Industry analysis and market analysis are two different ways to look at the environment in which a company competes. Although related, these two types of analysis differ in their scope.
Industry analysis looks at long-term trends and economic forces that affect the overall industry. Industry analysis is commonly performed within the framework of Michael Porter’s "Five Forces," a theory used to assess the structure of an industry.
Porter identified the following forces that affect an industry: bargaining power of suppliers; bargaining power of buyers; threat of new entrants; threat of substitutes (products or services that may be used instead of those in question; also called replacement products); and rivalry among competitors.
Market analysis considers the “market” the company operates in. It asks questions like, “ What features are important to the target customer?” “How can I cause the target customer to buy this company’s product, instead of another’s?” “What marketing vehicles will attract and engage the target customer?”
Finding a Niche
An integral part of market analysis is identifying “who” the target customer is, meaning the sort of person the product or service appeals to most. Also called a “niche”, it is typically expressed as a demographic. For example, the niche market for iPads could be young professional urbanites in two-income homes.
Competition is examined in both industry and market analysis, and both types of analysis are important in understanding the competition a company faces. However, the scopes differ. In industry analysis, competition is examined at the industry level in terms of all the possible competition out there: companies that make the same product (i.e., candles), or make a product that fills the same need (i.e., gifts). Market analysis looks specifically at the competition that exists relative to the target market (i.e., designer candles, Yankee candles and scented candles).