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Definition: Industry Environment Analysis
Industry Environment Analysis is a study or exercise done to assess the current industry environment. This exercise helps understand the various aspects and predict trends of the industry better, and helps in many other ways. Generally, industry analysis is done by external research agencies, consulting firms or businesses themselves.
The major objectives of industry environment analysis are:
- To identify key success factors of that industry
- To assess attractiveness and growth prospects for entry
- To formulate competitive strategy
- To study changes over time and predict trends
The industry environment is composed of the following stakeholders, around which analysis is done. Namely: Competitors, Suppliers and Buyers. There are also other major considerations like the political, legal, technological aspects which are a part of the environment analysis.
To analyse these aspects of the industry, models such as PEST, PESTEL, and PORTER’s 5 forces have been developed.
Let us look at the automobile industry.
PEST and PESTEL are two models used to analyze political, legal, economic, social, environmental and technological factors pertaining to that particular industry.
Example: PEST analysis for the automobile industry
Porter’s 5 forces analysis is done to study aspects like Suppliers, Buyers, Competitors, new potential entrants and substitutes of that industry.
Example: Porter’s 5 force analysis for automobile industry: