What Is Economic Industry Analysis?

Jan Fletcher

An economic industry analysis quantifies and analyzes economic performance and activity within an industry sector. This type of analysis may be conducted by governmental entities, businesses seeking to understand the competitive landscape in which they operate, or for academic purposes. Political motivations or environmental concerns may instigate an economic industry analysis as well. This type of research may also be used to determine the full impacts of industrial activity within a certain geographical area.

Political motivations sometimes come into play during an economic industry analysis.
Political motivations sometimes come into play during an economic industry analysis.

Both commercial enterprises and government agencies are often keenly interested in accurately measuring economic activity in a particular sector. In the commercial arena, individual businesses, business associations or private organizations that advocate for a robust business climate may conduct an economic industry analysis. This may be done to increase prosperity in a region or nation. Those with commercial interests in a particular industry sector frequently seek to analyze a variety of metrics that impact the marketplace.

Academicians may engage in an economic industry analysis to conduct a scientific assessment of how an industry sector may impact society, or how it may affect marketplace dynamics. The research may then be used to improve our understanding of how markets operate. Such findings are sometimes used by government researchers or agencies to identify potential threats to national security. For example, an economic industry analysis conducted by government officials may look at how the overall market supply of rare earths could affect technology considered crucial to maintaining a nation's defensive capabilities.

Political motivations sometimes come into play in an economic industry analysis. Reports that indicate a shortage or excess of labor or raw materials in a certain industry sector may result in political action that creates tax incentives to change the imbalance, for example. Environmental concerns are also the focus of an economic industry analysis at times. Advocates may also attempt to measure environmental impacts of a particular industry, such as coal mining.

Businesses within a particular sector may seek competitive advantage by researching and understanding the macro environments in which they operate. Predictive capabilities within an industry sector are often highly valued as important business intelligence. An economic industry analysis conducted for this purpose may focus on the metrics and business operations of specific competitors within that industry sector. Companies conducting a competitive industry analysis often attempt to determine the sector's productive capacities, the number of current suppliers and the competition for raw materials commonly used in that industrial niche.

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