The analysis of any industry is important for industry players for the formulation of strategic plans of action as well as charting the way forward. Moreover, such an approach is basic to the formulation of business plans for market entrants. Potentials in the industry can be captured through an analysis tools as well as the possible challenges and opportunities that are uniquely faced in each industry. This paper focuses on the analysis of the construction industry using different analysis tool.
The SWOT analysis tool is one that is an acronym for strengths, weaknesses, opportunities and threats. This gives any business the opportunity to structurally plan their activities within a market based on four indicators of any business set-up (Armstrong, 2006). This tool enables the organization to envision the factors within an industry that will be either beneficial or harmful to the enterprise. Therefore, the strengths will present the aspects of the organization that give it an edge over other industry players while weaknesses present the disadvantages of one business compared with others in the market. On the other hand, opportunities could be engaged by the business to gain advantage over others after the set-up while threats present environmental threats to the operations of the business. Organizational planning is a key phenomenon and SWOT Analysis enables the organizations leadership to engage environmental analysis of their business surroundings to determine the viability of pursuit of investments in an area.
SWOT Analysis is normally conducted in a two by two matrix table which allows for the harmful factors to be stacked on one side (threats and weaknesses) while the favorable factors are listed on the other side (strengths and opportunities). The result is that the business can take the analysis using a combination of factors that will either boost or deflate the business. The organizational manager can then determine whether they will proceed with the undertaking in that industry or otherwise.
PEST analysis is another industry analysis that can be used especially for companies that are looking to expand to overseas branches. This analysis presents a business with a wide angle view into the business sector they aim to venture into. The objective of doing such an analysis is to determine the general conduciveness of the environment where one intends to do business. Therefore, PEST allows a business to determine the political environment of the industry. Issues of governmental policies, interventions, and involvement in the industry are measured. Further, an economic factors analysis is conducted both at the state and local level for the determination of the favorability of the environment. Issues such as tax breaks, incentives, grants among other favors are determined at this instance. Moreover, the abilities of the market that one is delving into are measured. Things like purchasing power, poverty levels, dispensable income and so on are some factors that are analyzed here (Mars, 2014).
On the other hand, social factors are also considered. Issues of demographic changes, trends, consumer trends like ethnocentrism and buying patterns are considered. For example, an industry player in the fashion industry would ask themselves what the current trends are at a particular time of year so that they dont end up stocking warm clothes during the summer. Finally, the PEST tool also contains a technological aspect to the analysis. This notes that technology is an important part of the industrial growth today. It analyzes the effect of technology on the trends of the industry.
Porters Five Analysis
Porters Five Analysis is an equally powerful tool for the analysis of an industry to determine various opportunities and challenges that present themselves for a potential market entrant. It contains five pointers towards the reality of this situation and points to the organizational leadership on the viability of entering a business. The analysis enables the managers to determine the challenges they are going to face out-rightly. An analysis of five threats to the business is conducted (Shopify, 2014).
The threat of new entrants is done. This determines how easy it is for market players to enter the market. Depending on the ease of this, the market will either be crowded or well-spaced enabling players to have their share. The threat of substitute products is also analyzed. The accessibility of similar products on the market can either reduce demand for your product or boost it. The bargaining power of customers is also important as it enables the producer to have some say in their pricing strategy. The bargaining power of the supplier is also reviewed in determining how dependent your business is on the consistency of the supplier. After the consideration of the above factors, one can determine the overall rivalry of the market one intends to move into (Porter, 1998).
These tools enable the business managers to adequately gauge their performance should they enter the fashion market. They give an overview of the possible opportunities and challenges that are presented when one is moving into a new market.
Armstrong, M. (2006). A handbook of Human Resource Management Practice (10th edition). London: Kogan Page Publishers.
Mars. (2014). Industry analysis and competition: Porters five forces. Retrieved June 2, 2016, from Mars: https://www.marsdd.com/mars-library/industry-analysis-and-competition-using-porters-five-forces/Porter, M. (1998). Competitive Strategy. New York: Free Press.
Shopify. (2014). The Industry. Retrieved June 2, 2016, from Shopify: https://www.shopify.com/guides/businessplan/the-industry.
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