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Startup 101

Know Your Industry Better 

Many people think opening a business is easy, they think they have a unique product idea, and with access to sufficient capital along with the correct marketing tools, their product will be a hit. That is a naïve idea, and every start-up must carefully consider their competition before entering an industry. A business operates within the confines of customers and their competition.

The market is not a game but a system that thrives on competition and to not study your opponents is a deadly mistake. Even in the saturated restaurant business where there are low barriers to entry and a large market segment, one has to consider who their rivals are in the vicinity, what cuisine and the quality they will provide compared to others, as well as matching pricing with their competitors to effectively capture a market.

Industry overview:

An industry overview is a document providing some basic information about an industry interest. People use overviews in research when they are making decisions about investments, entering industries, and other activities. Primary data can be found if a firm commissions a research firm to conduct market research tailored specifically to that firm’s needs. A general industry overview can also be found in secondary sources such as in trade newspapers and magazines, although they sometimes tend to have outdated statistics, and in a dynamic business environment, it is important to have up-to-date material to make the right decisions.

The overview usually defines the industry, talks about its major products, and discusses the market size. It also includes a list of the major companies and provides information about the number of people working in the industry, baseline qualifications needed to enter various job positions, and the earnings of the industry in recent years.

In addition, an industry overview often includes projections into the future. The document details forecast future market activity based on current information and economic trends. This can inform a firm of whether growth is likely or not in the industry as well as their chances of survival in the market.


Industry analysis:

Using an industry overview the next step a firm takes is doing an industry analysis. Industry analysis is a market analysis that looks at how your company compares to others in your niche. Again, research has to be conducted using both primary and secondary data. There are several critical components all business should research for their particular industry:

  • Barriers to entry
  • Supplier Power
  • Threat of substitutes
  • The purchasing power of customers
  • Market competition

Understanding these aspects gives an insight to firms of their chances of survival, how strong their competitors are as well as the viability of the industry in the long run. They also show the weakness of the industry which the firm can exploit as well as the likely problems they will be facing when entering a new market.

Going beyond normal market research, an industry analysis also studies every aspect of your company and how it compares up to others. It looks at all the quantitative and qualitative aspects of your competitors, some of which include:

  • The products or services they provide and how they market them to customers.
  • The prices are being charged.
  • Channels of distribution and how they deliver.
  • How they treat employees as well as the quality of their customer service to keep a loyal customer base
  • Brand and design values
  • How innovative the firms are – business methods as well as product.


Once again, these questions are crucial to understanding your foes and their intentions. If your startup were to enter any industry, other firms would not give up their market share voluntarily. As such it is important for entrants in the industry to anticipate a firm reaction or counterattack from other companies who will be trying to maintain their profit margins as much as possible.

Evaluating all these the startup can then try to formulate a well-devised market strategy, which not only deals with competitors but also tries to attract customers by playing to their strengths.


Business categories:

After carefully considering the business environment in which a startup will have to operate within by utilizing the industry overview and analysis, as well as comparing it with their products and marketing strategy. If the entrepreneur still feels confident enough to break into the market, they then have to contemplate what will be the best and most effective way to surpass their competitors. A way they can do that is by looking at which business category to operate in. Rome was not built in a day, and depending on the startup capital they have to choose which category to enter in a market and then consolidate their position:

  1. Service Business- This business is when a company provides intangible products, such as professional skills, expertise, advising, etc.


Examples are consultation firms, advertising, accounting, salons, gyms.

  1.    Merchandising Business- This type of business buys products at wholesale price and sells the same at retail price. These firms make a profit by selling the products at prices higher than their purchase costs.

Examples include all distribution and retail stores such as department stores, grocery, hardware, clothes, and accessories shop, consumer electronics, home furniture, appliance stores, drug stores, etc.


  1. Manufacturing Business- a manufacturing business buys products to use them as raw materials to make a new product. A manufacturing business combines raw materials, labor, and overhead costs in its production process. The goods produced will then be sold to customers.


Examples are factories, textiles, furniture workshops.

A company can operate more than one of these businesses but that would require high levels of finance. Usually, firms build their way up and concentrate on one category of business to gain a significant foothold in the market. This is easier said than done, as most firms’ objective in the first few years is to just survive and will not create notable profits, the mega-corporation Amazon did not experience any net profit in the first seven years of their business. Companies then invest in other forms of business to maximize capital and diversify their portfolio.

Looking at Industry overview and analysis, and business categories we appreciate how they are necessary for not only envisioning the goals and objectives of a business but also to outwit adversaries and attract investors.


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