market presence. 

After compiling this information into a table like the one below, you consider a unique strategy. To beat out your competitors, you can use localization. Instead of marketing to dentists nationwide like your competitors are doing, you decide to focus your marketing strategy on one region, state, or city. Once you’ve become the known SEO company for dentists in that city, you’ll branch out. 

You won’t know what conclusions you can draw from your competitive analysis until you do the work and see the results. Whether you decide on a new pricing strategy, a way to level up your marketing, or a revamp of your product, understanding your competition can provide significant insight.

Drawbacks of competitive analysis

There are some drawbacks to competitive analysis you should consider before moving forward with your report. While these drawbacks are minor, understanding them can make you an even better manager or business owner. 

Don’t forget to take action

You don’t just want to gather the information from your competitive analysis—you also want to take action on that information. The data itself will only show you where you fit into the market landscape. The key to competitive analysis is using it to problem solve and improve your company’s strategic plan .

Be wary of confirmation bias

Confirmation bias means interpreting information based on the beliefs you already hold. This is bad because it can cause you to hold on to false beliefs. To avoid bias, you should rely on all the data available to back up your decisions. In the example above, the business owner may believe they’re the best in the SEO dental market at social media. Because of this belief, when they do market research for social media, they may only collect enough information to confirm their own bias—even if their competitors are statistically better at social media. However, if they were to rely on all the data available, they could eliminate this bias.

Update your analysis regularly

A competitive analysis report represents a snapshot of the market landscape as it currently stands. This report can help you gain enough information to make changes to your company, but you shouldn’t refer to the document again unless you update the information regularly. Market trends are always changing, and although it’s tedious to update your report, doing so will ensure you get accurate insight into your competitors at all times. 

Boost your marketing strategy with competitive analysis

Learning your competitors’ strengths and weaknesses will make you a better marketer. If you don’t know the competition you’re up against, you can’t beat them. Using competitive analysis can boost your marketing strategy and allow you to capture your target audience faster.

Competitive analysis must lead to action, which means following up on your findings with clear business goals and a strong business plan. Once you do your competitive analysis, you can use the templates below to put your plan into action.

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A step-by-step guide to competitive market analysis

I remember Blockbuster going bankrupt in 2010. As a 12-year-old, this news meant the end of walking down aisles with my family, looking for the perfect weekend flick. But to Netflix, this meant their competitive market analysis had paid off.

As much as I miss my three-day VHS and DVD rentals, video entertainment has improved significantly, thanks to innovation and competitive pressure. Your industry isn't immune to change either, which is why it's so important to get ahead.

Table of contents:

What is a competitive analysis?

The importance of competitive analysis in marketing, how to conduct competitive market analysis in 6 steps, competitive analysis example, internal operations as a competitive advantage.

Competitive market analysis is the process of determining who your competitors are, researching their strategies, and unpacking what they do well (and not so well).

From this process, you can learn a lot about your company's own strengths and weaknesses, as well as how to remain a strong competitor in your industry.

A deep dive into your competitors' strategies will reveal their product offerings, mission statements , target markets, marketing strategies, and more. You may even identify new competitors you didn't know existed.

Identify and fill crucial gaps in your business  

The greats learn from the greats. Yes, you're trying to beat your competitors, but that doesn't mean you can't learn from them—especially if they've been around the block a few times. Seeing what works for your competitors will point toward gaps in your own strategies (as well as gaps in their strategies)—and ideally give you some inspiration on how to fill those gaps.

Spot trends and get ahead

Competitive market analysis isn't just about understanding specific competitors. It can also uncover the direction that an entire industry is moving. For example, Blockbuster didn't move with the industry, and we all know how that ended. Competitive analysis can help you avoid that same fate.

Recognize product value and pain point solutions

By analyzing competitors, you uncover customer pain points they might've missed, allowing you to refine your product's value and directly address those needs. It's not just about watching rivals, but seizing opportunities to stand out.

Set future objectives for growth

By examining market leaders, you define bold markers for your growth, and you can emulate their tactics. You can also employ AI-driven tools like Google Analytics' predictive metrics, HubSpot's forecasting tools, or IBM Watson's analytics. These tools can decipher market patterns, anticipate future prospects, and help you set precise KPIs. With AI's assistance, you can unearth data-driven insights and opportunities even top-tier competitors might miss.

Competitive market analysis isn't just a matter of making sure you have a unique selling point. Here's how to dig into the competition and figure out where you stand—and how to stand out.

1. List your competitors

Start by creating a comprehensive list of everyone operating in your industry. You can weed out the less relevant competitors later, but for now, jot down anyone that offers similar products or services.

If you're a small local business, your competitors are located nearby—you probably know a lot about them, but at the very least, you know they exist. But for something like an eCommerce store or online service, it's important to figure out who your competitors even are.

Start with basic keyword research. Google your product category a few different ways, maybe with words like "price," "cheap," or "sale" to reinforce the commercial nature of your query.

This will help you identify any competitors and can shed some light on how saturated your industry is.

Next, categorize the companies you identify into direct and indirect competitors.

Direct competitors provide similar products or services to a target market similar to yours. For example, Gucci and Prada both offer high-end clothing and accessories to fashion-conscious consumers with high disposable income.

Indirect competitors provide different products or services (though ones that land in the same category as yours) to a target market similar to yours. For example, gyms and companies producing at-home workout equipment can be considered indirect competitors.

As the name suggests, direct competitors tend to pose a more direct risk to your business. That said, indirect competitors can still attract customers and pull business away from you. You need to identify and analyze both to truly understand your competitive landscape.

2. Identify their target markets

Sometimes, a competitor's target market is clear—especially if it's a niche brand. Take Dick's Sporting Goods—it's pretty obvious that they're targeting people who are into sports (or who want to be).

For other companies, it isn't as obvious. To determine your competitors' target markets, try the following:

Study their mission statement: Sometimes, a company's mission statement will explicitly state who their products and/or services are designed for. And even when it isn't explicit, it will almost certainly provide a hint. Navigate to the "About" page on their website, and soak up whatever insight you can.

Analyze their voice and tone: Stoic or cheeky? Packed with jargon or written for the novice? Your competitors' tone and wording have a purpose—to get through to their target market. Read company blog posts, join their newsletters, and watch promotional video content, all the while paying close attention to who they seem to be speaking to.

Pay attention to their social media engagement: Observe who comments on their content and how they respond to those comments. The influencers they partner with can also shed light on the audience they want to reach.

3. Unpack their 4 P's

Competitive market analysis requires you to analyze your competitors' four P's of marketing : product, price, place, and promotion.

The best way to learn about your competitors' customer experiences is to become a customer yourself. You'll gain incredible insights into what's working for them—and more importantly, where there's room to offer something better.

Whenever possible, give your competitors' products a spin. Get a free trial or even buy or sign up for the real deal, if your budget allows. When using their products, try contacting their customer support for additional insight.

Pricing can be one of the most sensitive aspects of marketing. For this reason, you need to understand and track what your competition is doing with their pricing. Here are some questions to ask yourself about each competitor:

What's their pricing model? Subscription-style, one-time purchase, or a mix of both?

Do they seem to be using skim pricing or penetration pricing?

Does their pricing model seem to align with the rest of the industry?

There are many tools out there to help, as well as specialized tools for specific industries, like hotel room price monitoring.

Once you have a grip on your competitors' pricing strategies, here are your options:

Reduce your prices: If pricing is the only differentiator in your industry (meaning product, place, and promotion strategies are all pretty uniform), you may consider lowering your prices to snag a higher share of the market. But be wary about how this will impact customers' perceptions of your quality, as well as the risk of a price reduction competition, driving everyone's prices to unprofitable levels.

Raise your prices: If your business already leads the market by providing something unique or higher-quality products than the competition, you may consider raising your prices. Be mindful of the price elasticity of your product before pursuing this strategy, as a small price increase can lose customers in certain industries.

Match your competitors' pricing: It's much more challenging to sell products at the same price as competitors. This strategy works if your business has been in the market for a while and can make a unique or niche offer. In this case, the customer will decide to purchase based on personal preferences rather than the price.

If you feel like none of the above strategies will work for you, you might explore nontraditional pricing structures like bundling.

Where are your competitors selling? Is everything online, or do they have brick-and-mortar stores?

Every industry trends differently here—shoe brands, for example, tend to have some in-person outlets since most people want to try on a pair of shoes before buying them. Furniture stores, on the other hand, don't always rely on brick-and-mortar locations. They can provide pictures, videos, and product details (such as dimensions and materials) to provide customers with a "good enough" idea of what they're getting.

Promotion encompasses more than just advertising, but since advertising is so measurable and public, it's the easiest to spy on. To avoid wasting your advertising budget , analyze your competitors' strategies.

Here's what you're looking for:

Cost per click: If the CPC is too high, you may not want to use paid ads as a promotion channel at all. It's better to learn this from your competitors than from your own experience.

Keywords: Examine the competition level for each keyword in your competitors' ad campaigns. This will help you find the best-performing keywords with low competition (and that means lower cost per click). You'll also be able to see which keywords aren't doing well and avoid those.

Long-running ads: If your competitor keeps running the same campaign for a long time, it definitely works for them. You can try to create something similar to replicate their success.

If most competitors rely on social media advertisements as opposed to TV or print ads, you should probably follow suit. Likewise, if they're putting their entire budget into advertising how crispy their chicken sandwich is, it's probably because chicken sandwich consumers really like their chicken crispy. Watch how your competitors allocate their advertising budget and use that information to inform your own strategy.

4. Get to know their SEO strategy

SEO is a beast, and there's no surefire way to fully dissect your competitors' strategy. But there are a few ways to at least figure out what's working for them.

Use a keyword research tool to see what topics your competitors are ranking for. Do they rely entirely on industry-specific queries, or do they branch into other tangential topics? What pages are bringing in the most traffic?

By discovering which keywords your competitors target (and rank for), you get insight into what's working for them and uncover new keywords you might have neglected. Even better, you might also find keywords they aren't targeting and identify the underserved customers. You can also use it as a chance to differentiate your message so that you're ranking for more targeted keywords .

The Ahrefs screenshot below shows the highest-traffic-driving pages from Slack's blog. A competing communication platform could use this data to learn what's working for Slack and replicate their success. To really be successful, however, you need to one-up the competition, bringing something new to the table.

Ahrefs also lets you see your competitors' backlinks. Figure out which websites are already linking to your competitors, and then you can try to get yourself a backlink from those sites as well.

Pro tip: As you do this research, actually click into some of your competitors' high-ranking pages to see what exactly is attracting users (and Google). Data is crucial, but nothing can replace the human eye.

5. Make note of their most popular content

If you can figure out which types of content—blog posts, videos, podcasts, guides, etc.—are most popular with your competitors' audiences, that can help inform your own content strategy . And here's a tech twist: you can employ ChatGPT to run a content analysis. Simply plug in a piece of content, ask it to run the analysis, and it will quickly dissect the post, highlighting themes, patterns, and potential gaps your brand can capitalize on.

The goal is to identify which content types get the most traffic or engagement. You can use a marketing analytics tool to analyze both of those things:

Do the highest-performing pieces of content tend to all be one specific medium (video, infographic, written content, or something else)?

Do the titles of the most-shared articles all have numbers or other specific characters (like brackets or hyphens) in them?

Is the most-shared content all about a similar topic?

Let's say you run a travel blog and discover that your competitor's article called "How to save money for a trip" is super popular among their audience. You now have an opportunity to create content on a similar topic but make it even better. Maybe "The ultimate guide to traveling on a budget" or even a real story about "How 21-year-old Mike saved $10K for his epic adventure." 

You should also be following all your competitors to learn more about their social media strategy , including which platforms work best for them.

Social media presents an opportunity to let your brand's voice and personality shine. Take Wendy's, for example. The brand publicly roasts its competitors on X (Twitter), and the internet loves it.

Not every brand can (or should) be quite as blunt and sassy as Wendy's, but showing some personality can pay off.

6. Conduct a final SWOT analysis

A SWOT analysis is a great way to spot opportunities to capitalize on and threats to prepare for before they strike. In short:

Strengths (S) and weaknesses (W) look internally at your company.

Opportunities (O) and threats (T) look externally to the industry and market.

While diving into your competitive market analysis, consider these factors:

Market share percentage: This metric reflects the proportion of sales a company has in the industry compared to its competitors. Tools like Statista or market research reports can offer insights into a brand's dominance or underperformance.

Competitive features: Understand the unique offerings that set a product or service apart from its rivals. Customer surveys and product comparison charts are useful methods to determine standout features.

Company culture: A company's values, work environment, and ethics can be a deciding factor for customers. Monitoring employer review sites like Glassdoor or observing a company's interactions on social media can provide insights.

Customer reviews: Customer reviews provide direct feedback on a product or service's quality and the company's reputation. Platforms like Yelp, Trustpilot, or Google Reviews offer a treasure trove of customer sentiments and concerns.

Geography (if applicable): Location can be pivotal in a company's success, especially for local businesses. Using tools like Google Trends can help identify where a product or brand is most popular geographically.

Let's be clear—this isn't going to shine a spotlight on the exact strategy you should pursue to beat your competitors. What it can do is provide a high-level look at your internal and external environment, making it easier to piece together your competitive strategy.

When promoting your brand, you're thinking about how to communicate your strengths. Conducting a SWOT analysis forces you to also view your brand with scrutiny. You may be working toward being "the best" at everything, but there will inevitably be things that other brands do better.

Download our SWOT analysis template and follow along with the example below to learn as much as possible about your brand and your competitive environment. You can also kick-start the process using ChatGPT.

Let's say you're the CEO of an automotive company conducting a competitive analysis. After doing a deep dive into your competition and your industry as a whole, organizing your notes and SWOT analyses in folders labeled by competitor, you notice a huge push toward electric vehicles.

In fact, you estimate that your closest competitor (who targets the same market as you) now allocates over half of its advertising budget to its newest electric vehicle release. But you only have one electric vehicle option, and you only allocate 15% of your advertising budget toward it. You reasonably guess that you're in trouble.

Additional research confirms your market is very interested in making the switch to electric. You decide to reallocate your budget toward researching, producing, and promoting electric vehicles. Five years pass, and you realize you would have been left in the dust had you failed to analyze the competition or ignored the warning signs.

Competitive market analysis can prevent wasted resources, inspire new opportunities, and help you stay one step ahead of the competition. Take these six steps to better understand your company's strengths and weaknesses—then identify where you need to improve and how to invest your resources to remain a strong competitor in your industry. 

Sometimes, a company's competitive advantage comes from its seamless internal operations. It can be hard to find out what's going on internally at another company, but you can be sure you streamline your own processes. Here are some tips to get started:

5 things you should automate today

9 ways to leverage automation in the workplace

How to write internal documentation that works

Streamline work across departments with automation

How to build an analysis assistant with ChatGPT

This article was originally published by Diana Ford in May 2021. The most recent update was in September 2023.

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Luke Strauss

Based in sunny San Diego, Luke is a digital marketer with 3+ years of experience developing and executing content strategy for eCommerce startups and SaaS enterprises alike—Airtable, Zoom, and yes, Zapier—to name a few. When he isn’t diving into a keyword research rabbit hole, you can find him at a music festival, thrifting, or spending time with his friends and family.

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Business Plan Market Analysis - Your Road Map to Success

Welcome to our comprehensive guide on the business plan market analysis section of a business plan. Market Analysis is a key part of any good business plan, which will help you better assess and understand your market. ‍ The business plan market analysis section is the heart and soul of your strategy, impacting everything from marketing to operations to the financial forecast. The market analysis helps you understand your position within the industry, the potential size of your market, the competitive landscape, and most importantly, it assists in identifying your target customers. In this blog post, we'll take you through the essentials of market analysis: what it is, why it's crucial, and the components it comprises.

Table of Contents

Business Plan Market Analysis - What Is It?

• Key Components
• How To Implement

Tips and Best Practices

• Market Analysis Case Study

Wrapping It All Up

Market analysis is a comprehensive examination of the dynamics, trends, and competitive landscape of the business environment within which a company operates. It is a vital component of a business plan as it allows entrepreneurs and business owners to understand their industry and market better, enabling them to make well-informed decisions. The business plan market analysis section has two main benefits. Firstly, it Allows you to Identify key opportunities in the market. By studying the market, a business can identify gaps, trends, or customer needs that aren't currently being met and then plan to cater to them effectively. Secondly, it also allows you to recognise potential threats and competition. By understanding your competitors, their offerings, strategies, strengths, and weaknesses, you can position yourself better against their position in the marketplace. Overall the role of market analysis in a business plan cannot be understated. It serves as the foundation upon which the marketing and sales strategies are built. In the following sections, we will take a deep dive into the key components of market analysis and how to conduct it effectively. 

