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A market analysis helps you understand the buyers in the marketplace and the influence and impact they have on the market fundamentals.
What it is: A market analysis is different from an industry analysis, based on the lens through which you are viewing the industry or market. Industry analysis looks at companies that sell into a particular industry or market, and market analysis looks at the customers that buy particular products and services. A market analysis evaluates the attractiveness and dynamics of a specific market within a specific industry. It market analysis is often a subset of a larger industry analysis. A market analysis of the automotive market would evaluate the consumers, fleet buyers, and other customers who buy automobiles. An industry analysis of the automotive industry would evaluate Ford and Toyota and other car manufacturers who are suppliers of cars (but you would also try to understand how Ford and others work with their customers). The market analysis would look at the size and concentration of buyers, what the key segments are, and how are the trends and issues evolve within the marketplace.
What it does: By understanding the market, a company can determine how it can best position itself to succeed in the market, with customers who buy their products and services. The market analysis will help a company determine how to leverage their SWOT analysis in that market for competitive advantage and opportunities to exploit. The market analysis can also provide insight aboutinventory management, purchasing, workforce expansion and contraction, facility expansion, shutdown or divestment, capital equipment procurement, promotion and advertising, and many other the decisions.
How it is used: Market analysis is used to make business decisions as part of the four Ps of marketing, as well as to build a business plan, industry analysis, and marketing plan and to determine future plans and approaches a company can use to create a competitive advantage. Understanding the market provides an opportunity for the company to make a profitable decision about the market and how it will or will not participate.
Where: The market analysis can be done as part of a market plan, SWOT analysis, industry analysis, or as a stand-alone document to help a company make participation decisions about the market being analyzed.
Why: Trying to compete in a market where you do not understand what drives the customers or the trends and factors impacting growth and buying decisions is a very risky process.
Where it shouldn't be used: None
Any restrictions: None
Warnings: If you do not segment your customers into homogeneous groups that act as a common market, you can develop plans that will only work in part of the market and not give you the performance you expected.
Analyzing your market (see a series of videos to complete the demonstration):LinkedIn Learning: Think Like a Marketer.
Gather data: Start by determining what information you want to gather for which market segments.
Complete a customer segmentation to understand how many distinct market segments you will analyze (see the Customer Segmentation page in this library).
Be sure to create a customer profile that is descriptive of the average participant in each market segment.
David A. Aaker outlined the following dimensions of market analysis that you should compete for each defined market or customer segment.
Market size (current and future): Try to identify the total sales in the customer market segment (historically, current, and forecasted future).
Government data
Trade association data
Financial data from major players
Customer surveys
Market trends: Identify what is changing and moving in the market segments. Look for changes in the following:
Government regulation
Advancing technology and evolution in the market
New products and services being offered in the industry
Changes in the needs and preferences of the customers in the market segment
Market growth rate: How is the market size changing? What is the growth rate historically, and how is it forecasted to change in the future? What is driving the change in growth rate?
Market profitability: Utilize data where possible to understand the market profitability of both the customers and the competitors. Use Porter's Five Forces to document the issues that drive profitability
Industry cost structure: Understand the cost structure and which players in the value chain are making the profit. Will the experience curve benefit some customers more than others? Customers who have a superior cost position are in a greater position to grow their market share. Therefore, they are better candidates to be your customer, because as they grow market share, so will you.
Distribution channels: Understanding the distribution channels may help you uncover opportunities or threats. See the following analysis for information about the distribution channel:
Existing distribution channels can be described by how direct they are to the customer.
Trends and emerging channels: New channels can offer the opportunity to develop a competitive advantage.
Channel power structure: When a product havs little brand equity, retailers have negotiating power over manufacturers and can capture more margin.
Key success factors: What are the key success factors that will impact who will win at the customer level and who will win at the competitor level? Identify the unique factors that will impact this market segment. See some examples of key factors below:
Access to key distribution channels
Developing technology that will address unmet customer needs and pain points
Gaining raw material advantaged positions or economies of scale
Access to unique essential resources
Market Opportunities: What market opportunities have become noticeable through market analysis? How can your company uniquely take advantage of the opportunity or have first-mover advantage?
Review the environmental analysis to understand the factors that could impact your ability to participate profitably in the market.
External factors, such as political issues, regulations, social potential force, and the local economy can impact the market segments.
Internal environmental factors come from the company's internal position, such as employees, department structure, budget, capital resources, capacity expansion opportunities, technology capabilities, etc.
Access your competitor analysis (see reference library topic) to understand the competitive positions of the companies that supply products and services to this market segment.
Gather data from your SWOT analysis (see reference library topic) of both competitors and customers to further characterize the market segment and who will be the potential winners and losers.
Explore the many publically available sources of data. See the list below from BPlan (the entire article is in Additional Resources below:
Your current customers: If your business is already up and running, your current customers are an invaluable resource. They are your existing market. You can use online surveys or social media to gather feedback about buying habits, needs, and other psychographic information.
US Census Bureau: Here’s where you’ll find demographics you can use to figure out your market share. There is plenty of other information you can use in your market analysis here as well.
US Small Business Administration: The SBA offers industry guides, development programs, and local resources, as well as loan guarantees when the time comes.
Bureau of Labor Statistics: The BLS describes where your industry has been and where it is headed.
Commerce.gov: The US Department of Commerce has a lot of good general information that you may be able to use, depending on your industry.
Internet: You can do internet searches to find information about any state or local regulations or licenses you may need for your industry. As always, there’s a lot of stuff out there, so make sure you depend on reliable sources. For your market analysis, Wikipedia won’t be enough. On the other hand, you can find plenty of useful information, including sample business plans right here on Bplans, where you can also obtain free industry reports.
Secondary Research at the HBLL: BYU has many proprietary databases that have information that would cost companies millions of dollars per year to access. As a BYU student, you have access to this information for free. See the reference document in this Experiential Learning Reference Library titled "Secondary Research" for further information.
Analyze the data: Analyze the data for each market segment by identifying opportunities for your company to take advantage of market segment and target the most attractive market segments for participation and market share growth in the segment.
Interpret the results: Use the analysis to find the opportunities and make changes to your market and business plans to take advantage.
Present results: Use one of the templates below to present your findings. The most common format is a PowerPoint presentation that highlights the data found, analysis completed, and recommendations proposed.
PowerPoint presentations are the most common presentation style, with many charts, tables, and graphics representing the market segments, growth rates, market shares, etc. Also, highlight findings from the SWOT analysis, Porter’s Five Forces, competitor analysis, comparisons (e.g., ratios), etc. in other analyses related to the market analysis.
This content is provided to you freely by Ensign College.
Access it online or download it at https://ensign.edtechbooks.org/projectbased_internships/market_analysis.
