Define the Industry
The first step in a Five Forces analysis is to define the industry in which a company operates. Do this by looking at what the company says in its 10-K report (Item 1 - Business). Business databases that classify and assign codes to companies based on their principal activity or market can also be helpful. In some cases, industry boundaries will have to be set and focus placed on a particular industry sector (e.g., craft beer industry, rather than beer or alcoholic beverages). The definition will determine competitors and the size and scope of of the market analysis.
Define the Industry with NAICS
One way to define your industry is to use the North American Industry Classification System (NAICS). NAICS (pronounced "nakes", rhymes with "snakes") codes are used by government agencies (for example,when collecting Economic Census data) and by business databases to classify companies by their lines of business.
NAICS codes classify establishments based on similar processes or means of production. Codes use a two to six digit level of detail, from broad sectors like manufacturing and retail (2-digit codes) to individual industries (6-digit codes). Revenue or value of shipments data is used to determine an establishment's primary business activity.
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NAICS- North American Industry Classification SystemSearch by industry name for NAICS code or by NAICS for an industry definition
Define the Industry with GICS
The Global Industry Classification Standard (GICS), was developed by Standard & Poor's and Morgan Stanley Capital International for use by financial analysts, investors and portfolio managers. It classifies public companies listed worldwide using a market-based approach based on how they earn their revenues. Many stock exchanges use GICS to develop industry/sector indexes.
Look up your company in S&P Capital IQ or Bloomberg to find its GICS classification.
Bloomberg terminals are available on the lower-level of the Library on the LIU Trading Floor, LB 132.
Find Industry Profiles
Begin researching by building a basic understanding of how an industry operates. Industry profiles are found in many business databases. They provide information on current market forces and trends, analyze industry performance, identify leading companies, and gather aggregate financial data and forecasts.
SEARCH TIP: Databases are often selective regarding the industries they choose to cover. The industry you are researching may not appear in every database listed.
- Business Insights: Essentials This link opens in a new windowSelect the "Industries" tab, to "Search by Industry Name (or 6-digit NAICS code)" (e.g., Eating Places or 722515).
- Business Source Complete This link opens in a new windowSelect "Industry Profiles" from the "Browse" box on the right-side of the page and enter industry keyword(s) (e.g., restaurants) to find links to industry reports. Five Forces Analysis developed by professional analysts may be available in those Industry Profiles published by MarketLine/Datamonitor.
- Hoover's This link opens in a new windowChoose "industries" from the drop-down "All Categories" menu and enter either a NAICS code or industry key words. Alternatively, perform a "Companies" search, then click on the "Industry Information" link in the Company Index. Click on any industry designation listed to view an in-depth report of the industry.
- Mergent Online This link opens in a new windowClick on the "Industry Analysis" tab at the top of the page to search for specific industries with a focus on North America, Europe, Latin America and the Asia Pacific regions. Each report examines the current environment for the industry and discusses major market trends.
- Research Library This link opens in a new windowClick on "All databases" and then on "Browse." Under the heading for "Business," open the drop-down "Industry and Market Research" menu to select "Business Monitor International (BMI) Industry Reports" (country and region-specific industry reports that provide overview, trends, forecasts, SWOT analysis, and more on a monthly or quarterly basis) and/or "First Research" industry profiles (U.S. focused industry reports).
Alternatively, under the heading for "Business," open the drop-down "Country Reports" menu to select "Oxford Economics By Country Industry Forecast" (monthly reports on top world economies, with updates between two and four times a year for other countries, including latest economic developments and policy changes, as well as risk assessments and long-term forecasts for key economic indicators.)
Find Industry News
Business news databases provide access to articles from the best business newspapers, trade journals and magazines. News databases are particularly useful in identifying current industry trends and researching the political, legal technological and environmental issues that affect industry operations.
- ABI/INFORM Collection This link opens in a new windowBusiness, Management and Trade - scholarly and trade journal articles, dissertations, market reports, industry reports, business cases and global and trade news. Includes full text of Barron's.
- Business Source Complete This link opens in a new windowUsing the "Thesaurus" to choose industry names will lead to broader or narrower ones. Industry information can also be located by using NAICS codes and changing the default "Select a Field" to "IC NAICS Code or Description."