Remember, the opening of your Executive Summary sets the tone for the entire document. Make it memorable and compelling to encourage the reader to continue exploring.

What Are The Key Components of Market Analysis?

Understanding the key components of a market analysis is crucial to conducting one effectively. Each element contributes a unique insight into your market, providing a comprehensive overview of the environment in which your business will operate. Here are the key components:

• Industry Description and Outlook: This involves describing the industry within which your business will operate. Look to identify the key trends influencing it and the outlook of the future of the industry based on reliable industry forecasts.
• Target Market: It's vital to identify and understand your ideal customers. This involves defining the demographics (age, gender, income, etc.), psychographics (interests, values, behaviours, etc.), and geographic location of the customers your business aims to target. Furthermore, it's important to understand their needs, preferences, and buying habits.
• Market Size and Trends: Here, you need to determine the total size of your target market. This involves quantifying the number of potential customers, the total sales volume, or the total market value. Furthermore, it's crucial to identify key market trends, which may include changes in customer behaviour, new technologies, or shifting regulatory environments.
• Market Segmentation: This involves dividing your target market into distinct groups (segments) based on certain characteristics. These might include age, location, buying habits, or customer needs. By taking the time to segment your customers you can develop better targeting strategies for your marketing campaigns.
• Competitive Analysis: This component involves identifying your key competitors and analysing their products, sales strategies, market share, strengths, and weaknesses. A competitive analysis will help your business identify its unique selling proposition (USP) and differentiate itself from competitors.
• SWOT Analysis: Finally, conducting a SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis will allow your business to identify its internal strengths and weaknesses, as well as external opportunities and threats in the market. This can help your business leverage its strengths, address its weaknesses, capitalise on opportunities, and prepare for potential threats.

Business Plan Market Analysis - How to Implement 

Conducting a business plan market analysis might seem like a daunting task, but you can make it more achievable by breaking it down into key tasks.

• Industry Description and Outlook: Start by gathering data on your industry. This can include industry reports, market research data, news articles, and government statistics. Remember to cite your sources to add credibility to your analysis.
• Target Market: Identifying your target market requires an understanding of who is most likely to buy your product or service. You can conduct surveys, interviews, or focus groups to gather data on potential customers. If you already have a customer database, try to delve into this further by conducting post-purchase interviews with customers. Try to identify demographic, geographic, and psychographic characteristics, as well as buying habits and needs. The aim is to create a clear and specific profile of your ideal customer. You will aim to use this data to generate customer segments to target with your marketing campaigns.
• Market Size and Trends: Estimating market size can be challenging but can be done by looking at industry reports, government data, and market research studies. You can also look at the sales of competitors or analogous products. Identify key market trends by examining changes in customer behaviour, technological advances, and regulatory changes.
• Competitive Analysis: Identify your key competitors and analyse their offerings. Look at their products, pricing, marketing strategies, and market share. Try to understand their strengths and weaknesses. You can gather this information from their websites, customer reviews, and industry reports. Use this analysis to identify opportunities for your business to differentiate itself.
• SWOT Analysis: You can consolidate all of your initial research into a SWOT analysis which will help synthesise your learning and make it easier to develop strategies from your research.

Remember, conducting a market analysis isn't a one-time task. Markets are dynamic, with customer preferences, competition, and external factors continually changing. Your aim should be to continually update your business plan market analysis periodically. Here at Action Planr we have a full guide on how to conduct a SWOT Analysis for more detailed information on the full process.

Successfully conducting a market analysis involves more than just understanding its components and knowing where to find the necessary data. Here are some tips and best practices to help make your market analysis more robust, reliable, and useful for decision-making:

• Using Reliable Data Sources for Market Research: The quality of your analysis is directly tied to the quality of your data. Therefore, it's important to use reliable sources such as government databases, industry reports, reputable market research firms, and academic studies. Be wary of data that doesn't come from reliable sources.
• Understanding the Importance of Both Quantitative and Qualitative Research: Quantitative data, like statistics and numerical facts, provides a solid base for your analysis. But don't underestimate the power of qualitative data—opinions, anecdotes, and experiences—which can provide deeper insight into customer behaviours and preferences.
• Keeping the Analysis Current and Updated: Markets change rapidly. What was true last year—or even last month—may not hold today. Regularly updating your market analysis can help you keep up with changes and adjust your business strategies accordingly.
• Ensuring Your Analysis is Relevant to Your Specific Business Model: The insights you need depend on your business model. A B2B company will need a different kind of analysis than a B2C company. Tailor your market analysis to your specific business needs and objectives.
• Importance of Validating Assumptions: In the course of conducting a market analysis, you'll likely make assumptions. Be sure to validate these assumptions with solid data whenever possible.
• Keep your Audience in Mind: If your business plan is read by investors, they'll be interested in market size, growth opportunities, and competitive landscape. Make sure your market analysis addresses these topics and is presented in a clear, easy-to-understand format.

Business Plan Market Analysis - Case Study

To understand how the principles and processes of market analysis work in a real-world context, let's look at a case study of an innovative tech startup, "Techie Toys." Techie Toys is a company that produces educational toys based on augmented reality technology, targeting children aged 6 to 12. Their goal is to make learning fun and interactive.

• Industry Description and Outlook: Techie Toys reviewed multiple industry reports and found that the educational toy market has seen substantial growth over recent years, and this growth is expected to continue due to increasing focus on interactive learning methods. The integration of technology into educational toys, specifically augmented reality, is a significant trend shaping the industry.
• Target Market: Through surveys and focus groups, Techie Toys identified their target customers as parents of children aged 6 to 12 who value educational development and are comfortable with technology integration in toys. These parents have middle to upper-middle income, are mostly city dwellers, and are willing to invest in their children's education.
• Market Size and Trends: By analysing industry reports and sales of similar products, Techie Toys estimated a sizable target market for their augmented reality educational toys. The trend of "edutainment" was identified as a key market trend, with technology-based educational toys gaining popularity.
• Market Segmentation: Techie Toys segmented their market based on age (6-8, 9-12), type of toy preferred (science, math, language arts), and parents' willingness to spend on educational toys. They plan to tailor their products and marketing strategies according to these segments.
• Competitive Analysis: Techie Toys identified several key competitors offering educational toys but found a gap in those providing augmented reality-based learning. They also discovered that their unique selling proposition – interactive learning through augmented reality – is an aspect where they outshine their competitors.
• SWOT Analysis: Strengths identified included a strong development team, unique product offering, and alignment with market trends. Weaknesses involved a higher price point and lack of brand recognition. Opportunities included a growing market and a trend toward edutainment, while threats were potential competitors and rapid technological change.

By conducting this detailed market analysis, Techie Toys was able to effectively position itself within the market, identify its unique selling proposition, and tailor their product development and marketing strategy to their target audience. This comprehensive understanding of their market greatly contributed to their success.

The business plan market analysis section of a business plan is one of its most critical components. Conducting a detailed and accurate market analysis can be a challenging process, but as we've seen in our guide, the benefits are large. Business is all about planning and conducting an in-depth market analysis process, It will allow your business to navigate its environment with knowledge and foresight. The insight gained can help you identify growth opportunities and provide a strong basis for the development of effective marketing and sales strategies. Keep these insights, steps, and tips in mind as you work on your market analysis and remember markets are continually changing so don't make this a one-and-done exercise. If you are looking for help with other sections of the business plan, please check out our Learning Zone homepage.

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How to Conduct a Market Analysis in 4 Steps — 2024 Guide

Posted february 5, 2021 by noah parsons.

Understanding your customers is the key to success for any startup. If you don’t have a deep understanding of who your customers are, you’ll have trouble developing products that truly fit their needs, and you’ll struggle to develop a successful marketing strategy.

This is where a market analysis comes in. It may sound like a daunting and complex process, but fortunately, it’s not.

What is a market analysis?

A market analysis is a thorough qualitative and quantitative assessment of the current market .

It helps you understand the volume and value of the market, potential customer segments and their buying patterns, the position of your competition, and the overall economic environment, including barriers to entry, and industry regulations.

Why you should conduct a market analysis

Whether you are writing a one-page plan or putting together a detailed business plan for a bank or other investor, a solid market analysis is expected. But, don’t just do a market analysis because you’re developing a plan. Do it because it will help you build a smarter strategy for growing your business.

Once you have in-depth knowledge of your market, you’ll be better positioned to develop products and services that your customers are going to love. And while diving into market research may seem like a daunting task it can be broken up into four simple elements:

• Industry overview: You’ll describe the current state of your industry and where it is headed.
• Target market: Who are your actual customers? You’ll detail how many of them are there, what their needs are, and describe their demographics.
• Competition: Describe your competitors’ positioning, strengths, and weaknesses.
• Pricing and forecast: Your pricing will help determine how you position your company in the market, and your forecast will show what portion of the market you hope to get.

How to conduct a market analysis

Now, let’s go into each step in more detail so you know exactly what you need for your market analysis.

1.  Industry overview

In this step, you’ll describe your industry and discuss the direction that it’s headed. You’ll want to include key industry metrics such as size, trends, and projected growth.

Industry research and analysis is different than market research . When you’re researching your industry, you’re looking at all of the businesses like yours. This is different than market research, where you are learning about your customers.

Your industry overview shows investors that you understand the larger landscape that you are competing in. More importantly, it helps you understand if there’s going to be more demand for your products in the future and how competitive the industry is likely to be.

For example, if you are selling mobile phones, you’ll want to know if the demand for mobile phones is growing or shrinking. If you’re opening a restaurant, you’ll want to understand the larger trends of dining out. Are people eating at restaurants more and more over time? Or is the market potentially shrinking as consumers take advantage of grocery delivery services?

If you’re in the United States, the U.S. Census has excellent industry data available . I’ve also found Statista to be useful. You should also look up your industry association—they often have a wealth of information on the trends in your industry.

2. Define your target market

Your target market is the most important section of your industry analysis. This is where you explain who your ideal customer is.

You may find that through the course of your analysis, that you identify different types of customers. When you have more than one type of customer, you do what’s called market segmentation. This is where you group similar types of customers into segments and describe the attributes of each segment.

You’ll need to start broadly and refine your research by defining the following elements.

Market size

Unlike industry size, which is usually measured in dollars, your market size is how many potential customers there are for your product or service. We’ve got a great method for figuring out your market size that you can read about here .

Demographics

Describe your customer’s typical age, gender, education, income, and more. If you could paint a picture of your perfect customer, this is where you’ll describe what they look like.

Where are your customers located? A specific country, region, state, city, county, you’ll want to describe that here. You may even find that your customer base is segmented based on location which can help you determine where you’ll be doing business.

Psychographics

It’s here that you need to get inside the mindset of your customers, know their needs, and how they’ll react. What are your customers’ likes and dislikes? How do they live? What’s their personality?

This piece can even help you better approach analyzing the competition.

This is essentially an extension of some of your psychographic information. Explain how your customers shop for and purchase products like yours.

Customer behavior is always changing. If there are trends that you’ve noticed with your target market, detail them here.

3. Competition

Your market analysis isn’t complete without thinking about your competition . Beyond knowing what other businesses you are competing with, a good competitive analysis will point out competitors’ weaknesses that you can take advantage of. With this knowledge, you can differentiate yourself by offering products and services that fill gaps that competitors have not addressed.

When you are analyzing the competition, you should take a look at the following areas.

Direct competition

These are companies that are offering very similar products and services. Your potential customers are probably currently buying from these companies.

Indirect competitors

Think of indirect competition as alternative solutions to the problem you are solving. This is particularly useful and important for companies that are inventing brand new products or services. For example, the first online task management software wasn’t competing with other online task managers—it was competing with paper planners, sticky notes, and other analog to-do lists.

How you’re different

You don’t want to be the same as the competition. Make sure to discuss how your company, product, or service is different than what the competition is offering. For a common business type, such as hair salons, your differentiation might be location, hours, types of services, ambiance, or price.

Barriers to entry

Describe what protections you have in place to prevent new companies from competing with you. Maybe you have a great location, or perhaps you have patents that help protect your business.

The best way to research your competition is to talk to your prospective customers and ask them who they are currently buying from and what alternate solutions they are using to solve the problem you are solving. Of course, spending some time on Google to figure out what else is out there is a great idea as well.

4. Pricing and forecast

The final step in a market analysis is to figure out your pricing and create a sales forecast to better understand what portion of the market you think you can get.

Pricing your product or service

First, think about your pricing . Of course, you should ensure that your price is more than what it costs you to make and deliver your product or service. But, beyond that, think about the message that your price sends to consumers.

Customers usually link high prices to quality. But, if you are pricing on the higher end of the spectrum, you need to make sure the rest of your marketing is also signaling that you are delivering a high-quality product or service. From what your business looks like to its logo and customer service experience, high-prices should come with a high-quality experience during the entire sales process.

On the other end of the spectrum, maybe you’re competing as a low-priced alternative to other products or businesses. If that’s the case, make sure your marketing and other messaging are also delivering that same, unified message.

Forecasting for initial sales volume

Once you have an idea of your pricing, think about how much you expect to sell. Your industry research will come into play here as you think about how much of the overall market you expect to capture. For example, if you’re opening a new type of grocery store, you’ll want to know how much people spend on groceries in your area. Your forecast should reflect a realistic portion of that total spend. It’s probably not realistic to gain 50 percent of the market within your first year.

However, don’t make the mistake of assuming that you can easily get 1 percent of a very large market. 1 percent of a 3 billion dollar market is still $30 million and even though 1 percent seems like a small, attainable number, you need to understand and explain how you will actually acquire that volume of customers.

When you build your forecast, use it as a goal for your business and track your actual sales compared to what you had hoped you would sell. Tools like LivePlan can help you automatically compare your forecast to your accounting data, so it’s easy to do. But, even if you use a spreadsheet, tracking your progress will help you adjust your business strategy quickly so that you can do more of what’s working and less of what isn’t.

Prepare your business with a market analysis

Creating a good market analysis is a very worthwhile exercise. It will help you uncover your blind spots and prepare you to compete with other businesses. More importantly, it will help you understand your customers so you can deliver the best possible service to them.

Looking for some examples of market analysis? Take a look at our free sample business plans on Bplans . There are more than 500 of them across a wide range of industries, and each one of them has a market analysis section.

Editor’s note: This article was originally published in 2018 and updated for 2021.

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Market Analysis

Connecting the Dots, Quantifying Technology Trends & Measuring Disruption

How to do a market analysis for a business plan

A market analysis is an important part of a business plan because it helps you understand the market in which your business will operate. It involves researching and analyzing the target market, competitors, and industry trends in order to identify opportunities and challenges. Here are the steps you can follow to do a market analysis for a business plan:

Define your target market: The first step in a market analysis is to identify the specific group of customers that you will be targeting with your products or services. This may include demographics (age, gender, income, education level, etc.), geographic location, and other characteristics that are relevant to your business.

Research the market size: Next, you’ll need to determine the size of the market you are targeting. This will help you understand the potential demand for your products or services and determine whether the market is large enough to support your business. You can use various sources of data, such as industry reports and government statistics, to estimate the size of the market.

Analyze competitors: It’s important to understand who your competitors are and what they are offering. This will help you identify unique selling points for your business and determine how you can differentiate yourself from your competitors. You can research your competitors online, ask customers about their preferences, and even visit their stores or websites to get a sense of their product offerings and pricing.

Assess industry trends: Understanding industry trends can help you anticipate changes in the market and position your business to take advantage of them. Look for trends in areas such as technology, consumer behavior, and regulatory changes that may affect your business.

Determine your target market’s needs and preferences: To effectively market your products or services, you need to understand what your target customers need and want. You can gather this information through customer surveys, focus groups, and other market research methods.

Determine your target market’s purchasing power: It’s important to understand how much your target customers are willing and able to pay for your products or services. This will help you determine your pricing strategy and determine whether there is enough demand at your target price point.

Analyze your target market’s attitudes and behaviors: Understanding your target customers’ attitudes and behaviors can help you tailor your marketing efforts to their preferences. For example, if your target market values sustainability, you may want to highlight the eco-friendliness of your products in your marketing materials.

By conducting a thorough market analysis, you can gain a better understanding of the market in which your business will operate and make informed decisions about your marketing, pricing, and product development strategies.

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How to Write the Market Analysis Section of a Business Plan

Written by Dave Lavinsky

What is the Market Analysis in a Business Plan?

The market analysis section of your business plan is where you discuss the size of the market in which you’re competing and market trends that might affect your future potential such as economic, political, social and/or technological shifts.

This helps you and readers understand if your market is big enough to support your business’ growth, and whether future conditions will help or hurt your business. For example, stating that your market size is $56 billion, has been growing by 10% for the last 10 years, and that trends are expected to further increase the market size bodes well for your company’s success.

Download our Ultimate Business Plan Template here

What Should a Market Analysis Include?

