Market AnalysisMarket Analysis

Business Organization and Business Organization and ManagementManagement

Chapter 6Chapter 6

Defining Areas of AnalysisDefining Areas of Analysis

• Market Analysis – Identify your target market and determine

customers spending habits– Analyze the industry

Target Market and CustomerTarget Market and Customer

• A market is a group of people or companies who have a demand for a product or service and are willing and able to buy it.

• Target customers are the particular groups of customers you want to buy your products/services.

Market SegmentationMarket Segmentation• The process of grouping a market into

smaller subgroups defined by specific characteristics– Geographic area– Demographics– Psychographics

Conducting Market ResearchConducting Market Research

• Occurs after you identify your target market.

• Market research is the collection and analysis of information aimed at understanding the behavior of consumers in a certain market.

Conducting Market ResearchConducting Market Research1. Identify the focus of the research2. Select the type of market research

• Choose a research approach• Exploratory Research is used when you know very

little about a subject. • Focus group- a group of people whose opinions are studied

to determine the opinions that can be expected from a larger population

• Descriptive research determines the status of something. Information is collected through questionnaires, surveys, observations

• Historical research studying the past. Help predict future potential.

Conducting Market ResearchConducting Market Research 3. Start the Research Process

Secondary Resources• Internet• US Census Bureau• Chamber of Commerce• Government and community organizations Primary Data– Information you obtain for the first time and

use specific to your study.• Observations, interviews, surveys

Researching the Target CustomerResearching the Target Customer

• Customer Profile is a complete picture of a venture’s prospective customers– Who are my customers?– What do they generally buy, and how do they

hear about the products and services they buy?

– How often do they buy?– How can my business meet their needs

Researching The Target CustomerResearching The Target Customer

• Forecasting demand– use historical analogy products

• Compact discs from cassettes and records

– Interview prospective customers and intermediaries

– Limited production to test the market• Kiosk

Industry Industry • Four factors useful in understanding the nature

of an industry– Carrying Capacity – ability to support growth and

expansion.– Uncertainty – degree of stability or instability in an

industry• Fast changing = high degree of uncertainty = more risk =

typically high rewards

– Complexity- # and diversity of contacts with which you must deal.

• Suppliers, customers and competitors

– Stage of Life Cycle – Birth, growth, maturity, decline

Researching the IndustryResearching the Industry

1. Trends and Patterns of Change

Early 19501939 Late 1960’s

2000’s 1990’s

1980’s

2. Barriers to Entry are conditions that make it difficult for a firm to enter into a market.

• Threats from substitute products• Sources of supply

– You must have access to affordable sources of inventory, raw materials, and goods. Consider where supplier is located, trade discounts and alternate sources.

• Economies of Scale– Wal-Mart can purchase their inventories at large

discount prices.

• Brand Loyalty• Technology

Researching the IndustryResearching the Industry3. Industry Demographics

– # of companies, annual revenues and average size of the companies by number of employees

4. The competition– Market share is a portion of the total sales

generated by all competing companies in a given market.

– Competitive advantage is a feature that makes a product more desirable than its competitors products.