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NISM-Series-XV: Research Analyst · Company Analysis - Business and Governance

Business Model and Industry Positioning for NISM Research Analyst

Updated 11 October 2026 · Fact-checked

Business model analysis explains how a company makes money: what it sells, to whom, through which value chain, and at what cost. Industry positioning asks how it competes against rivals. To answer exam questions, identify revenue source, customers, cost drivers, then test competitive strength using Porter's Five Forces and moat sources.

Understand Business Model and Industry Positioning

A business model is the logic of how a company earns revenue and turns it into profit. Start with simple questions. What does it sell? Who pays? How does it deliver? What does it cost to deliver? A research analyst answers these before touching any ratio.

The value chain is the sequence of activities from raw material to the final customer: sourcing, manufacturing or service creation, distribution, marketing, after-sales. Look at where the company sits in this chain. A company may be fully integrated, or it may do only one stage. Where it sits decides its margins and its risks. A firm that controls a scarce or hard-to-copy stage usually earns more.

Revenue analysis looks at the mix: products or segments, customer groups, geographies, and whether sales are one-time or recurring. Concentration is a risk. If a few customers or one product give most of the revenue, losing one hurts badly. Also check pricing power, meaning the ability to raise prices without losing volume.

Industry positioning is the company's standing among its competitors. Check market share, cost position, brand, technology, distribution reach and scale. Porter's Five Forces frames the industry: threat of new entrants, bargaining power of suppliers, bargaining power of buyers, threat of substitutes, and rivalry among existing competitors. Strong forces reduce industry profitability. Weak forces support it.

A company with a durable edge has a competitive advantage or economic moat. Common sources are cost leadership, differentiation (brand, quality, technology), switching costs, network effects, regulatory licences and scale. In the exam, you must match a described situation to the right force or advantage.

Key formulas to remember

Porter's Five Forces
1) Threat of new entrants; 2) Bargaining power of suppliers; 3) Bargaining power of buyers; 4) Threat of substitutes; 5) Rivalry among existing competitors
Strong forces lower industry profit. Learn the exact five names. Do not add 'government' or 'complementors' as a force.
Market share
Market share (%) = Company sales ÷ Total industry sales × 100
Use the same period and the same market definition for both numbers.
Operating margin
Operating margin (%) = Operating profit ÷ Revenue × 100
A margin above peers can hint at pricing power or cost advantage.
Revenue concentration
Share of top customer (%) = Revenue from top customer ÷ Total revenue × 100
A high share signals dependence risk.
Generic strategies
Cost leadership | Differentiation | Focus
These are the three ways a firm builds competitive advantage in Porter's framework.

How to solve Business Model and Industry Positioning questions

Use this order for any question on business model or competitive position.

  1. 1Read the stem and find what is asked: business model element, value chain stage, Porter force, or type of advantage.
  2. 2Identify how the company earns revenue: product, customer, pricing, recurring or one-time.
  3. 3Place the company in the value chain and note what it controls.
  4. 4Match each clue in the stem to a force: entry barriers, supplier or buyer concentration, alternatives, number and aggression of rivals.
  5. 5Decide whether the force is strong or weak and what it does to industry profit.
  6. 6Link to advantage: cost, differentiation, switching cost, network effect, licence or scale.
  7. 7Eliminate options that mix up forces or use absolute words like 'always' or 'never'.
  8. 8If a calculation is given, compute market share or margin and compare with peers.

Quickest way: Clue-to-force matching

When to use it: Use when a short MCQ describes a situation and asks which force or advantage it shows.

  1. Spot the keyword: 'new players', 'few suppliers', 'large customers', 'alternative product', 'price war'.
  2. Map it: new players = entrants; few suppliers = supplier power; large customers = buyer power; alternative product = substitutes; price war = rivalry.
  3. Check the direction: does the situation raise or lower the force?
  4. Pick the option that matches both force and direction.

Common mistakes in Business Model and Industry Positioning

  • Confusing threat of substitutes with rivalry among existing competitors.

    Both involve competing products.

    Fix: Rivals sell the same kind of product in the same industry. Substitutes meet the same need in a different way, such as a ride-hailing app against a personal car.

  • Saying high entry barriers mean a high threat of new entrants.

    Students read the word 'high' and stop.

    Fix: High barriers mean a low threat of entry. Always state the direction of the force.

  • Treating strong buyer power as good for the company.

    Students mix up 'strong' with 'favourable'.

    Fix: Strong buyer or supplier power squeezes the company's margin. It is unfavourable to the firm.

  • Equating large market share with a durable moat.

    Size looks like strength.

    Fix: A moat needs a lasting edge such as cost, switching costs or a licence. Share alone can be lost.

  • Ignoring revenue concentration and customer dependence.

    Focus stays on total sales growth.

    Fix: Check how much revenue comes from the top customers, products and regions. High dependence is a risk.

  • Mixing value chain activities with Porter's Five Forces.

    Both are frameworks with lists.

    Fix: The value chain looks inside the company's activities. Five Forces looks at the industry's competitive pressures.

Worked examples

Example 1

A listed firm sells branded packaged food. Entry needs heavy advertising and a nationwide distribution network. A few large retail chains buy most of its output, and there are many alternative brands. Which forces are described, and what is their effect?

Show the solution
  1. Heavy advertising and a distribution network are entry barriers.
  2. High entry barriers mean a low threat of new entrants. This supports profit.
  3. A few large retail chains buying most output means strong bargaining power of buyers. This pressures margin.
  4. Many alternative brands point to high rivalry among existing competitors, which also pressures margin.

Answer: Low threat of new entrants (favourable), strong buyer power and high rivalry (both unfavourable).

Example 2

A company has revenue of ₹800 crore in an industry with total sales of ₹10,000 crore. Its operating profit is ₹120 crore. Find its market share and operating margin.

Show the solution
  1. Market share = 800 ÷ 10,000 × 100 = 8%.
  2. Operating margin = 120 ÷ 800 × 100 = 15%.
  3. Compare 15% with peers before judging; the figure alone does not prove an advantage.

Answer: Market share is 8% and operating margin is 15%.

Exam tips

  • Learn the five force names exactly and practise matching a one-line clue to a force and its direction.
  • Watch the direction words: high barriers lower entry threat; strong suppliers or buyers hurt the company.
  • Questions are often scenario based. Underline the clue before reading the options.
  • Be careful with absolute words like 'always' and 'only'; they often mark wrong options.
  • Under negative marking, skip a scenario only if you cannot tell the force. Most can be solved by keyword mapping.

Practice questions from Company Analysis - Business and Governance

Business Model and Industry Positioning in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Business Model and Industry Positioning: frequently asked questions

What is a business model in company analysis?

It is the way a company earns revenue and converts it into profit. It covers products, customers, pricing, delivery and costs. Analysts study it before ratios.

How do I use Porter's Five Forces for an Indian company?

Pick the company's industry and rate each of the five forces as strong or weak with reasons. Then decide how they affect industry profit and how the company is placed against them. Use facts like customer concentration and entry barriers.

What is the difference between industry analysis and competitive positioning?

Industry analysis looks at the profit potential of the whole sector. Competitive positioning looks at how one company ranks within it, through share, cost, brand and other advantages.

What are common sources of economic moat?

Cost leadership, brand and differentiation, switching costs, network effects, regulatory licences and scale. A moat must be durable, not just a temporary lead.