You’ll want to address these issues in your market analysis:

• Size of Industry – How big is the overall industry?
• Projected Growth Rate of Industry – Is the industry growing or shrinking? How fast?
• Target Market – Who are you targeting with this product or service?
• Competition – How many businesses are currently in the same industry?

Learn how to write the full market analysis below.

How to Write a Market Analysis

Here’s how to write the market analysis section of a business plan.

• Describe each industry that you are competing in or will be targeting.
• Identify direct competition, but don’t forget about indirect competition – this may include companies selling different products to the same potential customer segments.
• Highlight strengths and weaknesses for both direct and indirect competitors, along with how your company stacks up against them based on what makes your company uniquely positioned to succeed.
• Include specific data, statistics, graphs, or charts if possible to make the market analysis more convincing to investors or lenders.

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Industry overview.

In your industry overview, you will define the market in which you are competing (e.g., restaurant, medical devices, etc.).

You will then detail the sub-segment or niche of that market if applicable (e.g., within restaurants there are fast food restaurants, fine dining, etc.).

Next, you will describe the key characteristics of your industry. For example, discuss how big the market is in terms of units and revenues. Let the reader know if the market is growing or declining (and at what rate), and what key industry trends are facing your market.

Use third-party market research as much as possible to validate the discussion of your industry.

Here is a list of additional items you may analyze for a complete industry overview:

• An overview of the current state of the industry . How big is it, how much does it produce or sell? What are its key differentiators from competitors? What is its target customer base like – demographic information and psychographics? How has the industry performed over time (global, domestic)?
• Analyze the macro-economic factors impacting your industry . This includes items such as economic growth opportunities, inflation, exchange rates, interest rates, labor market trends, and technological improvements. You want to make sure that all of these are trending in a positive direction for you while also being realistic about them. For example, if the economy is in shambles you might want to wait before entering the particular market.
• Analyze the political factors impacting your industry . This is an often-overlooked section of any business plan, but it can be important depending on what type of company you are starting. If you’re in a highly regulated industry (such as medical devices), this is something that you’ll want to include.
• Analyze the social factors impacting your industry . This includes analyzing society’s interest in your product or service, historical trends in buying patterns in your industry, and any effects on the industry due to changes in culture. For example, if there is a growing counter-culture trend against big oil companies you might want to position yourself differently than a company in this industry.
• Analyze the technological factors impacting your industry . This includes analyzing new technologies being developed in software, hardware, or applications that can be used to improve your product or service. It also includes emerging consumer trends and will be highly dependent on your business type. In a technology-related venture, you would analyze how these changes are impacting consumers. For an educational-related venture, you would analyze how these changes are impacting students, teachers, and/or administrators.

For each of these items, you want to provide some detail about them including their current state as well as what external factors have played a role in the recent past. You can also include many other important factors if they apply to your business including demographic trends, legal issues, environmental concerns, and sustainability issues.

When you are done analyzing all of these factors, wrap it up by summing them up in a statement that includes your view on the future of the industry. This should be positive to attract investors, potential customers, and partners.

If you’re having trouble thinking about all of these factors then it might be helpful to first develop a SWOT analysis for your business.

Once you have an understanding of the market, you’ll need to think about how you will position yourself within that potential market.

Picking Your Niche

You want to think about how large your market is for this venture. You also want to consider whether you’d like to pick a niche within the overall industry or launch yourself into the mainstream.

If you have an innovative product it can be easier to enter the mainstream market – but at the same time, you might face some additional competition if there are similar products available.

You can choose to specialize in a niche market where you’ll face less competition – but might be able to sell your services at a higher price point (this could make it easier for you to get potential customers).

Of course, if your product or service is unique then there should be no competition. But, what happens if it isn’t unique? Will you be able to differentiate yourself enough to create a competitive advantage or edge?

If you are planning on entering the mainstream market, think about whether there are different sub-niches within your specific market. For example, within the technology industry, you can choose to specialize in laptops or smartphones or tablets, or other categories. While it will be more difficult to be unique in a mainstream market, you will still be able to focus on one type or category of products.

How Will You Stand Out?

Many companies are able to stand out – whether by offering a product that is unique or by marketing their products in a way that consumers notice. For example, Steve Jobs was able to take a business idea like the iPhone and make it into something that people talked about (while competitors struggled to play catch up).

You want your venture to stand out – whether with an innovative product or service or through marketing strategies. This might include a unique brand, name, or logo. It might also include packaging that stands out from competitors.

Write down how you will achieve this goal of standing out in the marketplace. If it’s a product, then what features do you have that other products don’t? If it’s a service, then what is it about this service that will make people want to use your company rather than your competition?

You also need to think about marketing. How are you going to promote yourself or sell your product or service? You’ll need a marketing plan for this – which might include writing copy, creating an advertisement, setting up a website, and several other activities. This should include a description of each of these strategies.

If you’re struggling with the details of any of these sections, it might be helpful to research what other companies in your market are doing and how they’ve been successful. You can use this business information to inform your own strategies and plans.

Relevant Market Size & Competition

In the second stage of your analysis, you must determine the size and competition in your specific market.

Target Market Section

Your company’s relevant market size is the amount of money it could make each year if it owned a complete market share.

It’s simple.

To begin, estimate how many consumers you expect to be interested in purchasing your products or services each year.

To generate a more precise estimate, enter the monetary amount these potential customers may be ready to spend on your goods or services each year.

The size of your market is the product of these two figures. Calculate this market value here so that your readers can see how big your market opportunity is (particularly if you are seeking debt or equity funding).

You’ll also want to include an analysis of your market conditions. Is this a growing or declining market? How fast is it growing (or declining)? What are the general trends in the market? How has your market shifted over time?

Include all of this information in your own business plan to give your readers a clear understanding of the market landscape you’re competing in.

The Competition

Next, you’ll need to create a comprehensive list of the competitors in your market. This competitive analysis includes:

• Direct Competitors – Companies that offer a similar product or service
• Indirect Competitors – Companies that sell products or services that are complementary to yours but not directly related

To show how large each competitor is, you can use metrics such as revenue, employees, number of locations, etc. If you have limited information about the company on hand then you may want to do some additional research or contact them directly for more information. You should also include their website so readers can learn more if they desire (along with social media profiles).

Once you complete this list, take a step back and try to determine how much market share each competitor has. You can use different methods to do this such as market research, surveys, or conduct focus groups or interviews with target customers.

You should also take into account the barriers to entry that exist in your market. What would it take for a new company to enter the market and start competing with you? This could be anything from capital requirements to licensing and permits.

When you have all of this information, you’ll want to create a table like the one below:

Once you have this data, you can start developing strategies to compete with the other companies which will be used again later to help you develop your marketing strategy and plan. 

Writing a Market Analysis Tips

• Include an explanation of how you determined the size of the market and how much share competitors have.
• Include tables like the one above that show competitor size, barriers to entry, etc.
• Decide where you’re going to place this section in your business plan – before or after your SWOT analysis. You can use other sections as well such as your company summary or product/service description. Make sure you consider which information should come first for the reader to make the most sense.
• Brainstorm how you’re going to stand out in this competitive market.

Formatting the Market Analysis Section of Your Business Plan

Now that you understand the different components of the market analysis, let’s take a look at how you should structure this section in your business plan.

Your market analysis should be divided into two sections: the industry overview and market size & competition.

Each section should include detailed information about the topic and supporting evidence to back up your claims.

You’ll also want to make sure that all of your data is up-to-date. Be sure to include the date of the analysis in your business plan so readers know when it was conducted and if there have been any major changes since then.

In addition, you should also provide a short summary of what this section covers at the beginning of each paragraph or page. You can do this by using a title such as “Industry Overview” or another descriptive phrase that is easy to follow.

As with all sections in a business plan, make sure your market analysis is concise and includes only the most relevant information to keep your audience engaged until they reach your conclusion.

A strong market analysis can give your company a competitive edge over other businesses in its industry, which is why it’s essential to include this section in your business plan. By providing detailed information about the market you’re competing in, you can show your readers that you understand the industry and know how to capitalize on current and future trends.

Business Plan Market Analysis Examples

The following are examples of how to write the market analysis section of a business plan:

Business Plan Market Analysis Example #1 – Hosmer Sunglasses, a sunglasses manufacturer based in California

According to the Sunglass Association of America, the retail sales volume of Plano (non-prescription) sunglasses, clip-on sunglasses, and children’s sunglasses (hereinafter collectively referred to as “Sunwear”) totaled $2.9 billion last year. Premium-priced sunglasses are driving the Plano Sunwear market. Plano sunglasses priced at $100 or more accounted for more than 49% of all Sunwear sales among independent retail locations last year. 

The Sunglass Association of America has projected that the dollar volume for retail sales of Plano Sunwear will grow 1.7% next year. Plano sunglass vendors are also bullish about sales in this year and beyond as a result of the growth of technology, particularly the growth of laser surgery and e-commerce.

Business Plan Market Analysis Example #2 – Nailed It!, a family-owned restaurant in Omaha, NE

According to the Nebraska Restaurant Association, last year total restaurant sales in Nebraska grew by 4.3%, reaching a record high of $2.8 billion. Sales at full-service restaurants were particularly strong, growing 7% over 2012 figures. This steady increase is being driven by population growth throughout the state. The Average Annual Growth Rate (AGR) since 2009 is 2.89%.

This fast growth has also encouraged the opening of new restaurants, with 3,035 operating statewide as of this year. The restaurant industry employs more than 41,000 workers in Nebraska and contributes nearly $3 billion to the state economy every year.

Nebraska’s population continues to increase – reaching 1.9 million in 2012, a 1.5% growth rate. In addition to population, the state has experienced record low unemployment every year since 2009 – with an average of 4.7% in 2013 and 2014.

Business Plan Market Analysis Example #3 – American Insurance Company (AIC), a chain of insurance agencies in Maine

American Insurance Company (AIC) offers high-quality insurance at low prices through its chain of retail outlets in the state of Maine. Since its inception, AIC has created an extensive network of agents and brokers across the country with expanding online, call center and retail business operations.

AIC is entering a market that will more than double in size over the next 50 years according to some industry forecasts. The insurance industry is enjoying low inflation rates, steady income growth, and improving standards of living for most Americans during what has been a difficult period for much of American business. This makes this a good time to enter the insurance industry as it enjoys higher margins because customers are purchasing more coverage due to increased costs from medical care and higher liability claims.

American Insurance Company provides affordable homeowners, auto, and business insurance through high-quality fulfillment centers across America that have earned a reputation for top-notch customer service.

AIC will face significant competition from both direct and indirect competitors. The indirect competition will come from a variety of businesses, including banks, other insurance companies, and online retailers. The direct competition will come from other well-funded start-ups as well as incumbents in the industry. AIC’s competitive advantages include its low prices, high quality, and excellent customer service.

AIC plans to grow at a rate that is above average for the industry as a whole. The company has identified a market that is expected to grow by more than 100% in the next decade. This growth is due to several factors: the increase in the number of two-income households, the aging population, and the impending retirement of many baby boomers will lead to an increase in the number of people who are purchasing insurance.

AIC projects revenues of $20M in year one, which is equivalent to 100% growth over the previous year. AIC forecasts revenue growth of 40%-60% each year on average for 10 years. After that, revenue growth is expected to slow down significantly due to market saturation.

The following table illustrates these projections:

Competitive Landscape

Direct Competition: P&C Insurance Market Leaders

Indirect Competition: Banks, Other Insurance Companies, Retailers

Market Analysis Conclusion

When writing the market analysis section, it is important to provide specific data and forecasts about the industry that your company operates in. This information can help make your business plan more convincing to potential investors.

If it’s helpful, you should also discuss how your company stacks up against its competitors based on what makes it unique. In addition, you can identify any strengths or weaknesses that your company has compared to its competitors.

Based on this data, provide projections for how much revenue your company expects to generate over the next few years. Providing this information early on in the business plan will help convince investors that you know what you are talking about and your company is well-positioned to succeed.  

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Other Resources for Writing Your Business Plan

How to Write a Great Business Plan Executive Summary How to Expertly Write the Company Description in Your Business Plan The Customer Analysis Section of Your Business Plan Completing the Competitive Analysis Section of Your Business Plan The Management Team Section of Your Business Plan Financial Assumptions and Your Business Plan How to Create Financial Projections for Your Business Plan Everything You Need to Know about the Business Plan Appendix Best Business Plan Software Business Plan Conclusion: Summary & Recap  

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How to Write Competitive Analysis in a Business Plan (w/ Examples)

Free Competitive Analysis Kit

• Vinay Kevadia
• January 9, 2024

14 Min Read

Every business wants to outperform its competitors, but do you know the right approach to gather information and analyze your competitors?

That’s where competitive analysis steps in. It’s the tool that helps you know your competition’s pricing strategies, strengths, product details, marketing strategies, target audience, and more.

If you want to know more about competitor analysis, this guide is all you need. It spills all the details on how to conduct and write a competitor analysis in a business plan, with examples.

Let’s get started and first understand the meaning of competitive analysis.

What is Competitive Analysis?

A competitive analysis involves collecting information about what other businesses in your industry are doing with their products, sales, and marketing.

Businesses use this data to find out what they are good at, where they can do better, and what opportunities they might have. It is like checking out the competition to see how and where you can improve.

This kind of analysis helps you get a clear picture of the market, allowing you to make smart decisions to make your business stand out and do well in the industry.

Competitive analysis is a section of utmost value for your business plan. The analysis in this section will form the basis upon which you will frame your marketing, sales, and product-related strategies. So make sure it’s thorough, insightful, and in line with your strategic objectives.

Let’s now understand how you can conduct a competitive analysis for your own business and leverage all its varied benefits.

How to Conduct a Competitive Analysis

Let’s break down the process of conducting a competitive analysis for your business plan in these easy-to-follow steps.

It will help you prepare a solid competitor analysis section in your business plan that actually highlights your strengths and opens room for better discussions (and funding).

Let’s begin.

1. Identify Your Direct and Indirect Competitors

First things first — identify all your business competitors and list them down. You can have a final, detailed list later, but right now an elementary list that mentions your primary competitors (the ones you know and are actively competing with) can suffice.

As you conduct more research, you can keep adding to it.

Explore your competitors using Google, social media platforms, or local markets. Then differentiate them into direct or indirect competitors.

Direct competitors

Businesses offering the same products or services, and targeting a similar target market are your direct competitors.

These competitors operate in the same industry and are often competing for the same market share.

Indirect competitors

On the other hand, indirect competitors are businesses that offer different products or services but cater to the same target customers as yours.

While they may not offer identical solutions, they compete for the same customer budget or attention. Indirect competitors can pose a threat by providing alternatives that customers might consider instead of your offerings.

2. Study the Overall Market

Now that you know your business competitors, deep dive into market research. Market research should involve a combination of both primary and secondary research methods.

Primary research

Primary research involves collecting market information directly from the source or subjects.  Some examples of primary market research methods include:

• Purchasing competitors’ products or services
• Conducting interviews with their customers
• Administering online surveys to gather customer insights

Secondary research

Secondary research involves utilizing pre-existing gathered information from some relevant sources. Some of its examples include:

• Scrutinizing competitors’ websites
• Assessing the current economic landscape
• Referring to online market databases of the competitors.

Have a good understanding of the market at this point to write your market analysis section effectively.

3. Prepare a Competitive Framework

Now that you have a thorough understanding of your competitors’ market, it is time to create a competitive framework that enables comparison between two businesses.

Factors like market share, product offering, pricing, distribution channel, target markets, marketing strategies, and customer service offer essential metrics and information to chart your competitive framework.

These factors will form the basis of comparison for your competitive analysis. Depending on the type of your business, choose the factors that are relevant to you.

4. Take Note of Your Competitor’s Strategies

Now that you have an established framework, use that as a base to analyze your competitor’s strategies. Such analysis will help you understand what the customers like and dislike about your competitors.

Start by analyzing the marketing strategies, sales and marketing channels, promotional activities, and branding strategies of your competitors. Understand how they position themselves in the market and what USPs they emphasize.

Evaluate, analyze their pricing strategies and keep an eye on their distribution channel to understand your competitor’s business model in detail.

This information allows you to make informed decisions about your strategies, helping you identify opportunities for differentiation and improvement.

5. Perform a SWOT Analysis of Your Competitors

A SWOT analysis is a method of analyzing the strengths, weaknesses, opportunities, and threats of your business in the competitive marketplace.

While strengths and weaknesses focus on internal aspects of your company, opportunities and threats examine the external factors related to the industry and market.

It’s an important tool that will help determine the company’s competitive edge quite efficiently.

It includes the positive features of your internal business operations. For example, a strong brand, skilled workforce, innovative products/services, or a loyal customer base.

