Industry and Competitive Analysis

It is essential for analysts to understand the industry context for a company’s financial performance and its evaluation. For example, is a company’s revenue growth driven by a macroeconomic or industry-wide factor (such as an economic expansion) or a company-specific factor (such as increasing market share)? The answer has important implications for forecasting and valuation.

In this learning module, we discuss how an industry is defined and address the challenges associated with grouping companies that operate in multiple industries. Next, we introduce methods to survey an industry in terms of size, profitability, and market share trends. Further analysis includes frameworks to interpret a competitive environment using Porter’s Five Forces and external trends using PESTLE analysis. Finally, we combine these approaches to understand a company’s competitive strategy and its position relative to its industry peers.