Porter's Five Forces Analysis

Define the Industry

Your first step is to define the industry your company operates in.  You can do this by looking at what the company says in its 10-K report (Read Item 1 - Business). You can also use business databases that classify and assign codes to companies based on their principal activity or market. In some cases you will have to set industry boundaries and focus on a particular industry sector, for example, on the craft beer industry rather than beer or alcoholic beverages.Your definition will determine who your competitors are and the size and scope of of your market analysis.

Define the Industry with NAICS

One way to define your industry is to use the NAICS industry classification system. 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.

Define the Industry with GICS

GICS, the Global Industry Classification Standard, 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. (Both databases available in the Subotnick Financial Services Center.)

Find Industry Profiles

Begin your research by building a basic understanding of how the industry operates. Industry profiles are found in many business databases. They will help you examine current market forces and trends, analyze industry performance, identify leading companies, and gather aggregate financial data and forecasts.

Find Industry News

Business news databases give you access to articles from the best business newspapers, trade journals and magazines. News databases are especially useful in identifying current industry trends and researching the political, legal, technological and environmental issues that affect industry operations.