It includes all the hindrances of your internal business operations. For example, limited resources, outdated technology, weak brand recognition, or inefficient processes.

Opportunities

It outlines several opportunities that will come your way in the near or far future. Opportunities can arise as the industry or market trend changes or by leveraging the weaknesses of your competitors.

For example, details about emerging markets, technological advancements, changing consumer trends, profitable partnerships in the future, etc.

Threats define any external factor that poses a challenge or any risk for your business in this section. For example, intense competition, economic downturns, regulatory changes, or any advanced technology disruption.

This section will form the basis for your business strategies and product offerings. So make sure it’s detailed and offers the right representation of your business.

And that is all you need to create a comprehensive competitive analysis for your business plan.

Want to Perform Competitive Analysis for your Business?

Discover your competition’s secrets effortlessly with our user-friendly and Free Competitor Analysis Generator!

How to Write Competitive Analysis in a Business Plan

The section on competitor analysis is the most crucial part of your business plan. Making this section informative and engaging gets easier when you have all the essential data to form this section.

Now, let’s learn an effective way of writing your competitive analysis.

1. Determine who your readers are

Know your audience first, because that will change the whole context of your competitor analysis business plan.

The competitive analysis section will vary depending on the intended audience is the team or investors.

Consider the following things about your audience before you start writing this section:

Internal competitor plan (employees or partners)

Objective: The internal competitor plan is to provide your team with an understanding of the competitive landscape.

Focus: The focus should be on the comparison of the strengths and weaknesses of competitors to boost strategic discussions within your team.

Use: It is to leverage the above information to develop strategies that highlight your strengths and address your weaknesses.

Competitor plan for funding (bank or investors)

Objective: Here, the objective is to reassure the potential and viability of your business to investors or lenders.

Focus: This section should focus on awareness and deep understanding of the competitive landscape to persuade the readers about the future of your business.

Use: It is to showcase your market position and the opportunities that are on the way to your business.

This differentiation is solely to ensure that the competitive analysis serves its purpose effectively based on the specific needs and expectations of the respective audience.

2. Describe and Visualise Competitive Advantage

Remember how we determined our competitive advantage at the time of research. It is now time to present that advantage in your competitive analysis.

Highlight your edge over other market players in terms of innovation, product quality, features, pricing, or marketing strategy. Understanding your products’ competitive advantage will also help you write the products and services section effectively.

However, don’t limit the edge to your service and market segment. Highlight every area where you excel even if it is better customer service or enhanced brand reputation.

Now, you can explain your analysis through textual blocks. However, a more effective method would be using a positioning map or competitive matrix to offer a visual representation of your company’s competitive advantage.

3. Explain your strategies

Your competitor analysis section should not only highlight the opportunities or threats of your business. It should also mention the strategies you will implement to overcome those threats or capitalize on the opportunities.

Such strategies may include crafting top-notch quality for your products or services, exploring the unexplored market segment, or having creative marketing strategies.

Elaborate on these strategies later in their respective business plan sections.

4. Know the pricing strategy

To understand the pricing strategy of your competitors, there are various aspects you need to have information about. It involves knowing their pricing model, evaluating their price points, and considering the additional costs, if any.

One way to understand this in a better way is to compare features and value offered at different price points and identify the gaps in competitors’ offerings.

Once you know the pricing structure of your competitors, compare it with yours and get to know the competitive advantage of your business from a pricing point of view.

Let us now get a more practical insight by checking an example of competitive analysis.

Competitive Analysis Example in a Business Plan

Here’s a business plan example highlighting the barber shop’s competitive analysis.

1. List of competitors

Direct & indirect competitors.

The following retailers are located within a 5-mile radius of J&S, thus providing either direct or indirect competition for customers:

Joe’s Beauty Salon

Joe’s Beauty Salon is the town’s most popular beauty salon and has been in business for 32 years. Joe’s offers a wide array of services that you would expect from a beauty salon.

Besides offering haircuts, Joe’s also offers nail services such as manicures and pedicures. In fact, over 60% of Joe’s revenue comes from services targeted at women outside of hair services. In addition, Joe’s does not offer its customers premium salon products.

For example, they only offer 2 types of regular hair gels and 4 types of shampoos. This puts Joe’s in direct competition with the local pharmacy and grocery stores that also carry these mainstream products. J&S, on the other hand, offers numerous options for exclusive products that are not yet available in West Palm Beach, Florida.

LUX CUTS has been in business for 5 years. LUX CUTS offers an extremely high-end hair service, with introductory prices of $120 per haircut.

However, LUX CUTS will primarily be targeting a different customer segment from J&S, focusing on households with an income in the top 10% of the city.

Furthermore, J&S offers many of the services and products that LUX CUTS offers, but at a fraction of the price, such as:

• Hairstyle suggestions & hair care consultation
• Hair extensions & coloring
• Premium hair products from industry leaders

Freddie’s Fast Hair Salon

Freddie’s Fast Hair Salon is located four stores down the road from J&S. Freddy’s has been in business for the past 3 years and enjoys great success, primarily due to its prime location.

Freddy’s business offers inexpensive haircuts and focuses on volume over quality. It also has a large customer base comprised of children between the ages of 5 to 13.

J&S has several advantages over Freddy’s Fast Hair Salon including:

• An entertainment-focused waiting room, with TVs and board games to make the wait for service more pleasurable. Especially great for parents who bring their children.
• A focus on service quality rather than speed alone to ensure repeat visits. J&S will spend on average 20 more minutes with its clients than Freddy’s.

While we expect that Freddy’s Fast Hair Salon will continue to thrive based on its location and customer relationships, we expect that more and more customers will frequent J&S based on the high-quality service it provides.

2. Competitive Pricing

John and Sons Barbing Salon will work towards ensuring that all our services are offered at highly competitive prices compared to what is obtainable in The United States of America.

We know the importance of gaining entrance into the market by lowering our pricing to attract all and sundry that is why we have consulted with experts and they have given us the best insights on how to do this and effectively gain more clients soon.

Our pricing system is going to be based on what is obtainable in the industry, we don’t intend to charge more (except for premium and customized services) and we don’t intend to charge less than our competitors are offering in West Palm Beach – Florida.

3. Our pricing

• Payment by cash
• Payment via Point of Sale (POS) Machine
• Payment via online bank transfer (online payment portal)
• Payment via Mobile money
• Check (only from loyal customers)

Given the above, we have chosen banking platforms that will help us achieve our payment plans without any itches.

4. Competitive advantage

5. SWOT analysis

Why is a Competitive Environment helpful?

Somewhere we all think, “What if we had no competition?” “What if we were the monopoly?” It would be great, right? Well, this is not the reality, and have to accept the competition sooner or later.

However, competition is healthy for businesses to thrive and survive, let’s see how:

1. Competition validates your idea

When people are developing similar products like you, it is a sign that you are on the right path. Having healthy competition proves that your idea is valid and there is a potential target market for your product and service offerings.

2. Innovation and Efficiency

Businesses competing with each other are motivated to innovate consistently, thereby, increasing their scope and market of product offerings. Moreover, when you are operating in a cutthroat environment, you simply cannot afford to be inefficient.

Be it in terms of costs, production, pricing, or marketing—you will ensure efficiency in all aspects to attract more business.

3. Market Responsiveness

Companies in a competitive environment tend to stay relevant and longer in business since they are adaptive to the changing environment. In the absence of competition, you would start getting redundant which will throw you out of the market, sooner or later.

4. Eases Consumer Education

Since your target market is already aware of the problem and existing market solutions, it would be much easier to introduce your business to them. Rather than focusing on educating, you would be more focused on branding and positioning your brand as an ideal customer solution.

Being the first one in the market is exciting. However, having healthy competition has these proven advantages which are hard to ignore.

A way forward

Whether you are starting a new business or have an already established unit, having a practical and realistic understanding of your competitive landscape is essential to developing efficient business strategies.

While getting to know your competition is essential, don’t get too hung up in the research. Research your competitors to improve your business plan and strategies, not to copy their ideas.

Create your unique strategies, offer the best possible services, and add value to your offerings—that will make you stand out.

While it’s a long, tough road, a comprehensive business plan can be your guide. Using modern business planning software is probably the easiest way to draft your plan.

Use Upmetrics. Simply enter your business details, answer the strategic questions, and see your business plan come together in front of your eyes.

Build your Business Plan Faster

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Frequently Asked Questions

Is swot analysis a competitive analysis.

SWOT analysis is just a component of a competitive analysis and not the whole competitive analysis. It helps you identify the strengths and weaknesses of your business and determine the emerging opportunities and threats faced by the external environment.

Competitive analysis in reality is a broad spectrum topic wherein you identify your competitors, analyze them on different metrics, and identify your competitive advantage to form competitive business strategies.

What tools can i use for competitor analysis?

For a thorough competitor analysis, you will require a range of tools that can help in collecting, analyzing, and presenting data. While SEMrush, Google Alerts, Google Trends, and Ahrefs can help in collecting adequate competitor data, Business planning tools like Upmetrics can help in writing the competitors section of your business plan quite efficiently.

What are the 5 parts of a competitive analysis?

The main five components to keep in mind while having a competitor analysis are:

• Identifying the competitors
• Analyzing competitor’s strengths and weaknesses
• Assessing market share and trends
• Examining competitors’ strategies and market positioning
• Performing SWOT analysis

What is the difference between market analysis and competitive analysis?

Market analysis involves a comprehensive examination of the overall market dynamics, industry trends, and factors influencing a business’s operating environment.

On the other hand, competitive analysis narrows the focus to specific competitors within the market, delving into their strategies, strengths, weaknesses, and market positioning.

About the Author

Vinay Kevadiya

Vinay Kevadiya is the founder and CEO of Upmetrics, the #1 business planning software. His ultimate goal with Upmetrics is to revolutionize how entrepreneurs create, manage, and execute their business plans. He enjoys sharing his insights on business planning and other relevant topics through his articles and blog posts. Read more

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How to Write the Competitor Analysis Section of the Business Plan

Writing The Business Plan: Section 4

Susan Ward wrote about small businesses for The Balance for 18 years. She has run an IT consulting firm and designed and presented courses on how to promote small businesses.

The competitor analysis section can be the most difficult section to compile when writing a business plan because before you can analyze your competitors, you have to investigate them. Here's how to write the competitor analysis section of the business plan.

First, Find Out Who Your Competitors Are

If you're planning to start a small business that's going to operate locally, chances are you already know which businesses you're going to be competing with. But if not, you can easily find out by doing an internet search for local businesses, looking in the online or printed local phone book, or even driving around the target market area. 

Your local business may also have non-local competitors that you need to be aware of.

If you're selling office supplies, for instance, you may also have to compete with big-box retailers within a driving distance of several hours and companies that offer office supplies online. You want to make sure that you identify all your possible competitors at this stage.

Then Find Out About Them

You need to know:

• what markets or market segments your competitors serve;
• what benefits your competitors offer;
• why customers buy from them;
• as much as possible about their products and/or services, pricing, and promotion.

Gathering Information for Your Competitor Analysis

A visit is still the most obvious starting point - either to the brick and mortar store or to the company's website. Go there, once or several times, and look around. Watch how customers are treated. Check out the prices.

You can also learn a fair bit about your competitors from talking to their customers and/or clients - if you know who they are. Other good "live" sources of information about competitors include a company's vendors or suppliers and a company's employees. They may or may not be willing to talk to you, but it's worth seeking them out and asking.

And watch for trade shows that your competitors may be attending. Businesses are there to disseminate information about and sell their products or services; attending and visiting their booths can be an excellent way to find out about your competition.

You'll also want to search for the publicly available information about your competitors. Online publications, newspapers, and magazines may all have information about the company you're investigating for your competitive analysis. Press releases may be particularly useful. 

Once you've compiled the information about your competitors, you're ready to analyze it. 

Analyzing the Competition

Just listing a bunch of information about your competition in the competitor analysis section of the business plan misses the point. It's the analysis of the information that's important.

Study the information you've gathered about each of your competitors and ask yourself this question: How are you going to compete with that company?

For many small businesses, the key to competing successfully is to identify a market niche where they can capture a  specific target market  whose needs are not being met.

• Is there a particular segment of the market that your competition has overlooked?
• Is there a service that customers or clients want that your competitor does not supply? 

The goal of your competitor analysis is to identify and expand upon your competitive advantage - the benefits that your proposed business can offer the customer or client that your competition can't or won't supply.

Writing the Competitor Analysis Section

When you're writing the business plan, you'll write the competitor analysis section in the form of several paragraphs. 

The first paragraph will outline the competitive environment, telling your readers who your proposed business's competitors are, how much of the market they control and any other relevant details about the competition.

The second and following paragraphs will detail your competitive advantage, explaining why and how your company will be able to compete with these competitors and establish yourself as a successful business.

Remember; you don't have to go into exhaustive detail here, but you do need to persuade the reader of your business plan that you are knowledgeable about the competition and that you have a clear, definitive plan that will enable your new business to successfully compete.

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The Market Analysis section of a business plan is crucial, providing detailed insights into the business environment. It helps entrepreneurs understand their industry, target markets , competition, and the broader economic landscape. This analysis is essential for informed decision-making, strategic planning, risk mitigation, and building investor or banker confidence.

However, before diving into the details of market analysis, it’s imperative for entrepreneurs to have a profound understanding of their target customer.

This foundational step is crucial as it shapes the entire market analysis process, ensuring that the insights gained are relevant and actionable for your specific business idea.

Divergent Paths to Understanding Your Customer

• Model-Based Planning®:  Ideal for experienced entrepreneurs in well-defined industries, Model-Based Planning® offers a structured, model-specific framework. It includes pre-developed customer profiles that guide focused market analysis.
• Pre-Vision Interviews:  Suited for entrepreneurs at the idea phase or those entering new markets, Pre-Vision Interviews establish deep customer understanding. This approach is crucial for businesses that aim to be first-movers or fast-followers and is often vital for those seeking investor capital. For entrepreneurs at the idea stage or entering new markets, delve into the detailed customer insights with Pre-Vision Interviews by   clicking here .

With a clear understanding of your customers, through either Model-Based Planning® or Pre-Vision Interviews , you’re now ready to delve into the various components of Market Analysis, as detailed in the following sections of this webpage.

Components of Market Analysis

Market analysis summary.

• Role as a Synthesis of Findings:  The Market Analysis Summary encapsulates the key findings from your market research . It serves as an executive overview, providing a snapshot of the market’s health, potential, and challenges. This summary should highlight significant points such as market size, growth projections, key trends, and competitive landscape.
• Writing it Last:  It’s recommended to write the summary after completing all other sections of the market analysis. This approach ensures that the summary accurately reflects the comprehensive understanding gained from detailed research.

Detailed Market Analysis

• Understanding Market Size, Growth Rate, and Trends:  Assess the size of the market, its growth rate over time, and key trends affecting it. This includes demographic shifts, technological advancements, and changes in consumer behavior. Use reliable data sources and forecasting methods to provide a well-rounded view of the market.
• Identifying Target Market Segments:  Define the specific customer segments within the market that your business will target. Consider factors like demographics , psychographics, geographic location, and buying behaviors. Tailor your marketing strategies to these segments to maximize impact and efficiency.

Industry Analysis

• Current State of the Industry:  Provide an overview of the industry, including its history, current status, and major players. Discuss the industry’s regulatory environment and any recent changes that might affect the business.
• Industry Structure and Dynamics:  Analyze the industry’s structure, including its supply chain , distribution channels , and major competitors. Evaluate the industry’s competitive dynamics, market entry barriers, and typical profit margins.

Trends Analysis

• Identifying and Evaluating Trends:  Identify current and emerging trends within the industry and market. These could be technological advancements, changes in consumer preferences, or shifts in regulatory policies. Analyze how these trends will impact the industry and your business specifically.
• Impact of Trends on Industry and Target Market:  Discuss the potential opportunities and threats these trends present. Plan strategies to leverage opportunities and mitigate risks associated with these trends.

Competitor Analysis

• Identifying Key Competitors:  List the major competitors in your market, focusing on those directly competing with your business. Assess their market share, strengths, weaknesses, and strategic positioning.
• Assessing Competitors’ Strengths, Weaknesses, and Strategies:  Conduct a SWOT analysis (Strengths, Weaknesses, Opportunities, Threats) for each key competitor. Understand their strategies and how they have been successful or fallen short in the market.

Utilizing Research Tools in Market Analysis

Role of ibis world, esri, and statista in market research.

