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Subject 3. Industry Survey PDF Download

Surveying the industry involves conducting thorough research and analysis to estimate various key metrics that provide insights into the industry's performance and prospects.

Size of the industry: To estimate the size of the industry, researchers typically gather data on the total revenue or sales generated by all companies operating within that industry. This data can be collected from various sources, including financial reports, industry associations, government agencies, and market research reports.

Growth rate: By analyzing historical data or conducting market research, researchers can determine the industry's growth rate over a specific period, such as a year or a quarter.

Character of the industry: Understanding the character of an industry involves identifying its key characteristics, trends, and dynamics. This includes examining factors such as technology advancements, regulatory changes, consumer preferences, and competitive forces. Qualitative research, interviews with industry experts, and analysis of industry reports can help in gaining insights into the industry's character.

Profitability: Estimating the profitability of an industry requires assessing the financial performance of its companies. Researchers can analyze financial statements, income statements, and balance sheets to calculate profitability ratios such as net profit margin, return on equity (ROE), and return on assets (ROA). This analysis provides an overview of how profitable companies are within the industry.

Market share trends: Determining market share involves assessing the portion of total industry sales or revenue that a specific company or group of companies holds. Researchers can collect data on market shares from various sources, including company financial reports, market research data, and industry reports. Analyzing market share trends over time helps identify which companies are gaining or losing market share within the industry.

The Herfindahl-Hirschman Index (HHI)

The Herfindahl-Hirschman index is the sum of the squared market shares of the top N largest firms in the industry.

H = M12 + M22 + M32 + ... + MN2

where Mi is the market share of an individual firm.

Suppose there are a total of four firms in a specific industry. Three firms have a 20% share each and one has a 40% market share, H = 0.202 + 0.202 + 0.202 + 0.402 = 0.28.

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