Difference Between Industry and Market Analysis

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Industry and market analysis can both help you plan your company's future. A good analysis can show you the condition of your industry and the steps you need to take to compete for customers. The market and industry definition is different and so are the market and industry analyses.

TL;DR (Too Long; Didn't Read)

Industry analysis looks at your industry: trends, growth and the main competitors. Market analysis focuses on your potential customers, looking at their demographics, spending patterns and budgets.

Sector, Market and Industry Definition

When analyzing your industry or your customers, there's a good chance you'll run into various words and definitions that sound similar, such as your sector, your industry and your market. To understand your business environment, you need to know the difference between them.

What's the difference between industry and sector, for example? Sectors are bigger. Ford is an automobile company, but autos are part of the overall discretionary spending sector of the economy. That takes in a lot more than just cars.

What's the difference between industry and market? If you open a grocery store, your industry includes Food Lion, Whole Foods, Harris Teeter's and other companies in the same line of work. The industry's market is food shoppers, the people who patronize your store and your competition. Your market is the food shoppers located within a reasonable range of your stores.

Industry vs. Market Examples

Whatever the sector and industry, the same difference between industry and market exists.

  • If you make laptops, you're in an industry that includes Apple and Microsoft. Your market might be businesses that use computers, consumers that use them at home or both.

  • If you publish fantasy novels, your industry includes giants such as Baen Books and Tor Books. Your market is fantasy readers.

For many companies, the market is smaller than all potential consumers — for example, "fantasy readers who like Harry Potter" or "laptops for people who do graphic design". A key part of market analysis is identifying and understanding your target market.

Analyzing Your Industry

Industry analysis and market analysis both help you understand the challenges and opportunities facing your company. The difference between industry and market analysis is that the former looks at your competitors, while the latter looks at the customers for whom you're competing.

Industry analysis helps you understand your position in the industry — for example, scrappy up-and-comer, established player or upstart with a new way of doing things. There are three classic approaches to industry analysis:

  • Competitive forces model. This looks at factors such as the bargaining power of your suppliers, the level of competition in the industry and the risk of new players entering the industry.

  • Broad factors analysis. This looks at the big picture. How do the economy and politics affect your industry?

  • SWOT analysis. What strengths, weaknesses, opportunities and threats do you see?

Industry analysis can show you the conditions under which you're operating. If, say, you're in a growth industry with lots of opportunity, you'll want a different strategy than if growth has stalled and everyone is fighting over a shrinking customer pool.

Understanding Your Market

The difference between industry and market analysis isn't absolute. Industry analysis may consider the industry's customers, and market analysis may consider the competition. Despite the overlap, market analysis focuses much more on your customers than your competition.

  • Who are your potential customers?
  • What's their demographic for age, wealth, number of kids and so on?
  • What are their shopping habits?
  • How many potential customers are there?
  • How much would they be willing to pay for your product?

If you're writing a business plan to show investors or lenders, they'll expect you to provide a detailed market analysis. Even if you haven't reached that point, conducting a market analysis can challenge some of your assumptions. A market analysis of how many people might buy your product and how much they'll pay may show that your assumptions about your business success are optimistic.

References

About the Author

Fraser Sherman has written about every aspect of business: how to start one, how to keep one in the black, the best business structure, the details of financial statements. He's also run a couple of small businesses of his own. He lives in Durham NC with his awesome wife and two wonderful dogs. His website is frasersherman.com

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