• IBIS World:  IBIS World is renowned for its comprehensive collection of industry reports and business environment profiles. It offers detailed insights into market conditions, industry trends, and competitive landscapes. These reports are pivotal for understanding industry dynamics and forecasting future market developments.
• ESRI:   ESRI , particularly through its ArcGIS platform, provides a wealth of location-based data and analytics. ESRI’s Market Potential data, for example, offers insights into consumer behavior and demand across various product and service categories. This data is instrumental in understanding geographical market trends and potential customer bases, making it invaluable for businesses seeking to target specific locations or demographics​​​​​​.
• Statista:   Statista is a leading statistics portal, offering access to data from market and opinion research institutions, as well as from business entities and government institutions. It’s a versatile tool for market analysis, providing up-to-date data on various industries, including market sizes, trends, and forecasts.

Leverage These Tools for Quality Research

• Deep Dive into Industry Reports:  Utilize IBIS World for in-depth industry reports to understand your market’s size, trends, and competitive landscape.
• Geographical and Demographic Analysis:  Use ESRI’s tools to analyze market potential based on location and demographics, helping to identify where your customers are and their spending behaviors.
• Statistical Data for Market Trends:  Leverage Statista for comprehensive statistical data to support your market size estimates, trend analysis, and forecasting.

Identifying Industry-Specific Resources

• Look for sources that provide up-to-date, comprehensive, and accurate data.
• Ensure the sources are recognized and respected within the industry.
• Consider the depth of information provided; more detailed reports often offer better insights.
• Trade associations often publish detailed reports on industry trends.
• Government databases can provide reliable statistics on various industries.
• Academic journals and publications can offer in-depth analysis and forecasts.

Incorporating these tools into your market analysis process will enhance the quality of your research, providing a solid foundation for your business plan.

Conducting Competitor Analysis

Importance of personal involvement in competitor research.

Engaging in competitor research personally offers invaluable insights. It allows you to observe and understand your competitors’ strengths and weaknesses from a customer’s perspective. This direct engagement is crucial for developing strategies to differentiate and compete effectively.

Techniques for Effective Competitive Analysis

• Talk to Competitors’ Customers:  Engaging with the customers of your competitors can provide candid insights into what they value and their experiences. This feedback is often more unfiltered and honest than promotional materials or sales pitches.
• Experience Competitors’ Offerings:  Purchase and use the products or services of your competitors. This firsthand experience can reveal strengths to emulate and weaknesses to exploit in your own offerings.
• Visit Competitor Locations:  If applicable, visit their physical establishments. Observe their customer service, store layout, product presentation, and overall customer experience.
• Analyze Competitor Websites:  Review their online presence, noting their branding, communication style, customer engagement, and online services. Look for areas where they excel or lack, providing opportunities for your business to stand out.
• Examine Online Reviews:  While being cautious of potentially manipulated reviews, pay special attention to less-than-perfect ratings. Trends in these reviews can highlight areas that customers feel need improvement.
• Market Positioning:  Understand how your competitors position themselves in the market. Analyze their marketing materials, advertising strategies, and any unique selling propositions they highlight.
• Pricing Strategies:  Observe their pricing models. Are they competing on price, quality, service, or innovation? Understanding their approach can guide your own pricing strategy.
• Supplier and Partner Relationships:  Investigate their supply chain and partnerships. This might give insights into their operational efficiencies or dependencies.
• Customer Service Analysis:  Evaluate their customer service approach. Are there gaps in their customer support that your business could fill?
• Social Media Engagement:  Analyze their social media presence. How do they interact with customers online? What kind of content generates the most engagement?
• Employee Feedback:  If possible, gain insights from current or former employees about the internal workings of the competitor’s business. This can provide a unique perspective on their operations, culture, and challenges.

Outsourcing Market Analysis

When to consider outsourcing.

Outsourcing market analysis can be a strategic decision for businesses, especially when internal resources are limited or when specialized expertise is required. Consider outsourcing when:

• Lack of In-House Expertise:  If your team lacks the skills or experience in conducting in-depth market research.
• Time Constraints:  When you’re under tight timelines to develop a business plan and need to expedite the research process.
• Need for Specialized Knowledge:  Certain industries or markets may require specialized knowledge that an external expert or agency can provide.
• Objective Perspective:  Sometimes, an external perspective can provide unbiased and fresh insights that internal teams might overlook.

Business Plan Writer Reviews

For guidance on choosing the right professional or agency for outsourcing your market analysis, check out our Business Plan Writer Reviews .

Essential Qualifications of Professional Business Plan Writers

When hiring a professional for market analysis, ensure they possess the following qualifications:

• Active Subscriptions to Key Research Organizations:  Verify that they have access to essential market research tools like IBIS World, ESRI, Statista, and others relevant to your industry. Active subscriptions indicate that they can provide current and comprehensive data.
• Experience and Expertise in Diverse Industry Research:  Look for professionals with a proven track record in conducting market analysis across various industries. This experience demonstrates their ability to adapt research methods to different business models and market conditions.
• Understanding of Different Business Models:  The consultant should understand various business models, especially if your business falls into a niche or emerging market. Their ability to adapt their research methodology to fit different models is crucial.
• Analytical Skills:  They should possess strong analytical skills to interpret data effectively and provide actionable insights.
• Communication Skills:  Good communication skills are essential for them to convey complex information in an understandable manner, aligning with your business needs.
• References and Past Work Samples:  Ask for references or samples of their past work to assess the quality and relevance of their research.

Market Analysis in Your Business Plan

Conducting a thorough market analysis is an indispensable part of developing a robust business plan. It provides critical insights into the market size, growth potential, industry trends, competitive landscape, and customer preferences. This analysis forms the foundation upon which strategic decisions are made, risks are assessed, and opportunities are identified.

The insights gained from the market analysis should be seamlessly integrated into your business plan.

A well-executed market analysis can significantly enhance the effectiveness and persuasiveness of your business plan, especially in the eyes of stakeholders, bankers, or potential investors.

Up Next: Developing the Organizational Structure

Having completed the market analysis, the next step in your business planning journey is to develop the organizational structure of your business. This involves outlining the management team, defining roles and responsibilities, and establishing the operational framework of your organization. A clear and efficient organizational structure is crucial for effective management and smooth operation.

Proceed to Organizational Structure

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Analyze your market like a pro with this step-by-step guide + insider tips

Don’t fall into the trap of assuming that you already know enough about your market.

No matter how fantastic your product or service is, your business cannot succeed without sufficient market demand .

You need a clear understanding of who will buy your product or service and why .

You want to know if there is a clear market gap and a market large enough to support the survival and growth of your business.

Industry research and market analysis will help make sure that you are on the right track .

It takes time , but it is time well spent . Thank me later.

WHAT is Market Analysis?

The Market Analysis section of a business plan is also sometimes called:

• Market Demand, Market Trends, Target Market, The Market
• Industry Analysis & Trends, Industry & Market Analysis, Industry and Market Research

WHY Should You Do Market Analysis?

First and foremost, you need to demonstrate beyond any reasonable doubt that there is real need and sufficient demand for your product or service in the market, now and going forward.

• What makes you think that people will buy your products or services?
• Can you prove it?

Your due diligence on the market opportunity and validating the problem and solution described in the Product and Service section of your business plan are crucial for the success of your venture.

Also, no company operates in a vacuum. Every business is part of a larger overall industry, the forces that affect your industry as a whole will inevitably affect your business as well.

Evaluating your industry and market increases your own knowledge of the factors that contribute to your company’s success and shows the readers of your business plan that you understand the external business conditions.

External Support

In fact, if you are seeking outside financing, potential backers will most definitely be interested in industry and market conditions and trends.

You will make a positive impression and have a better chance of getting their support if you show market analysis that strengthens your business case, combining relevant and reliable data with sound judgement.

Let’s break down how to do exactly that, step by step:

HOW To Do Market Analysis: Step-by-Step

So, let’s break up how market analysis is done into three steps:

• Industry:  the total market
• Target Market: specific segments of the industry that you will target
• Target Customer: characteristics of the customers that you will focus on

Step 1: Industry Analysis

How do you define an industry.

For example, the fashion industry includes fabric suppliers, designers, companies making finished clothing, distributors, sales representatives, trade publications, retail outlets online and on the high street.

How Do You Analyze an Industry?

Briefly describe your industry, including the following considerations:

1.1. Economic Conditions

Outline the current and projected economic conditions that influence the industry your business operates in, such as:

• Official economic indicators like GDP or inflation
• Labour market statistics
• Foreign trade (e.g., import and export statistics)

1.2. Industry Description

Highlight the distinct characteristic of your industry, including:

• Market leaders , major customer groups and customer loyalty
• Supply chain and distribution channels
• Profitability (e.g., pricing, cost structure, margins), financials
• Key success factors
• Barriers to entry preventing new companies from competing in the industry

1.3. Industry Size and Growth

Estimate the size of your industry and analyze how industry growth affects your company’s prospects:

• Current size (e.g., revenues, units sold, employment)
• Historic and projected industry growth rate (low/medium/high)
• Life-cycle stage /maturity (emerging/expanding/ mature/declining)

1.4. Industry Trends

• Industry Trends: Describe the key industry trends and evaluate the potential impact of PESTEL (political / economic / social / technological / environmental / legal) changes on the industry, including the level of sensitivity to:
• Seasonality
• Economic cycles
• Government regulation (e.g. environment, health and safety, international trade, performance standards, licensing/certification/fair trade/deregulation, product claims) Technological change
• Global Trends: Outline global trends affecting your industry
• Identify global industry concerns and opportunities
• International markets that could help to grow your business
• Strategic Opportunity: Highlight the strategic opportunities that exist in your industry

Step 2: Target Customer Identification

Who is a target customer.

One business can have–and often does have–more than one target customer group.

The success of your business depends on your ability to meet the needs and wants of your customers. So, in a business plan, your aim is to assure readers that:

• Your customers actually exist
• You know exactly who they are and what they want
• They are ready for what you have to offer and are likely to actually buy

How Do You Identify an Ideal Target Customer?

2.1. target customer.

• Identify the customer, remembering that the decision-maker who makes the purchase can be a different person or entity than the end-user.

2.2. Demographics

• For consumers ( demographics ): Age, gender, income, occupation, education, family status, home ownership, lifestyle (e.g., work and leisure activities)
• For businesses ( firmographic ): Industry, sector, years in business, ownership, size (e.g., sales, revenues, budget, employees, branches, sq footage)

2.3. Geographic Location

• Where are your customers based, where do they buy their products/services and where do they actually use them

2.4 Purchasing Patterns

• Identify customer behaviors, i.e., what actions they take
• how frequently
• and how quickly they buy

2.5. Psychographics

• Identify customer attitudes, i.e., how they think or feel
• Urgency, price, quality, reputation, image, convenience, availability, features, brand, customer service, return policy, sustainability, eco-friendliness, supporting local business
• Necessity/luxury, high involvement bit ticket item / low involvement consumable

Step 3: Target Market Analysis

What is a target market.

Target market, or 'target audience', is a group of people that a business has identified as the most likely to purchase its offering, defined by demographic, psychographic, geographic and other characteristics. Target market may be broken down to target customers to customize marketing efforts.

How Do You Analyze a Target Market?

So, how many people are likely to become your customers?

To get an answer to this questions, narrow the industry into your target market with a manageable size, and identify its key characteristics, size and trends:

3.1. Target Market Description

Define your target market by:

• Type: B2C, B2B, government, non-profits
• Geographic reach: Specify the geographic location and reach of your target market

3.2. Market Size and Share

Estimate how large is the market for your product or service (e.g., number of customers, annual purchases in sales units and $ revenues). Explain the logic behind your calculation:

• TAM (Total Available/Addressable/Attainable Market) is the total maximum demand for a product or service that could theoretically be generated by selling to everyone in the world who could possibly buy from you, regardless of competition and any other considerations and restrictions.
• SAM (Serviceable Available Market) is the portion of the TAM that you could potentially address in a specific market. For example, if your product/service is only available in one country or language.
• SOM (Service Obtainable Market / Share of Market) is the share of the SAM that you can realistically carve out for your product or service. This the target market that you will be going after and can reasonably expect to convert into a customer base.

3.3. Market Trends

Illustrate the most important themes, changes and developments happening in your market. Explain the reasons behind these trends and how they will favor your business.

3.4. Demand Growth Opportunity

Estimate future demand for your offering by translating past, current and future market demand trends and drivers into forecasts:

• Historic growth: Check how your target market has grown in the past.
• Drivers past: Identify what has been driving that growth in the past.
• Drivers future: Assess whether there will be any change in influence of these and other drivers in the future.

How Big Should My Target Market Be?

Well, if the market opportunity is small, it will limit how big and successful your business can become. In fact, it may even be too small to support a successful business at all.

On the other hand, many businesses make the mistake of trying to appeal to too many target markets, which also limits their success by distracting their focus.

What If My Stats Look Bad?

Large and growing market suggests promising demand for your offering now and into the future. Nevertheless, your business can still thrive in a smaller or contracting market.

Instead of hiding from unfavorable stats, acknowledge that you are swimming against the tide and devise strategies to cope with whatever lies ahead.

Step 4: Industry and Market Analysis Research

The market analysis section of your business plan should illustrate your own industry and market knowledge as well as the key findings and conclusions from your research.

Back up your findings with external research sources (= secondary research) and results of internal market research and testing (= primary research).

What is Primary and Secondary Market Research?

Yes, there are two main types of market research – primary and secondary – and you should do both to adequately cover the market analysis section of your business plan:

• Primary market research is original data you gather yourself, for example in the form of active fieldwork collecting specific information in your market.
• Secondary market research involves collating information from existing data, which has been researched and shared by reliable outside sources . This is essentially passive desk research of information already published .

Unless you are working for a corporation, this exercise is not about your ability to do professional-level market research.

Instead, you just need to demonstrate fundamental understanding of your business environment and where you fit in within the market and broader industry.

Why Do You Need To Do Primary & Secondary Market Research?

There are countless ways you could go collecting industry and market research data, depending on the type of your business, what your business plan is for, and what your needs, resources and circumstances are.

For tried and tested tips on how to properly conduct your market research, read the next section of this guide that is dedicated to primary and secondary market research methods.

In any case, tell the reader how you carried out your market research. Prove what the facts are and where you got your data. Be as specific as possible. Provide statistics, numbers, and sources.

When doing secondary research, always make sure that all stats, facts and figures are from reputable sources and properly referenced in both the main text and the Appendix of your business plan. This gives more credibility to your business case as the reader has more confidence in the information provided.

Go to the Primary and Secondary Market Research post for my best tips on industry, market and competitor research.

7 TOP TIPS For Writing Market Analysis

1. realistic projections.

Above all, make sure that you are realistic in your projections about how your product or service is going to be accepted in the market, otherwise you are going to seriously undermine the credibility of your entire business case.

2. Laser Focus

Discuss only characteristic of your target market and customers that are observable, factual and meaningful, i.e. directly relate to your customers’ decision to purchase.

Always relate the data back to your business. Market statistics are meaningless until you explain where and how your company fits in.

For example, as you write about the market gap and the needs of your target customers, highlight how you are uniquely positioned to fill them.

In other words, your goal is to:

• Present your data
• Analyze the data
• Tie the data back to how your business can thrive within your target market

3. Target Audience

On a similar note, tailor the market analysis to your target audience and the specific purpose at hand.

For example, if your business plan is for internal use, you may not have to go into as much detail about the market as you would have for external financiers, since your team is likely already very familiar with the business environment your company operates in.

4. Story Time

Make sure that there is a compelling storyline and logical flow to the market information presented.

The saying “a picture is worth a thousand words” certainly applies here. Industry and market statistics are easier to understand and more impactful if presented as a chart or graph.

6. Information Overload

Keep your market analysis concise by only including pertinent information. No fluff, no repetition, no drowning the reader in a sea of redundant facts.

While you should not assume that the reader knows anything about your market, do not elaborate on unnecessary basic facts either.

Do not overload the reader in the main body of the business plan. Move everything that is not essential to telling the story into the Appendix. For example, summarize the results of market testing survey in the main body of the business plan document, but move the list of the actual survey questions into the appendix.

7. Marketing Plan

Note that market analysis and marketing plan are two different things, with two distinct chapters in a business plan.

As the name suggests, market analysis examines where you fit in within your desired industry and market. As you work thorugh this section, jot down your ideas for the marketing and strategy section of your business plan.

Final Thoughts

Remember that the very act of doing the research and analysis is a great opportunity to learn things that affect your business that you did not know before, so take your time doing the work.

Related Questions

What is the purpose of industry & market research and analysis.

The purpose of industry and market research and analysis is to qualitatively and quantitatively assess the environment of a business and to confirm that the market opportunity is sufficient for sustainable success of that business.

Why are Industry & Market Research and Analysis IMPORTANT?

Industry and market research and analysis are important because they allow you to gain knowledge of the industry, the target market you are planning to sell to, and your competition, so you can make informed strategic decisions on how to make your business succeed.

How Can Industry & Market Research and Analysis BENEFIT a Business?

