Industry trends are examined to make predictions. The study includes trends related to consumer behaviour, employment, technological advancements, new product development, competition, government norms and other factors that impact the industry.
Sources of Industry Trends
Here are some 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.
How to Spot and Measure Industry Trends
The ‘Five Forces’ model put forward by Michael Porter is a useful tool for spotting industry trends. The assessment of an industry’s structure is done by analyzing the following forces:
- Bargaining power of buyers
- Bargaining power of sellers
- Threat of substitutes
- Threat of new entrants
- Rivalry among competitors
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.