How to Actually Analyze a Company: A Field Guide

You've been handed a company to profile. Where do you even start?

Picture this: you're a junior analyst. A client wants a competitive profile of some mid-sized software firm. You open your laptop. You see a spreadsheet full of numbers. Your gut says start with revenue, headcount, maybe a few ratios. That's a mistake. The first thing you need is the market—the arena where the company plays. Get that wrong, and everything else is just noise. In our shop, we go in this order: market definition, five forces, strategic groups, then—only then—financials. It's not a rule we invented; it's how you avoid treating a company like an island. I learned this the hard way when I spent a week profiling a logistics startup before realizing I had the wrong market entirely. The client wanted to know about last-mile delivery, and I was analyzing freight forwarding. Oops.

How do you define the market without overthinking it?

Most people define a market by product category. But the European Commission's updated guidance (2024, after 25 years) says: think about what customers actually see as interchangeable. That's demand-side substitution (European Commission). So if you're profiling a coffee shop, your market isn't 'coffee shops'—it's 'morning caffeine,' which includes tea, energy drinks, maybe even a banana. And the geographic market? It's wherever competitive conditions are basically the same (European Commission). For a local coffee shop, that's a few blocks. For a global software firm, it's the world. Get the boundaries right, and your five-forces analysis starts to make sense. If you define the market too narrowly, you miss the real threat; too broadly, you dilute everything. The trick is to test it: if the price went up by 5%, would customers really switch? For that software firm, if their product is a niche CRM, the substitute might be a spreadsheet—not another CRM. That changes everything.

Are the five forces still the best tool—or is there a sixth?

Porter's five forces—rivalry, new entrants, substitutes, supplier power, buyer power—are still the backbone. They determine how the economic value an industry creates gets split among players (Harvard Business Review (Porter 2008)). But there's a decades-old fight about whether complements—products used together with the industry's product—should be a sixth force. Porter says no, arguing that complements' effect runs through the five forces (Harvard Business Review (Porter 2008)). Yale's Brandenburger and Nalebuff disagree, saying substitution and complementarity are symmetric, so complements deserve equal footing (Brandenburger & Nalebuff (Yale SOM paper)). Our take? In practice, don't get hung up on the label. Just analyze complements explicitly. A hardware company that ignores the software ecosystem is blind. But don't let the labeling debate distract you from the real work—weighing the forces that actually squeeze margins. For example, in the music streaming industry, the record labels have massive supplier power, and that's the force that matters most.

How do you tell which competitors matter most?

Not all competitors are equal. A strategic group is a set of firms following similar competitive approaches within an industry (Mastering Strategic Management (open textbook)). Your closest rivals are in your own group. Mapping these groups reveals not only who you're fighting but also untapped gaps—positions no one occupies (Mastering Strategic Management (open textbook)). For example, in the airline industry, you might have low-cost carriers in one group and full-service legacy carriers in another. They compete, but not head-to-head on price. Mobility barriers—factors that make it hard to jump groups—explain why a budget airline won't easily become premium (Mastering Strategic Management (open textbook)). In a company profile, we always draw a strategic group map. It's one of the most underused tools, and it immediately clarifies who the real threats are. I remember profiling a regional bank and initially listing every bank in the state as a competitor. After mapping strategic groups, I realized only two other banks were in the same group—focused on small business lending. That changed the whole analysis.

Is more data always better?

Here's a myth worth busting: that a thicker report equals a better analysis. We've seen 80-page profiles that quote every stat but never answer the client's question. Data has a cost—time, money, cognitive load. The CFA Institute recommends using Porter's Five Forces to interpret the competitive environment and PESTLE to understand external trends (CFA Institute). That's a lean, targeted approach. PESTLE covers political, economic, social, technological, legal, environmental factors—but you don't need all six for every profile. If you're analyzing a tech startup, legal and technological matter; environmental might not. The skill is picking the forces that actually move the needle. As Porter said, strategy is as much about what you won't do as what you will (University of Central Florida Pressbooks). Same for analysis. A client once asked for a deep dive on a food company, and I was about to include a full PESTLE—until I realized that only the 'legal' (food safety regulations) and 'social' (health trends) really mattered. I cut the rest, and the report was twice as useful.

Quick tip

Before you run any numbers, write down the market definition in one sentence. If you can't, you're not ready.

How do you avoid getting 'stuck in the middle' in your own analysis?

Just as firms can get stuck between cost leadership and differentiation, analysts can get stuck between too much and too little. Porter's value chain, introduced in 1985, breaks a firm into primary activities—inbound logistics, operations, outbound logistics, marketing and sales, service—and support activities like procurement and technology development (IBM Think). Cost leadership comes from making those activities more efficient; differentiation from making them unique enough to command a premium (IBM Think). In a company profile, you want to identify which generic strategy the firm is pursuing and whether it's credible. A firm that tries to be both low-cost and differentiated usually ends up with neither—the classic 'stuck in the middle' trap (University of Central Florida Pressbooks). The same applies to your analysis: don't try to be both exhaustive and quick. Pick a focus. In practice, I've seen analysts try to cover every possible angle and end up with a report that's 200 pages and completely forgettable. The best reports I've seen are 30 pages, focused on the one big question.

What role does market concentration play?

Market concentration is a quick, quantitative read on competitive structure. The Herfindahl-Hirschman Index (HHI) sums the squares of market shares, approaching zero with many small firms and hitting 10,000 in a monopoly (US DOJ Antitrust Division). Under the 2023 Merger Guidelines, an HHI between 1,000 and 1,800 is 'moderately concentrated,' and above 1,800 is 'highly concentrated' (US DOJ Antitrust Division). If a merger pushes HHI up by over 100 points in a highly concentrated market, regulators presume it's anticompetitive (US DOJ Antitrust Division). In a company profile, we compute HHI for the defined market. It's not perfect—it ignores strategic groups—but it gives a sense of whether the market is fragmented or tight. For example, if you're profiling a regional bank in a market with an HHI of 2,500, you know you're in a concentrated arena where rivalry might be muted but regulatory scrutiny is high. I once profiled a niche manufacturing company and computed the HHI for its product market—it came out to 4,200. That told me the company had real pricing power, which changed my recommendation entirely.

The takeaway

Profiling a company isn't about collecting every fact; it's about making disciplined choices. Define the market from the buyer's perspective, run the five forces (and keep complements in mind), map strategic groups, and check the concentration. That's the practitioner's shortcut. The next time you're handed a stack of data, resist the urge to dive in. Start with the market. Your analysis will be sharper, and your client will thank you.

Sources

• European Commission - https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=OJ:C_202401645
• Harvard Business Review (Porter 2008) - https://hbr.org/2008/01/the-five-competitive-forces-that-shape-strategy
• Brandenburger & Nalebuff (Yale SOM paper) - https://som.yale.edu/sites/default/files/2024-12/1-SYMMETRY-AND-THE-SIXTH-FORCE-THE-ESSENTIAL-ROLE-OF-COMPLEMENTS-Adam-Brandenburger-Barry-Nalebuff%202.pdf
• Mastering Strategic Management (open textbook) - https://saylordotorg.github.io/text_mastering-strategic-management/s07-04-mapping-strategic-groups.html
• US DOJ Antitrust Division - https://www.justice.gov/atr/herfindahl-hirschman-index
• IBM Think - https://www.ibm.com/think/topics/value-chain-analysis