Industry and market research and analysis benefit a business by uncovering opportunities and threats within its environment, including attainable market size, ideal target customers, competition and any potential difficulties on the company’s journey to success.

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Business Plan Section 5: Market Analysis

Find out the 9 components to include in the market analysis portion of your business plan, plus 6 sources for market analysis information.

This is the part of your business plan where you really get to shine and show off that awesome idea you have. Of course, your product or service is the best! Now, let’s talk about how you know it’s a hit. Be prepared to show you know your market AND that it’s big enough for you to build a sustainable, successful business .

In writing up your market analysis, you’ll get to demonstrate the knowledge you’ve gained about the industry, the target market you’re planning to sell to, your competition, and how you plan to make yourself stand out.

A market analysis is just that: a look at what the relevant business environment is and where you fit in. It should give a potential lender, investor, or employee no doubt that there is a solid niche for what you’re offering, and you are definitely the person to fill it. It’s both quantitative, spelling out sales projections and other pertinent figures, and qualitative, giving a thoughtful overview of how you fit in with the competition. It needs to look into the potential size of the market, the possible customers you’ll target, and what kind of difficulties you might face as you try to become successful. Let’s break down how to do that.

What Goes Into A Business Plan Market Analysis?

Industry description and outlook.

Describe the industry with enough background so that someone who isn’t familiar with it can understand what it’s like, what the challenges are, and what the outlook is. Talk about its size, how it’s growing, and what the outlook is for the future.

Target Market

Who have you identified as your ideal client or customer ? Include demographic information on the group you’re targeting, including age, gender and income level. This is the place to talk about the size of your potential market, how much it might spend, and how you’ll reach potential customers. For example, if women aged 18 to 54 are your target market, you need to know how many of them there are in your market. Are there 500 or 500,000? It’s imperative to know. Similarly, if your product or service is geared toward a high-end clientele, you need to make sure you’re located in an area that can support it.

Market Need

What factors influence the need for your product or service? Did the need exist before or are you trying to create it? Why will customers want to do business with you, possibly choosing you over someone else? This is where you can briefly introduce the competitive edge you have, although you’ll get into that in more depth in following sections. Focus on how the product or service you’re offering satisfies what’s needed in the market.

Market Growth

While no one can predict the future, it’s important to get a possible idea of what business may be like down the road and make sales projections. Have the number of people in your target market been increasing or decreasing over the last several years? By how much per year? To make an intelligent forecast, you have to start with current conditions, then project changes over the next three to five years.

Market Trends

You need to take a look at trends the same way you look at population and demographics. Is there a shift to more natural or organic ingredients that might impact your business? How might energy prices figure in? The easy availability of the internet and smartphone technology? The questions will be different for every type of business, but it’s important to think about the types of changes that could affect your specific market. In this section, you can cite experts from the research you’ve done-a market expert, market research firm, trade association, or credible journalist.

Market Research Testing

Talk about what kind of testing and information gathering you’ve done to figure out where you stand in the market. Who have you spoken to about the viability of your product? Why are you confident of its success? Again, if you can, cite experts to back up your information.

Competitive Analysis

There’s no way to succeed unless you’ve examined your competition. It might be helpful to try analyzing your position in the market by performing a SWOT analysis. You need to figure out their strengths and the weaknesses you can exploit as you work to build your own business. You do need to be brutally honest here, and also look at what the potential roadblocks are-anything that might potentially stand in your way as you try to meet your goals and grow your business.

Barriers to Entry

Lenders and investors need to have a reasonable assurance they’ll be paid back, so they’ll want to know what would stop someone else from swooping in, doing what you do, and grabbing half the available business. Do you have technical knowledge that’s difficult to get? A specialized product no one else can manufacture? A service that takes years to perfect? It’s possible your industry has strict regulations and licensing requirements. All of these help protect you from new competition, and they’re all selling points for you.

Regulations

As we touched on above, you should cover regulations as a barrier to entry. If your field is covered by regulations, you do need to talk about how they apply to your business and how you’ll comply with them.

Six Sources for Market Analysis Information

The Market Analysis section of your business plan is far more than a theoretical exercise. Doing an analysis of the market really gives YOU the information you need to figure out whether your plans are viable, and tweak them in the early stages before you go wrong.

So, where do you start? Research is the key here, and there are several sources available.

1. The Internet

Some of the first information you need is about population and demographics: who your potential customers are, how many there are, and where they live or work. The U.S. Census Bureau has an impressive amount of these statistics available. USA.gov’s small business site is another good source for links to the U.S. Departments of Labor and Commerce, among others.

2. Local Chamber of Commerce

A lot of local information can be gotten from the chamber of commerce in the area where you plan to operate. Often, they can provide details into what the general business climate is like, and get even more specific about how many and what type of businesses are operating in their jurisdiction.

3. Other Resources

When actual statistical information isn’t available, you’ll often be able to put together a good picture of the market from a variety of other sources. Real estate agents can be a source of information on demographics and population trends in an area. Catalogs and marketing materials from your competition are useful. Many industry associations have a great amount of relevant information to use in putting your analysis together. Trade publications and annual reports from public corporations in your industry also contain a wealth of relevant information.

4. Customer Mindset

Take yourself out of the equation as the owner and stand in your customer’s shoes when you look at the business. As a customer, what problems do you have that need to be solved? What would you like to be able to do better, faster, or cheaper that you can’t do now? How does the competition work to solve those issues? How could this business solve them better?

5. the Competition

If you have a clothing store, visit others in your area. If you’d like to open a pizzeria, try pies from surrounding restaurants. If you’re a salon owner, park across the street and see what the store traffic is like and how customers look when they come out. Check out websites for pricing and other marketing information. Follow their Facebook pages. If you can’t be a customer of the competition, ask your customers and suppliers about them. Always be aware of what’s going on in the market.

6. Traditional Market Research

While you can gather a lot of data online, your best information will come from potential customers themselves. Send out surveys, ask for input and feedback, and conduct focus groups. You can do this yourself or hire a market research firm to do it for you.

What to Do With All That Data

Now that you’ve gathered the statistics and information and you’ve done the math to know there’s a need and customer base for your product or service, you have to show it off to your best advantage. You can start the market analysis section with a simple summary that describes your target customers and explains why you have chosen this as your market. You can also summarize how you see the market growing, and highlight one or two projections for the future.

If your information is dense with numbers and statistics, someone who reads your business plan will probably find it easier to understand if you present it as a chart or graph. You can generate them fairly easily with tools built into Google docs and free infographic apps and software .

Don’t assume that your readers have an understanding of your market, but don’t belabor simple points, either. You want to include pertinent, important information, but you don’t want to drown the reader in facts. Be concise and compelling with the market analysis, and remember that a good graphic can cover a lot of text, and help you make your point. It’s great to say you project sales to increase by 250% over the next five years, but it makes an even bigger wow when you show it in a graphic.

Always relate the data back to your business. Statistics about the market don’t mean much unless you describe how and where you fit in. As you talk about the needs of your target market, remember to focus on how you are uniquely positioned to fill them.

Don’t hesitate to break down your target market into smaller segments, especially if each is likely to respond to a different message about your product or service. You may have one market that consists of homes and another of small businesses. Perhaps you sell to both wholesale and retail customers. Talk about this in the market analysis, and describe briefly how you’ll approach each. (You will have more of an opportunity to do this in detail later in the plan.) Segmentation can help you target specific messages to specific areas, focusing in on the existing needs and how you fill them.

Remember to tailor your information to the purpose at hand. If your business plan is for internal use, you may not have to go into as much detail about the market since you and your team may already know it well. Remember, however, that the very act of doing the research may help you learn things you didn’t know, so don’t skimp on doing the work. This is a great opportunity to get information from outside that might affect your business.

It’s not about your ability to do professional-level market research; a plan intended for a bank or other lender needs to show your understanding of where your business fits into the grand scheme of things. Yes, you need to detail the information, but your main goal is to show how you’ve incorporated that knowledge into making solid decisions about the direction of your company. Use this section of your business plan to explain your understanding of your industry, your market and your individual business so that lenders and investors feel comfortable with your possibility for success.

NEXT ARTICLE > BUSINESS PLAN SECTION 6: SALES AND MARKETING

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How to Conduct an Industry Analysis? Steps, Template, Examples

Appinio Research · 16.11.2023 · 39min read

Are you ready to unlock the secrets of Industry Analysis, equipping yourself with the knowledge to navigate markets and make informed strategic decisions? Dive into this guide, where we unravel the significance, objectives, and methods of Industry Analysis.

Whether you're an entrepreneur seeking growth opportunities or a seasoned executive navigating industry shifts, this guide will be your compass in understanding the ever-evolving business terrain.

What is Industry Analysis?

Industry analysis is the process of examining and evaluating the dynamics, trends, and competitive forces within a specific industry or market sector. It involves a comprehensive assessment of the factors that impact the performance and prospects of businesses operating within that industry. Industry analysis serves as a vital tool for businesses and decision-makers to gain a deep understanding of the environment in which they operate.

Key components of industry analysis include:

• Market Size and Growth: Determining the overall size of the market, including factors such as revenue, sales volume, and customer base. Analyzing historical and projected growth rates provides insights into market trends and opportunities.
• Competitive Landscape: Identifying and analyzing competitors within the industry. This includes assessing their market share, strengths, weaknesses, and strategies. Understanding the competitive landscape helps businesses position themselves effectively.
• Customer Behavior and Preferences: Examining consumer behavior , preferences, and purchasing patterns within the industry. This information aids in tailoring products or services to meet customer needs.
• Regulatory and Legal Environment: Assessing the impact of government regulations, policies, and legal requirements on industry operations. Compliance and adaptation to these factors are crucial for business success.
• Technological Trends: Exploring technological advancements and innovations that affect the industry. Staying up-to-date with technology trends can be essential for competitiveness and growth.
• Economic Factors: Considering economic conditions, such as inflation rates, interest rates, and economic cycles, that influence the industry's performance.
• Social and Cultural Trends: Examining societal and cultural shifts, including changing consumer values and lifestyle trends that can impact demand and preferences.
• Environmental and Sustainability Factors: Evaluating environmental concerns and sustainability issues that affect the industry. Industries are increasingly required to address environmental responsibility.
• Supplier and Distribution Networks: Analyzing the availability of suppliers, distribution channels, and supply chain complexities within the industry.
• Risk Factors: Identifying potential risks and uncertainties that could affect industry stability and profitability.

Objectives of Industry Analysis

Industry analysis serves several critical objectives for businesses and decision-makers:

• Understanding Market Dynamics: The primary objective is to gain a comprehensive understanding of the industry's dynamics, including its size, growth prospects, and competitive landscape. This knowledge forms the basis for strategic planning.
• Identifying Growth Opportunities: Industry analysis helps identify growth opportunities within the market. This includes recognizing emerging trends, niche markets, and underserved customer segments.
• Assessing Competitor Strategies: By examining competitors' strengths, weaknesses, and strategies, businesses can formulate effective competitive strategies. This involves positioning the company to capitalize on its strengths and exploit competitors' weaknesses.
• Risk Assessment and Mitigation: Identifying potential risks and vulnerabilities specific to the industry allows businesses to develop risk mitigation strategies and contingency plans. This proactive approach minimizes the impact of adverse events.
• Strategic Decision-Making: Industry analysis provides the data and insights necessary for informed strategic decision-making. It guides decisions related to market entry, product development, pricing strategies, and resource allocation.
• Resource Allocation: By understanding industry dynamics, businesses can allocate resources efficiently. This includes optimizing marketing budgets, supply chain investments, and talent recruitment efforts.
• Innovation and Adaptation: Staying updated on technological trends and shifts in customer preferences enables businesses to innovate and adapt their offerings effectively.

Importance of Industry Analysis in Business

Industry analysis holds immense importance in the business world for several reasons:

• Strategic Planning: It forms the foundation for strategic planning by providing a comprehensive view of the industry's landscape. Businesses can align their goals, objectives, and strategies with industry trends and opportunities.
• Risk Management: Identifying and assessing industry-specific risks allows businesses to manage and mitigate potential threats proactively. This reduces the likelihood of unexpected disruptions.
• Competitive Advantage: In-depth industry analysis helps businesses identify opportunities for gaining a competitive advantage. This could involve product differentiation, cost leadership, or niche market targeting .
• Resource Optimization: Efficient allocation of resources, both financial and human, is possible when businesses have a clear understanding of industry dynamics. It prevents wastage and enhances resource utilization.
• Informed Investment: Industry analysis assists investors in making informed decisions about allocating capital. It provides insights into the growth potential and risk profiles of specific industry sectors.
• Adaptation to Change: As industries evolve, businesses must adapt to changing market conditions. Industry analysis facilitates timely adaptation to new technologies, market shifts, and consumer preferences .
• Market Entry and Expansion: For businesses looking to enter new markets or expand existing operations, industry analysis guides decision-making by evaluating the feasibility and opportunities in target markets.
• Regulatory Compliance: Understanding the regulatory environment is critical for compliance and risk avoidance. Industry analysis helps businesses stay compliant with relevant laws and regulations.

In summary, industry analysis is a fundamental process that empowers businesses to make informed decisions, stay competitive, and navigate the complexities of their respective markets. It is an invaluable tool for strategic planning and long-term success.

How to Prepare for Industry Analysis?

Let's start by going through the crucial preparatory steps for conducting a comprehensive industry analysis.

1. Data Collection and Research

• Primary Research: When embarking on an industry analysis, consider conducting primary research . This involves gathering data directly from industry sources, stakeholders, and potential customers. Methods may include surveys , interviews, focus groups , and observations. Primary research provides firsthand insights and can help validate secondary research findings.
• Secondary Research: Secondary research involves analyzing existing literature, reports, and publications related to your industry. Sources may include academic journals, industry-specific magazines, government publications, and market research reports. Secondary research provides a foundation of knowledge and can help identify gaps in information that require further investigation.
• Data Sources: Explore various data sources to collect valuable industry information. These sources may include industry-specific associations, government agencies, trade publications, and reputable market research firms. Make sure to cross-reference data from multiple sources to ensure accuracy and reliability.

2. Identifying Relevant Industry Metrics

Understanding and identifying the right industry metrics is essential for meaningful analysis. Here, we'll discuss key metrics that can provide valuable insights:

• Market Size: Determining the market's size, whether in terms of revenue, units sold, or customer base, is a fundamental metric. It offers a snapshot of the industry's scale and potential.
• Market Growth Rate: Assessing historical and projected growth rates is crucial for identifying trends and opportunities. Understanding how the market has evolved over time can guide strategic decisions.
• Market Share Analysis: Analyzing market share among industry players can help you identify dominant competitors and their respective positions. This metric also assists in gauging your own company's market presence.
• Market Segmentation : Segmenting the market based on demographics, geography, behavior, or other criteria can provide deeper insights. Understanding the specific needs and preferences of various market segments can inform targeted strategies.

3. Gathering Competitive Intelligence

Competitive intelligence is the cornerstone of effective industry analysis. To gather and utilize information about your competitors:

• Competitor Identification: Begin by creating a comprehensive list of your primary and potential competitors. Consider businesses that offer similar products or services within your target market. It's essential to cast a wide net to capture all relevant competitors.
• SWOT Analysis : Conduct a thorough SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis for each competitor. This analysis helps you identify their internal strengths and weaknesses, as well as external opportunities and threats they face.
• Market Share Analysis: Determine the market share held by each competitor and how it has evolved over time. Analyzing changes in market share can reveal shifts in competitive dynamics.
• Product and Pricing Analysis: Evaluate your competitors' product offerings and pricing strategies . Identify any unique features or innovations they offer and consider how your own products or services compare.
• Marketing and Branding Strategies: Examine the marketing and branding strategies employed by competitors. This includes their messaging, advertising channels, and customer engagement tactics. Assess how your marketing efforts stack up.

Industry Analysis Frameworks and Models

Now, let's explore essential frameworks and models commonly used in industry analysis, providing you with practical insights and examples to help you effectively apply these tools.

Porter's Five Forces Model

Porter's Five Forces is a powerful framework developed by Michael Porter to assess the competitive forces within an industry. This model helps you understand the industry's attractiveness and competitive dynamics.

