Identify industry/economic trends that will
impact business activities
Introduction

 The world is changing rapidly around us. We are no
longer a small town business world with one man
shops. Successful competition means constant
growth. The money your business will make and
where it will head, in terms of growth, is determined
by the trends within the global economy. Take heed
of these trends as you plan your future success.
Major Economic Global Trends

 GNP is Rising: The Gross National Product (GNP) of
the United States, Western Europe, Eastern Europe and
Asia are growing. There is minimal growth in places like
the Middle East, Africa and the Caucus region.
 Those nations that experience the highest growth are
likely to also bring in the most wealth. High growth in
places like China can actually change world dynamics.
 Lesson: There is lots of money to be made in an expanding
economy
Major Economic Global
Trends

 Service Sector is Big Business: Around 2001
developed countries had 72% of their new growth in
the service industry while developing countries had
52% growth in the service industry (Shackman,
2005).
 Hotels, restaurants, software, telecommunications,
food service, outsourcing, etc. will take a larger
percentage of the economy over time.
 Lesson: Businesses in the service industry will
experience the most growth.
Major Economic Global
Trends

 Industry is on the Decline: Contrary to popular
believe Industry like manufacturing has been in
serious decline in developed countries and slightly
declining in developing countries.
 Due to high labor costs and unions in developed
countries the labor market is uncompetitive. It is
cheaper for companies to move overseas and develop
similar operations.
 Lesson: If you base your business on industry try and
find something new or improve your services.
Major Economic Global
Trends

 Telecommunications and Internet are on the
Rise: Countries are screaming for more technology
and communications. Throughout the world much
of the commerce and economic activity among
developed nations is through these electronic forms.
 Huge projects are being conducted in Iraq, Africa and
Eastern Europe to get everyone on a cell phone.
 Lesson: If you have a business you are eventually
going to have to get hooked into the global electronic
grid (i.e. internet, web pages, ecommerce, etc.)
Business/Industry Trends

 Industry trends are examined to make predictions.
 The study includes trends related to consumer
behavior, employment, technological advancements,
new product development, competition, government
norms and other factors that impact the industry.
Reasons Why Businesses Identify
Industry/Economic Trends

 inform and guide strategic planning
 reduce risks
 seek opportunities
 anticipate business cycle changes
 improve inventory management
 improve supply chain management
 enhance management forecasts
 improve financial management
 enhance marketing management
Identify factors to consider when
determining industry trends
 Industry

 organized economic activity connected with the production, manufacture,
or construction of a particular product or range of products
 Geographic area
 A specific area
 Product
 something that is made or created by a person, machine, or natural process,
especially something that is offered for sale
 Targeted customers
 the intended group for which something is performed or marketed
 Regulatory environment
 the laws, rules, and regulations put into place by federal, state, or other
government entities and civilian organizations to control the behavior and
actions of business activities.
 Competitors
 a company in the same industry or a similar industry which offers a similar
product or service
Major Sources of Information for
Identifying Industry Trends:

 Standard & Poor's Industry Surveys:
 These cover over 50 industries including biotechnology and
telecommunications. The study comprises of fundamental analysis
examining the prospects of each industry, with a comparative analysis of
company data. Information on major trends, key players and financials is
accompanied by an update on the recent developments in the industry and
a forecast on the impact of government legislations on the industry.
 Business & Company Resource Center:
 This source, provided by the Gale Group, is helpful in identifying industry
trends through an analysis of company profiles. Information on a
company’s products, share prices and consumer marketing is provided.
 Faulkner's Advisory for IT Studies:
 This collection of reports covers technological aspects, such as IT
infrastructure, data networking and enterprise systems. Also, FAITS links
to business news sources such as The New York Times and Nando Net.
Forces that drive trends

 political and social
 population and demographics
 resources and environment
 science and technology
 work and workplace
General resources that are useful in
identifying industry trends

 industry profiles
 trade/professional associations
 census data
 industry surveys
 online databases
 business directories
 company websites
 government agencies
 Securities and Exchange Commission)
Porter’s five forces model in industry analysis
.

 a useful tool for spotting industry trends.
 identifies five factors that act together to determine
the nature of competition within an industry. These
are the:





Threat of new entrants to a market
Bargaining power of suppliers
Bargaining power of customers (“buyers”)
Threat of substitute products
Degree of competitive rivalry
Porter’s Five Forces Model in Industry Analysis
 Greater market share and a higher ability to influence the selling price
indicate the trend of consolidation.
 Profits rise and costs decline.

 The expansion of the areas of operation, product line, customer base and
technical capabilities encourages companies to consolidate.
 An example of this trend in the electronics industry is that of the
acquisition of Compaq by Hewlett Packard.
 From banking to software, and from automotive to telecom, almost every
industry has undergone consolidation in recent times.
 The measurement of industry trends can be done by studying the profile
of an industry.
 By locating a pattern of movement of certain companies within an
industry, trends can be measured.
 This research can also include a study of statistical data on business and
financial ratios.
How to identify industry trends that will
impact business activities.

 An industry trend analysis is a qualitative and
quantitative report on a specific sector of economic
activity defined by national or international industry
classification systems.
 Industry is any activity in which raw materials
are processed into finished goods.
 There are various methods used to collect, quantify
and interpret economic activity in an industry trend
analysis.
 Generally, the analysis selects an industry
according to its North American Industrial
Classification System (NAICS) code.
How to identify industry trends that will
impact business activities.

 Some industry trend analysis reports compare the
performance of a particular business to that
industry’s performance as a whole.
 Others are conducted to gain a better
understanding of market dynamics and
performance within the industry sector.
 Analyzing industry trends helps business leaders,
economists, and policy makers understand the structure of
an industry. Vulnerabilities and opportunities that may
exist within an industry can be revealed through the
analysis.
How to identify industry trends that will
impact business activities.

 Which data is collected in an industry trend analysis
depends upon the purpose for the analysis.
 Economists look at industrial trends in order to provide
feedback to government officials or industry leaders.
 Political systems are closely intertwined with economic
systems, as a nation's productivity is essential for
supporting a population with essential and luxury goods.
 The government might use the data collected to give
incentives to one industry rather than another.
 Business leaders conduct an industry trend analysis to
measure their companies' ability to remain competitive.
(NAICS) North American Industrial
Classification Code

 The NAICS is used in an industry trend analysis to compare one industry to
another, or to group industries within the scope of a broader analysis.
Economic activity generated by the sale of finished goods is also included in an
NAICS category.
 This system replaced the Standard Industrial Classification System (SIC) used
in the U.S. in 1997. This change was made to modernize the system to include
categorization by how production occurs, not just what is produced. The
change also allowed industrial activity in Mexico, Canada, and the U.S. to be
considered as a whole.
(NAICS) North American Industrial
Classification Code

 NAICS organizes industry categories using numerical codes. Classification
codes mark the boundaries of where one industrial sector ends and another
begins. The strict delineation is helpful when comparing one industry trend
analysis to another industrial category's trend analysis.

An example of how NAICS codes operate may be understood by looking at the
seafood industry. The industry sector of Seafood Product Preparation and Packaging
has a numerical code of 3117. Seafood canning, an activity that falls under the larger
category of seafood production in general, has been assigned the code 311711, while
fresh and frozen seafood processing has the code 311712.
 Coding industrial sectors helps set specific boundaries for each industry's
activities. These codes are structured so that one part of an industrial sector's
activity can be broken out as a separate economic statistic for trend analysis
purposes. Such statistics are crucial in conducting the quantitative part of an
industry trend analysis.