Lesson 3 of 8 · All lessons in this module
- Why analyse an industry, and the five steps
- Defining an industry and grouping companies
- Industry size and the character of its growth
- Profitability, market share trends and concentration (HHI)Video lesson
- Industry structure: Porter's Five ForcesVideo lesson
- External influences: PESTLE analysis
- Integrated case: from an industry survey to a forecast
- Competitive strategy and positioning
Lesson 3 of 8 · 13 min
Industry size and the character of its growth
The industry survey starts by measuring total sales and their growth, then characterises that growth: is the industry still growing into its market or mature, and is it cyclical or defensive?
In short
- Industry size = total annual sales from the product or customer perspective, not the total sales of every constituent (a firm's unrelated segments are excluded).
- Where private firms dominate, size comes from government statistics, consultancy surveys or company presentations, which the analyst must sanity-check.
- Growth is measured year over year or as a CAGR, and ideally split into volume and price/mix.
- Growth industries have not yet saturated their addressable market and grow for their own reasons; mature industries are fully penetrated and grow with the economy (or shrink as demand moves to substitutes).
- Cycle sensitivity depends on whether purchases are discretionary or necessary, pricing, interest-rate exposure, and durable/capital goods vs recurring purchases.
- The style box combines growth vs mature with cyclical vs defensive, but the labels are of degree. Growth industries are the group relatively insensitive to the cycle (above-trend growth continues through it); a mature industry may be cyclical or defensive.
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