market analysis business plan preparation
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1Market Analysis
Business Plan PreparationBusiness Plan PreparationBusiness Plan PreparationBusiness Plan Preparation
Frank MoyesFrank MoyesLeeds School of BusinessLeeds School of BusinessUniversity of ColoradoUniversity of ColoradoBoulder, ColoradoBoulder, Colorado
2Market Analysis
Tonight’s AgendaTonight’s Agenda TopicsTopics
Opportunity/NeedOpportunity/Need Market Analysis Market Analysis SegmentationSegmentation Financial CompFinancial Comp Model CompanyModel Company
Evaluate MRP & Hecho en Casa business plansEvaluate MRP & Hecho en Casa business plans Hand-in Interview ListHand-in Interview List
3Market Analysis
Next WeekNext Week
TopicsTopics Industry AnalysisIndustry Analysis Competitive AdvantageCompetitive Advantage Value ChainValue Chain Business ModelBusiness Model
ReadRead BP pp 11-13, 27BP pp 11-13, 27 Business Model AssignmentBusiness Model Assignment
In the FireIn the Fire Opportunity/NeedOpportunity/Need Value PropositionValue Proposition
4Market Analysis
Opportunity/NeedOpportunity/Need
What is the pain?What is the pain? What problem is being solved? What problem is being solved?
Dissatisfaction with current products/servicesDissatisfaction with current products/services Poor quality or servicePoor quality or service
Must be compellingMust be compelling Must be easily understood by TM Must be easily understood by TM
5Market Analysis
Market AnalysisMarket Analysis
Market: “group of current and potential customers Market: “group of current and potential customers having the willingness and ability to buy having the willingness and ability to buy product/services to satisfy a need.”product/services to satisfy a need.”
Industry: “group of sellers that offer product/services Industry: “group of sellers that offer product/services that are similar and close substitutes for one another.”that are similar and close substitutes for one another.”
JW Mullins, New Business Road Test
6Market Analysis
Market Analysis SectionsMarket Analysis Sections
Market size & growthMarket size & growth TrendsTrends Target MarketTarget Market Channels of distributionChannels of distribution
7Market Analysis
Market Analysis (Macro)Market Analysis (Macro)
What is the size & growth potential?What is the size & growth potential? Historic and futureHistoric and future Must indicate sourcesMust indicate sources Segment your marketSegment your market
Lot’s of numbers – show in tablesLot’s of numbers – show in tables
8Market Analysis
Market Segmentation Market Segmentation (Macro)(Macro)
Groups of customers – demographics & psychographicsGroups of customers – demographics & psychographics Products – features, benefits, pricesProducts – features, benefits, prices Geography – see Hecho en CasaGeography – see Hecho en Casa Distribution channelsDistribution channels Sector – industrial (see MRT), consumer, governmentSector – industrial (see MRT), consumer, government
Objective is to identify potential entry pointsObjective is to identify potential entry points
Environmental Market Table$ in bn
Projected 10 YearUS Industry 2000 2002 2010 Growth Rate
Environmental Services 98$ 99$ 104$ 6.1%Environmental Equipment 54 55 57 5.6%Environmental Resources 52 55 67 28.8%
Total 204$ 209$ 228$ 11.8%Global Industry 480$ 487$ 517$ 0.75%
US Marketplace Projected 10 YearEnvironmental Equipment 2000 2002 2010 Growth Rate
Water Equipment & Chemicals 21$ 23$ 28$ 31.0%Process & Prevention Tech 2 3 4 83.0%All Other Segments 30 29 25 -18.4%Total 54$ 55$ 57$ 5.6%
Source: Environmental Business International (EBI)
Market Size
Market Size
10Market Analysis
TrendsTrends
What changes are taking place – economic, socio-What changes are taking place – economic, socio-cultural, political/legal, global, environmental, cultural, political/legal, global, environmental, demographic, technologicaldemographic, technological
Positive and negative trendsPositive and negative trends Dissatisfied groupsDissatisfied groups Must provide your sourcesMust provide your sources
11Market Analysis
Target Segment Target Segment (Micro)(Micro)
Best point of entryBest point of entry What is the size & growth potential?What is the size & growth potential?
Consumer - demographics & psychographicsConsumer - demographics & psychographics Business – types of organizations, buying decisionsBusiness – types of organizations, buying decisions
Understand customer behaviorUnderstand customer behavior How are products used?How are products used? How are buying decisions made?How are buying decisions made?
It’s not about you!It’s not about you!
12Market Analysis
Target Market (Micro)Target Market (Micro)
Benefits are understood, compelling & differentiatedBenefits are understood, compelling & differentiated Potential to grow & expand to other segmentsPotential to grow & expand to other segments Evidence that the customer wants to buyEvidence that the customer wants to buy
Customer research is keyCustomer research is key Surveys provide credibilitySurveys provide credibility Lurk & ListenLurk & Listen
13Market Analysis
Channels of DistributionChannels of Distribution
What is normal for your market?What is normal for your market? Distributors, wholesalers, dealer, retailer, internet, system Distributors, wholesalers, dealer, retailer, internet, system
integrator, Value Added Retailer (VAR) Original Equipment integrator, Value Added Retailer (VAR) Original Equipment Manufacturer (OEM)Manufacturer (OEM)
How are buying decisions madeHow are buying decisions made
14Market Analysis
Value Proposition -Value Proposition - 3 Elements3 Elements
What are the features?What are the features? Who is the target market?Who is the target market? What are the benefits?What are the benefits?
