After having analyzed the general environment in which the entrepreneur has to operate, it is important to study the sector or industry conditions in which the entrapper proposes to launch a venture. This will help to put the proposed venture in the proper context.

The propose of industry analysis is to determine what makes an industry attractive. This is usually indicated by either above normal profits or higher rate of growth. For such analysis one should study the history of the industry, the future trends, new products developed in the industry, and forecasts made by competition, threat of substitutes and entry barriers. Sometimes there might be bilateral agreements between countries regarding some sectors or government policy that is sector specific or some events that throw up challenges e.g., bird flu dealt a severe blow to the Rs. 3,000 core poultry industry in India in 2008.

There might be certain constraints, regarding availability of technology, manpower or raw materials, which are industry specific. Similarly there might be certain strengths of a particular sector, which might outweigh some negative general trends.

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