It consists of five key forces:

• Threat of New Entrants: This force evaluates how easy or difficult it is for new companies to enter the industry. Factors that increase barriers to entry include high capital requirements, strong brand loyalty among existing players, and complex regulatory hurdles. For example, the airline industry has significant barriers to entry due to the need for large capital investments in aircraft, airport facilities, and regulatory approvals.
• Bargaining Power of Suppliers: This force examines the influence suppliers have on the industry's profitability. Powerful suppliers can demand higher prices or impose unfavorable terms. For instance, in the automotive industry, suppliers of critical components like microchips can wield significant bargaining power if they are few in number or if their products are highly specialized.
• Bargaining Power of Buyers: The bargaining power of buyers assesses how much influence customers have in negotiating prices and terms. In industries where buyers have many alternatives, such as the smartphone market, they can demand lower prices and better features, putting pressure on manufacturers to innovate and compete.
• Threat of Substitutes: This force considers the availability of substitute products or services that could potentially replace what the industry offers. For example, the rise of electric vehicles represents a significant threat to the traditional gasoline-powered automotive industry as consumers seek eco-friendly alternatives.
• Competitive Rivalry: Competitive rivalry assesses the intensity of competition among existing firms in the industry. A highly competitive industry, such as the smartphone market, often leads to price wars and aggressive marketing strategies as companies vie for market share.

Example: Let's consider the coffee shop industry . New entrants face relatively low barriers, as they can set up a small shop with limited capital. However, the bargaining power of suppliers, such as coffee bean producers, can vary depending on the region and the coffee's rarity. Bargaining power with buyers is moderate, as customers often have several coffee shops to choose from. Threats of substitutes may include energy drinks or homemade coffee, while competitive rivalry is high, with numerous coffee chains and independent cafes competing for customers.

SWOT Analysis

SWOT Analysis is a versatile tool used to assess an organization's internal strengths and weaknesses, as well as external opportunities and threats. By conducting a SWOT analysis, you can gain a comprehensive understanding of your industry and formulate effective strategies.

• Strengths: These are the internal attributes and capabilities that give your business a competitive advantage. For instance, if you're a tech company, having a talented and innovative team can be considered a strength.
• Weaknesses: Weaknesses are internal factors that hinder your business's performance. For example, a lack of financial resources or outdated technology can be weaknesses that need to be addressed.
• Opportunities: Opportunities are external factors that your business can capitalize on. This could be a growing market segment, emerging technologies, or changing consumer trends.
• Threats: Threats are external factors that can potentially harm your business. Examples of threats might include aggressive competition, economic downturns, or regulatory changes.

Example: Let's say you're analyzing the fast-food industry. Strengths could include a well-established brand, a wide menu variety, and efficient supply chain management. Weaknesses may involve a limited focus on healthy options and potential labor issues. Opportunities could include the growing trend toward healthier eating, while threats might encompass health-conscious consumer preferences and increased competition from delivery apps.

PESTEL Analysis

PESTEL Analysis examines the external macro-environmental factors that can impact your industry. The acronym stands for:

• Political: Political factors encompass government policies, stability, and regulations. For example, changes in tax laws or trade agreements can affect industries like international manufacturing.
• Economic: Economic factors include economic growth, inflation rates, and exchange rates. A fluctuating currency exchange rate can influence export-oriented industries like tourism.
• Social: Social factors encompass demographics, cultural trends, and social attitudes. An aging population can lead to increased demand for healthcare services and products.
• Technological: Technological factors involve advancements and innovations. Industries like telecommunications are highly influenced by technological developments, such as the rollout of 5G networks.
• Environmental: Environmental factors cover sustainability, climate change, and ecological concerns. Industries such as renewable energy are directly impacted by environmental regulations and consumer preferences.
• Legal: Legal factors encompass laws, regulations, and compliance requirements. The pharmaceutical industry, for instance, faces stringent regulatory oversight and patent protection laws.

Example: Consider the automobile manufacturing industry. Political factors may include government incentives for electric vehicles. Economic factors can involve fluctuations in fuel prices affecting consumer preferences for fuel-efficient cars. Social factors might encompass the growing interest in eco-friendly transportation options. Technological factors could relate to advancements in autonomous driving technology. Environmental factors may involve emissions regulations, while legal factors could pertain to safety standards and recalls.

Industry Life Cycle Analysis

Industry Life Cycle Analysis categorizes industries into various stages based on their growth and maturity. Understanding where your industry stands in its life cycle can help shape your strategies.

• Introduction: In the introduction stage, the industry is characterized by slow growth, limited competition, and a focus on product development. New players enter the market, and consumers become aware of the product or service. For instance, electric scooters were introduced as a new mode of transportation in recent years.
• Growth: The growth stage is marked by rapid market expansion, increased competition, and rising demand. Companies focus on gaining market share, and innovation is vital. The ride-sharing industry, exemplified by companies like Uber and Lyft, experienced significant growth in this stage.
• Maturity: In the maturity stage, the market stabilizes, and competition intensifies. Companies strive to maintain market share and differentiate themselves through branding and customer loyalty programs. The smartphone industry reached maturity with multiple established players.
• Decline: In the decline stage, the market saturates, and demand decreases. Companies must adapt or diversify to survive. The decline of traditional print media is a well-known example.

Example: Let's analyze the video streaming industry . The introduction stage saw the emergence of streaming services like Netflix. In the growth stage, more players entered the market, and the industry saw rapid expansion. The industry is currently in the maturity stage, with established platforms like Netflix, Amazon Prime, and Disney+ competing for market share. However, with continued innovation and changing consumer preferences, the decline stage may eventually follow.

Value Chain Analysis

Value Chain Analysis dissects a company's activities into primary and support activities to identify areas of competitive advantage. Primary activities directly contribute to creating and delivering a product or service, while support activities facilitate primary activities.

• Primary Activities: These activities include inbound logistics (receiving and storing materials), operations (manufacturing or service delivery), outbound logistics (distribution), marketing and sales, and customer service.
• Support Activities: Support activities include procurement (acquiring materials and resources), technology development (R&D and innovation), human resource management (recruitment and training), and infrastructure (administrative and support functions).

Example: Let's take the example of a smartphone manufacturer. Inbound logistics involve sourcing components, such as processors and displays. Operations include assembly and quality control. Outbound logistics cover shipping and distribution. Marketing and sales involve advertising and retail partnerships. Customer service handles warranty and support.

Procurement ensures a stable supply chain for components. Technology development focuses on research and development of new features. Human resource management includes hiring and training skilled engineers. Infrastructure supports the company's administrative functions.

By applying these frameworks and models effectively, you can better understand your industry, identify strategic opportunities and threats, and develop a solid foundation for informed decision-making.

Data Interpretation and Analysis

Once you have your data, it's time to start interpreting and analyzing the data you've collected during your industry analysis.

You can unlock the full potential of your data with Appinio 's comprehensive research platform. Beyond aiding in data collection, Appinio simplifies the intricate process of data interpretation and analysis. Our intuitive tools empower you to effortlessly transform raw data into actionable insights, giving you a competitive edge in understanding your industry.

Whether it's assessing market trends, evaluating the competitive landscape, or understanding customer behavior, Appinio offers a holistic solution to uncover valuable findings. With our platform, you can make informed decisions, strategize effectively, and stay ahead of industry shifts.

Experience the ease of data collection and interpretation with Appinio – book a demo today!

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1. Analyze Market Size and Growth

Analyzing the market's size and growth is essential for understanding its dynamics and potential. Here's how to conduct a robust analysis:

• Market Size Calculation: Determine the total market size in terms of revenue, units sold, or the number of customers. This figure serves as a baseline for evaluating the industry's scale.
• Historical Growth Analysis: Examine historical data to identify growth trends. This includes looking at past year-over-year growth rates and understanding the factors that influenced them.
• Projected Growth Assessment: Explore industry forecasts and projections to gain insights into the expected future growth of the market. Consider factors such as emerging technologies, changing consumer preferences, and economic conditions.
• Segmentation Analysis: If applicable, analyze market segmentation data to identify growth opportunities in specific market segments. Understand which segments are experiencing the most significant growth and why.

2. Assess Market Trends

Stay ahead of the curve by closely monitoring and assessing market trends. Here's how to effectively evaluate trends within your industry.

• Consumer Behavior Analysis: Dive into consumer behavior data to uncover shifts in preferences, buying patterns, and shopping habits. Understand how technological advancements and cultural changes influence consumer choices.
• Technological Advancements: Keep a keen eye on technological developments that impact your industry. Assess how innovations such as AI, IoT, blockchain, or automation are changing the competitive landscape.
• Regulatory Changes: Stay informed about regulatory shifts and their potential consequences for your industry. Regulations can significantly affect product development, manufacturing processes, and market entry strategies.
• Sustainability and Environmental Trends: Consider the growing importance of sustainability and environmental concerns. Evaluate how your industry is adapting to eco-friendly practices and how these trends affect consumer choices.

3. Evaluate Competitive Landscape

Understanding the competitive landscape is critical for positioning your business effectively. To perform a comprehensive evaluation:

• Competitive Positioning: Determine where your company stands in comparison to competitors. Identify your unique selling propositions and areas where you excel.
• Market Share Analysis: Continuously monitor market share among industry players. Identify trends in market share shifts and assess the strategies that lead to such changes.
• Competitive Advantages and Weaknesses: Analyze your competitors' strengths and weaknesses. Identify areas where you can capitalize on their weaknesses and where you need to fortify your own strengths.

4. Identify Key Success Factors

Recognizing and prioritizing key success factors is crucial for developing effective strategies. To identify and leverage these factors:

• Customer Satisfaction: Prioritize customer satisfaction as a critical success factor. Satisfied customers are more likely to become loyal advocates and contribute to long-term success.
• Quality and Innovation: Focus on product or service quality and continuous innovation. Meeting and exceeding customer expectations can set your business apart from competitors.
• Cost Efficiency: Strive for cost efficiency in your operations. Identifying cost-saving opportunities can lead to improved profitability.
• Marketing and Branding Excellence: Invest in effective marketing and branding strategies to create a strong market presence. Building a recognizable brand can drive customer loyalty and growth.

5. Analyze Customer Behavior and Preferences

Understanding your target audience is central to success. Here's how to analyze customer behavior and preferences:

• Market Segmentation: Use market segmentation to categorize customers based on demographics, psychographics , and behavior. This allows for more personalized marketing and product/service offerings.
• Customer Surveys and Feedback: Gather customer feedback through surveys and feedback mechanisms. Understand their pain points, preferences, and expectations to tailor your offerings.
• Consumer Journey Mapping: Map the customer journey to identify touchpoints where you can improve engagement and satisfaction. Optimize the customer experience to build brand loyalty.

By delving deep into data interpretation and analysis, you can gain valuable insights into your industry, uncover growth opportunities, and refine your strategic approach.

How to Conduct Competitor Analysis?

Competitor analysis is a critical component of industry analysis as it provides valuable insights into your rivals, helping you identify opportunities, threats, and areas for improvement.

1. Identify Competitors

Identifying your competitors is the first step in conducting a thorough competitor analysis. Competitors can be classified into several categories:

• Direct Competitors: These are companies that offer similar products or services to the same target audience. They are your most immediate competitors and often compete directly with you for market share.
• Indirect Competitors: Indirect competitors offer products or services that are related but not identical to yours. They may target a slightly different customer segment or provide an alternative solution to the same problem.
• Potential Competitors: These companies could enter your market in the future. Identifying potential competitors early allows you to anticipate and prepare for new entrants.
• Substitute Products or Services: While not traditional competitors, substitute products or services can fulfill the same customer needs or desires. Understanding these alternatives is crucial to your competitive strategy.

2. Analyze Competitor Strengths and Weaknesses

Once you've identified your competitors, you need to analyze their strengths and weaknesses. This analysis helps you understand how to position your business effectively and identify areas where you can gain a competitive edge.

• Strengths: Consider what your competitors excel at. This could include factors such as brand recognition, innovative products, a large customer base, efficient operations, or strong financial resources.
• Weaknesses: Identify areas where your competitors may be lacking. Weaknesses could involve limited product offerings, poor customer service, outdated technology, or financial instability.

3. Competitive Positioning

Competitive positioning involves defining how you want your business to be perceived relative to your competitors. It's about finding a unique position in the market that sets you apart. Consider the following strategies:

• Cost Leadership: Strive to be the low-cost provider in your industry. This positioning appeals to price-conscious consumers.
• Differentiation: Focus on offering unique features or attributes that make your products or services stand out. This can justify premium pricing.
• Niche Market: Target a specific niche or segment of the market that may be underserved by larger competitors. Tailor your offerings to meet their unique needs.
• Innovation and Technology: Emphasize innovation and technology to position your business as a leader in product or service quality.
• Customer-Centric: Prioritize exceptional customer service and customer experience to build loyalty and a positive reputation.

4. Benchmarking and Gap Analysis

Benchmarking involves comparing your business's performance and practices with those of your competitors or industry leaders. Gap analysis helps identify areas where your business falls short and where improvements are needed.

• Performance Benchmarking: Compare key performance metrics, such as revenue, profitability, market share, and customer satisfaction, with those of your competitors. Identify areas where your performance lags behind or exceeds industry standards.
• Operational Benchmarking: Analyze your operational processes, supply chain, and cost structures compared to your competitors. Look for opportunities to streamline operations and reduce costs.
• Product or Service Benchmarking: Evaluate the features, quality, and pricing of your products or services relative to competitors. Identify gaps and areas for improvement.
• Marketing and Sales Benchmarking: Assess your marketing strategies, customer acquisition costs, and sales effectiveness compared to competitors. Determine whether your marketing efforts are performing at a competitive level.

Market Entry and Expansion Strategies

Market entry and expansion strategies are crucial for businesses looking to enter new markets or expand their presence within existing ones. These strategies can help you effectively target and penetrate your chosen markets.

Market Segmentation and Targeting

• Market Segmentation: Begin by segmenting your target market into distinct groups based on demographics , psychographics, behavior, or other relevant criteria. This helps you understand the diverse needs and preferences of different customer segments.
• Targeting: Once you've segmented the market, select specific target segments that align with your business goals and capabilities. Tailor your marketing and product/service offerings to appeal to these chosen segments.

Market Entry Modes

Selecting the proper market entry mode is crucial for a successful expansion strategy. Entry modes include:

• Exporting: Sell your products or services in international markets through exporting. This is a low-risk approach, but it may limit your market reach.
• Licensing and Franchising: License your brand, technology, or intellectual property to local partners or franchisees. This allows for rapid expansion while sharing the risk and control.
• Joint Ventures and Alliances: Partner with local companies through joint ventures or strategic alliances. This approach leverages local expertise and resources.
• Direct Investment: Establish a physical presence in the target market through subsidiaries, branches, or wholly-owned operations. This offers full control but comes with higher risk and investment.

Competitive Strategy Formulation

Your competitive strategy defines how you will compete effectively in the target market.

• Cost Leadership: Strive to offer products or services at lower prices than competitors while maintaining quality. This strategy appeals to price-sensitive consumers.
• Product Differentiation: Focus on offering unique and innovative products or services that stand out in the market. This strategy justifies premium pricing.
• Market Niche: Target a specific niche or segment within the market that is underserved or has particular needs. Tailor your offerings to meet the unique demands of this niche.
• Market Expansion : Expand your product or service offerings to capture a broader share of the market. This strategy involves diversifying your offerings to appeal to a broader audience.
• Global Expansion: Consider expanding internationally to tap into new markets and diversify your customer base. This strategy involves thorough market research and adaptation to local cultures and regulations.

International Expansion Considerations

If your expansion strategy involves international markets, there are several additional considerations to keep in mind.

• Market Research: Conduct in-depth market research to understand the target country's cultural, economic, and legal differences.
• Regulatory Compliance: Ensure compliance with international trade regulations, customs, and import/export laws.
• Cultural Sensitivity: Adapt your marketing and business practices to align with the cultural norms and preferences of the target market.
• Localization: Consider adapting your products, services, and marketing materials to cater to local tastes and languages.
• Risk Assessment: Evaluate the political, economic, and legal risks associated with operating in the target country. Develop risk mitigation strategies.

By carefully analyzing your competitors and crafting effective market entry and expansion strategies, you can position your business for success in both domestic and international markets.

Risk Assessment and Mitigation

Risk assessment and mitigation are crucial aspects of industry analysis and strategic planning. Identifying potential risks, assessing vulnerabilities, and implementing effective risk management strategies are essential for business continuity and success.

1. Identify Industry Risks

• Market Risks: These risks pertain to factors such as changes in market demand, economic downturns, shifts in consumer preferences, and fluctuations in market prices. For example, the hospitality industry faced significant market risks during the COVID-19 pandemic, resulting in decreased travel and tourism .
• Regulatory and Compliance Risks: Regulatory changes, compliance requirements, and government policies can pose risks to businesses. Industries like healthcare are particularly susceptible to regulatory changes that impact operations and reimbursement.
• Technological Risks: Rapid technological advancements can disrupt industries and render existing products or services obsolete. Companies that fail to adapt to technological shifts may face obsolescence.
• Operational Risks: These risks encompass internal factors that can disrupt operations, such as supply chain disruptions, equipment failures, or cybersecurity breaches.
• Financial Risks: Financial risks include factors like liquidity issues, credit risk , and market volatility. Industries with high capital requirements, such as real estate development, are particularly vulnerable to financial risks.
• Competitive Risks: Intense competition and market saturation can pose challenges to businesses. Failing to respond to competitive threats can result in loss of market share.
• Global Risks: Industries with a worldwide presence face geopolitical risks, currency fluctuations, and international trade uncertainties. For instance, the automotive industry is susceptible to trade disputes affecting the supply chain.

