Industry Outlook Report

The purpose of this assignment is for you to gain a full understanding of a particular
industry in which your chosen company operates. The goal is to assess how your company
is positioned in its industry.
Understanding the nuts and bolts of a particular industry is instrumental to an analysts
success. Many companies operate in a similar regulatory and operational environment, so
oftentimes certain events will affect not only one company but all the companies that
operate in that industry. A clever analyst should be able to anticipate such events and assess
their impact on the firms operating in that particular industry. Different industries have
different competitive structures when compared to each other. Industries start with a small
number of firms and the lack of initial competition makes it easy for some of its members to
grow very fast (e.g., Google). This idea is articulated by Michael J. Mauboussin of Legg
Mason as follows:
Technologies, ideas, and illnesses tend to diffuse following an S-curve
pattern. So, for example, a new technology will start with only a few
adopters, and will grow at a relatively slow rate early on. The rate then
accelerates, and the technology takes off. . The key point is the growth
rate is not stable: its low to start, rises, and then slows down again. Also
important is that most technologies or ideas dont diffusethey simply
sputter out.

Eventually competition intensifies and the companies in that particular industry reach a
mature state (e.g., Utilities). Thus, understanding the phase of the growth cycle in which an
industry currently finds itself is very crucial.
Below is a list of issues that you should address:
1) Identify a set of companies from your industry that are most comparable to your
company in terms of their underlying business model.
2) Discuss what is currently going on in the industry?
a. Do you see any trends towards increased competition, efficiency, or
regulation?
b. How competitive is the industry? How many players? What is the speed
with which new companies are entering?
3) Who are the major players in the industry? Identify them and what are their
strengths?
4) Conduct a Porters Five Forces model for your company to assess how it is
positioned in its industry.

5) Discuss the working capital strategy of your company and compare it with that of
other companies in your comp set. Specifically, discuss the cash flow cycle (and
its components) of your company historically and compare it with that of
companies in your comp set. Explain trends or differences.
6) Discuss revenue growth, gross margins, operating profit margins, and cash flow
generating ability of your company both historically and as compared to
companies in the comp set. Again, explain trends and differences.
7) Discuss what are the growth and value drivers for your company and the comp
set. Explain differences
Other things to consider:
8) How are things going to be a year or 5 years from now for this industry?
9) Any major innovations?
10) How is this industry going to be affected by major macro or economy-wide
shocks?