2. Assess Business Vulnerabilities

• SWOT Analysis: Revisit your SWOT analysis to identify internal weaknesses and threats. Assess how these weaknesses may exacerbate industry risks.
• Financial Health: Evaluate your company's financial stability, debt levels, and cash flow. Identify vulnerabilities related to financial health that could hinder your ability to withstand industry-specific challenges.
• Operational Resilience: Assess the robustness of your operational processes and supply chain. Identify areas where disruptions could occur and develop mitigation strategies.
• Market Positioning: Analyze your competitive positioning and market share. Recognize vulnerabilities in your market position that could be exploited by competitors.
• Compliance and Regulatory Adherence: Ensure that your business complies with relevant regulations and standards. Identify vulnerabilities related to non-compliance or regulatory changes.

3. Risk Management Strategies

• Risk Avoidance: In some cases, the best strategy is to avoid high-risk ventures or markets altogether. This may involve refraining from entering certain markets or discontinuing products or services with excessive risk.
• Risk Reduction: Implement measures to reduce identified risks. For example, diversifying your product offerings or customer base can reduce dependence on a single revenue source.
• Risk Transfer: Transfer some risks through methods such as insurance or outsourcing. For instance, businesses can mitigate cybersecurity risks by purchasing cyber insurance.
• Risk Acceptance: In cases where risks cannot be entirely mitigated, it may be necessary to accept a certain level of risk and have contingency plans in place to address potential issues.
• Continuous Monitoring: Establish a system for continuous risk monitoring. Regularly assess the changing landscape and adjust risk management strategies accordingly.

4. Contingency Planning

Contingency planning involves developing strategies and action plans to respond effectively to unforeseen events or crises. It ensures that your business can maintain operations and minimize disruptions in the face of adverse circumstances. Key elements of contingency planning include:

• Risk Scenarios: Identify potential risk scenarios specific to your industry and business. These scenarios should encompass a range of possibilities, from minor disruptions to major crises.
• Response Teams: Establish response teams with clearly defined roles and responsibilities. Ensure that team members are trained and ready to act in the event of a crisis.
• Communication Plans: Develop communication plans that outline how you will communicate with employees, customers, suppliers, and other stakeholders during a crisis. Transparency and timely communication are critical.
• Resource Allocation: Determine how resources, including personnel, finances, and equipment, will be allocated in response to various scenarios.
• Testing and Simulation: Regularly conduct tests and simulations of your contingency plans to identify weaknesses and areas for improvement. Ensure your response teams are well-practiced and ready to execute the plans effectively.
• Documentation and Record Keeping: Maintain comprehensive documentation of contingency plans, response procedures, and communication protocols. This documentation should be easily accessible to relevant personnel.
• Review and Update: Continuously review and update your contingency plans to reflect changing industry dynamics and evolving risks. Regularly seek feedback from response teams to make improvements.

By identifying industry risks, assessing vulnerabilities, implementing risk management strategies, and developing robust contingency plans, your business can navigate the complexities of the industry landscape with greater resilience and preparedness.

Industry Analysis Template

When embarking on the journey of Industry Analysis, having a well-structured template is akin to having a reliable map for your exploration. It provides a systematic framework to ensure you cover all essential aspects of the analysis. Here's a breakdown of an industry analysis template with insights into each section.

Industry Overview

• Objective: Provide a broad perspective of the industry.
• Market Definition: Define the scope and boundaries of the industry, including its products, services, and target audience.
• Market Size and Growth: Present current market size, historical growth trends, and future projections.
• Key Players: Identify major competitors and their market share.
• Market Trends: Highlight significant trends impacting the industry.

Competitive Analysis

• Objective: Understand the competitive landscape within the industry.
• Competitor Identification: List direct and indirect competitors.
• Competitor Profiles: Provide detailed profiles of major competitors, including their strengths, weaknesses, strategies, and market positioning.
• SWOT Analysis: Conduct a SWOT analysis for each major competitor.
• Market Share Analysis: Analyze market share distribution among competitors.

Market Analysis

• Objective: Explore the characteristics and dynamics of the market.
• Customer Segmentation: Define customer segments and their demographics, behavior, and preferences.
• Demand Analysis: Examine factors driving demand and customer buying behavior.
• Supply Chain Analysis: Map out the supply chain, identifying key suppliers and distribution channels.
• Regulatory Environment: Discuss relevant regulations, policies, and compliance requirements.

Technological Analysis

• Objective: Evaluate the technological landscape impacting the industry.
• Technological Trends: Identify emerging technologies and innovations relevant to the industry.
• Digital Transformation: Assess the level of digitalization within the industry and its impact on operations and customer engagement.
• Innovation Opportunities: Explore opportunities for leveraging technology to gain a competitive edge.

Financial Analysis

• Objective: Analyze the financial health of the industry and key players.
• Revenue and Profitability: Review industry-wide revenue trends and profitability ratios.
• Financial Stability: Assess financial stability by examining debt levels and cash flow.
• Investment Patterns: Analyze capital expenditure and investment trends within the industry.

Consumer Insights

• Objective: Understand consumer behavior and preferences.
• Consumer Surveys: Conduct surveys or gather data on consumer preferences, buying habits , and satisfaction levels.
• Market Perception: Gauge consumer perception of brands and products in the industry.
• Consumer Feedback: Collect and analyze customer feedback and reviews.

SWOT Analysis for Your Business

• Objective: Assess your own business within the industry context.
• Strengths: Identify internal strengths that give your business a competitive advantage.
• Weaknesses: Recognize internal weaknesses that may hinder your performance.
• Opportunities: Explore external opportunities that your business can capitalize on.
• Threats: Recognize external threats that may impact your business.

Conclusion and Recommendations

• Objective: Summarize key findings and provide actionable recommendations.
• Summary: Recap the most critical insights from the analysis.
• Recommendations: Offer strategic recommendations for your business based on the analysis.
• Future Outlook: Discuss potential future developments in the industry.

While this template provides a structured approach, adapt it to the specific needs and objectives of your Industry Analysis. It serves as your guide, helping you navigate through the complex landscape of your chosen industry, uncovering opportunities, and mitigating risks along the way.

Remember that the depth and complexity of your industry analysis may vary depending on your specific goals and the industry you are assessing. You can adapt this template to focus on the most relevant aspects and conduct thorough research to gather accurate data and insights. Additionally, consider using industry-specific data sources, reports, and expert opinions to enhance the quality of your analysis.

Industry Analysis Examples

To grasp the practical application of industry analysis, let's delve into a few diverse examples across different sectors. These real-world scenarios demonstrate how industry analysis can guide strategic decision-making.

Tech Industry - Smartphone Segment

Scenario: Imagine you are a product manager at a tech company planning to enter the smartphone market. Industry analysis reveals that the market is highly competitive, dominated by established players like Apple and Samsung.

Use of Industry Analysis:

• Competitive Landscape: Analyze the strengths and weaknesses of competitors, identifying areas where they excel (e.g., Apple's brand loyalty ) and where they might have vulnerabilities (e.g., consumer demand for more affordable options).
• Market Trends: Identify trends like the growing demand for sustainable technology and 5G connectivity, guiding product development and marketing strategies.
• Regulatory Factors: Consider regulatory factors related to intellectual property rights, patents, and international trade agreements that can impact market entry and operations.
• Outcome: Armed with insights from industry analysis, you decide to focus on innovation, emphasizing features like eco-friendliness and affordability. This niche approach helps your company gain a foothold in the competitive market.

Healthcare Industry - Telehealth Services

Scenario: You are a healthcare entrepreneur exploring opportunities in the telehealth sector, especially in the wake of the COVID-19 pandemic. Industry analysis is critical due to rapid market changes.

• Market Size and Growth: Evaluate the growing demand for telehealth services, driven by the need for remote healthcare during the pandemic and convenience factors.
• Regulatory Environment: Understand the evolving regulatory landscape, including changes in telemedicine reimbursement policies and licensing requirements.
• Technological Trends: Explore emerging technologies such as AI-powered diagnosis and remote monitoring that can enhance service offerings.
• Outcome: Industry analysis underscores the potential for telehealth growth. You adapt your business model to align with regulatory changes, invest in cutting-edge technology, and focus on patient-centric care, positioning your telehealth service for success.

Food Industry - Plant-Based Foods

Scenario: As a food industry entrepreneur , you are considering entering the plant-based foods market, driven by increasing consumer interest in health and sustainability.

• Market Trends: Analyze the trend toward plant-based diets and sustainability, reflecting changing consumer preferences.
• Competitive Landscape: Assess the competitive landscape, understanding that established companies and startups are vying for market share.
• Consumer Behavior: Study consumer behavior, recognizing that health-conscious consumers seek plant-based alternatives.
• Outcome: Informed by industry analysis, you launch a line of plant-based products emphasizing both health benefits and sustainability. Effective marketing and product quality gain traction among health-conscious consumers, making your brand a success in the plant-based food industry.

These examples illustrate how industry analysis can guide strategic decisions, whether entering competitive tech markets, navigating dynamic healthcare regulations, or capitalizing on shifting consumer preferences in the food industry. By applying industry analysis effectively, businesses can adapt, innovate, and thrive in their respective sectors.

Industry Analysis is the compass that helps businesses chart their course in the vast sea of markets. By understanding the industry's dynamics, risks, and opportunities, you gain a strategic advantage that can steer your business towards success. From identifying competitors to mitigating risks and formulating competitive strategies, this guide has equipped you with the tools and knowledge needed to navigate the complexities of the business world.

Remember, Industry Analysis is not a one-time task; it's an ongoing journey. Keep monitoring market trends, adapting to changes, and staying ahead of the curve. With a solid foundation in industry analysis, you're well-prepared to tackle challenges, seize opportunities, and make well-informed decisions that drive your business toward prosperity. So, set sail with confidence and let industry analysis be your guiding star on the path to success.

How to Conduct Industry Analysis in Minutes?

Introducing Appinio , the real-time market research platform that transforms how you conduct Industry Analysis. Imagine getting real-time consumer insights in minutes, putting the power of data-driven decision-making at your fingertips. With Appinio, you can:

• Gain insights swiftly: Say goodbye to lengthy research processes. Appinio delivers answers fast, ensuring you stay ahead in the competitive landscape.
• No research degree required: Our intuitive platform is designed for everyone. You don't need a PhD in research to harness its capabilities.
• Global reach, local insights: Define your target group precisely from over 1200 characteristics and access consumer data in over 90 countries.

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Competitive Analysis for a Tools Rental Business (Example)

• May 14, 2024
• Business Plan , Competitive Analysis

A competitive analysis is not just a tool for gauging the position of your tools rental business in the market and its key competitors; it’s also a fundamental component of your business plan.

This analysis helps in identifying your tools rental business’s unique selling points, essential for differentiating your business in a competitive market.

In addition, the competitive analysis is integral in laying a solid foundation for your business plan. By examining various operational aspects of your competitors, you gain valuable information that ensures your business plan is robust, informed, and tailored to succeed in the current market environment.

Tools Rental Business Plan

Fully editable 30+ slides Powerpoint presentation business plan template.

Download an expert-built 30+ slides Powerpoint business plan template

Identifying Your Competitors in the Tools Rental Industry

The first step in a competitive analysis is to pinpoint your competitors. Begin by identifying other tools rental companies in your vicinity. If your business specializes in high-end power tools, your direct competitors include nearby tools rental businesses that offer similar products, as well as larger home improvement stores with rental services. Also, consider indirect competitors such as online tool rental services or equipment sales businesses that offer rental options.

Utilize online tools like Google Maps to visually assess the distribution of these competitors. Platforms like Yelp and other customer review sites can provide insights into the strengths and weaknesses of these competitors from user feedback. For instance, if a competitor consistently receives praise for its flexible rental terms and excellent customer service, these are significant competitive strengths.

Tools Rental Competitors’ Strategies

Analyzing the strategies of these competitors involves several key areas:

• Tool and Equipment Range: Scrutinize the variety of tools and equipment they offer. If “ProTool Rentals” nearby is becoming popular for its comprehensive selection of construction equipment, it indicates a market trend or demand that you might need to address.
• Rental Terms: Examine the flexibility and attractiveness of their rental agreements. A competitor like “EasyRent Tools” that offers customizable rental periods could appeal to a broad customer base, from professional contractors to DIY enthusiasts.
• Pricing Strategy : Compare your pricing with those of competitors. Are your rental fees competitive with budget-friendly options like “Budget Tool Hire,” or do they align more closely with premium providers like “Elite Equipment Rentals”?
• Marketing Tactics: Evaluate how competitors market their offerings. Do they leverage digital marketing, engage in local trade shows, or rely on partnerships with construction companies and local contractors?
• Customer Service: Assess the quality of customer service. For example, “Helpful Hire” might be known for its knowledgeable staff and proactive customer support, enhancing the rental experience.
• Operational Efficiency: Note if competitors utilize technology or innovative processes to improve service delivery, such as “Streamline Rentals” with its online booking system and mobile delivery service.

What’s Your Tools Rental Business’s Value Proposition?

Reflect on what sets your tools rental business apart. Perhaps you offer the latest in eco-friendly gardening equipment, or maybe your service includes free delivery and setup for heavy machinery.

Identify market opportunities through customer feedback and industry trends. For example, an increasing demand for smart home installation tools could represent a niche market if competitors have not yet tapped into this area.

Consider your location: A tools rental business in an urban setting might focus on light residential tools and small construction equipment, whereas one near industrial areas could specialize in heavy machinery and long-term leases.

How To Summarize It All In Your Business Plan?

Competitors’ strategies and market positioning can be superposed with your own tools rental business’s value proposition by laying out on a page (or a presentation slide) the main differentiating factors. These factors will show investors and banks:

• How each competitor is positioned in the market
• How your tools rental business compares vs. competitors (what’s your value proposition )

In a competitive analysis, various parameters are used to compare and contrast your tools rental business with its competitors. The parameters listed below are examples of what you might include in your analysis. 

They are not exhaustive but serve as a guide to help you understand key aspects to consider. Each parameter provides insights into different facets of the competitive landscape, helping to paint a comprehensive picture of where your rental business stands.

The location of your tools rental business significantly influences its success. It affects foot traffic, accessibility, and the type of clientele attracted. For example, a tool rental shop near construction sites or residential areas might serve frequent DIYers or professional contractors.

Moreover, location plays into logistics like supply chain efficiency and equipment delivery reach. A tool rental business close to major roads or with easy access to a wide delivery radius has distinct advantages.

Range of Tools Offered

Offering a wide and varied range of tools sets a tools rental business apart in a competitive market. It reflects the business’s ability to cater to diverse customer needs—from basic home repair tools to specialized construction equipment.

This parameter helps identify market trends and potential gaps. If most competitors focus on basic tools, introducing a line of high-end, specialized equipment could capture a new customer segment.

Specialization

Specialization indicates a focus on particular types of tools or services, like landscaping or carpentry, which appeals to specific customer segments seeking expert advice and high-quality equipment.

Delivery Service

Delivery services expand a tool rental business’s reach beyond its immediate location. Offering delivery can cater to a broader audience, tapping into the convenience market. For instance, a tool rental business with a robust delivery system can serve busy contractors who value time efficiency.

In contrast, a business without delivery services might focus on providing exceptional in-store customer service, drawing customers into the shop.

Online Store

An online reservation and booking system allows customers to browse available tools, compare prices, and book rentals in advance. This not only improves the customer experience but also streamlines your operations and inventory management.

Knowing whether a competitor is part of a franchise provides insights into their operational model and brand strength. Franchises often have established brand recognition and marketing support. On the other hand, independent tools rental businesses might focus on local charm and personalized services, differentiating themselves from the standardized approach of franchises.

Other Comparison Factors

In addition to the parameters discussed, there are several other factors that can be included in a competitive analysis to provide a more comprehensive view:

• Marketing Strategies : Understanding how competitors market their products can offer insights into effective advertising channels and promotional tactics.
• Customer Service: Evaluating the level of customer service, including staff friendliness and responsiveness, can highlight areas for improvement in your own business.
• Brand Presence : Assessing the online and offline presence of competitors, including social media activity and community engagement, can inform your branding strategies.
• Product Innovation: Keeping track of new product launches or unique offerings by competitors can inspire innovation and help in staying ahead of market trends.
• Supplier Relationships : Information about suppliers and partnerships can reveal insights into product quality, sourcing ethics, and cost efficiency.

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