15Market Analysis
Value PropositionValue Proposition
“XYZ is a_______[describe] company. By its _______[feature(s)], it provides ______ [unique benefit(s)] to ______[target market]”
16Market Analysis
Simple Value PropositionSimple Value PropositionSST CorporationSST Corporation
“SST is a stainless steel toothbrush company. By its one bristle brush made of high tensile stainless steel, it provides an exhilarating tooth cleaning experience to thrill-seeking X-gen consumers”
17Market Analysis
Simple Value PropositionSimple Value PropositionDell ComputerDell Computer
“Dell Computer sells personal computers to consumers. Our build-to-order manufacturing and customer-direct sales enable us to offer custom built computers at very competitive prices. Our customers get the computer that they have always imagined and save money.”
18Market Analysis
Simple Value PropositionSimple Value PropositionVic’s CoffeeVic’s Coffee
“Vic’s Coffee is a Boulder based coffee house. Its gourmet coffee, convenient and fast service, provide a welcoming environment for people who want to meet with their friends or a stimulating morning coffee for on-the-go business people.”
19Market Analysis
Value PropositionValue Proposition
Proflowers serves the “price sensitive and convenience Proflowers serves the “price sensitive and convenience oriented customers” with the “freshest cut flowers at a oriented customers” with the “freshest cut flowers at a competitive price”, because of their unique sourcing and competitive price”, because of their unique sourcing and Fed/Ex shipping arrangements.Fed/Ex shipping arrangements.
FTD.com serves the “mid-to high-end market” by FTD.com serves the “mid-to high-end market” by providing the “easiest way to send flowers and gifts” providing the “easiest way to send flowers and gifts” because of their strong brand name, market because of their strong brand name, market communications and supplier network.communications and supplier network.
e-Commerce; Rayport & Jawroski
20Market Analysis
Financial COMP’sFinancial COMP’s
Company in your marketplace. Company in your marketplace. NAIC codeNAIC code Publicly tradedPublicly traded Industry ratios – see Selected Resources Guide LibraryIndustry ratios – see Selected Resources Guide Library
Key financial measures to compare when developing Key financial measures to compare when developing strategy and projectionsstrategy and projections
Reality testReality test
Select BestRatios Company A Company B Company C Comparison Year 1 Year 2 Year 3 Year 4 Year 5
Accounts Receivable % of Rev 10.0% 15.0% 12.0% 10.0% 8.3% 8.3% 8.3% 8.3% 8.3%Inventory % of Rev 15.0% 10.0% 7.0% 15.0% 8.3% 8.3% 6.7% 6.7% 6.7%Accounts Payable % of Rev 8.0% 9.0% 8.5% 8.0% 8.3% 8.3% 8.7% 8.7% 8.7%Working Capital % of Rev 16.0% 18.0% 12.0% 16.0% 8.3% 8.3% 6.3% 6.3% 6.3%Net Fixed Assets % of Rev 9.0% 8.0% 2.0% 9.0% 23.7% 11.5% 9.3% 7.3% 5.5%Current Ratio 2.3 3.0 2.5 2.3 4.3 2.1 2.0 1.9 2.1Debt to Capital (LT Debt + Equity) 1.2 0 0.2 1.2 0.00 0.32 0.18 0.10 0.04
ProfitabilityGross Profit % of Rev 30.0% 25.0% 22.0% 30.0% -11.7% 32.7% 41.5% 42.5% 46.0%Sales & Marketing % of Rev 30.0% 20.0% 18.0% 20.0% 22.9% 19.0% 18.5% 17.9% 18.0%Research & Development % of Rev 30.0% 10.0% 11.0% 10.0% 14.9% 7.9% 7.2% 7.6% 6.7%General & Administration % of Rev 30.0% 10.0% 8.0% 7.0% 17.2% 8.9% 8.1% 7.3% 6.8%Operating Expenses % of Rev 80.0% 30.0% 35.0% 30.0% 55.0% 35.7% 33.8% 32.9% 31.5%Earnings from Operations % of Rev 12.0% 7.5% 10.0% 12.0% -66.7% -3.0% 7.7% 9.6% 14.5%EBIT % of Rev 12.0% 5.0% 10.0% 12.0% -71.2% -3.0% 7.7% 9.6% 14.5%Depreciation % of Rev 3.0% 5.0% 4.0% 3.0% 4.3% 2.5% 2.5% 2.3% 2.0%EBITDA % of Rev 14.0% 12.0% 10.0% 14.0% -66.9% -0.5% 10.2% 11.9% 16.5%Net Earnings % of Rev 5.0% -4.0% 2.0% 5.0% -71.2% -4.2% 7.2% 6.2% 8.7%
Projections
Financial COMP’sFinancial COMP’s
22Market Analysis
Model CompanyModel Company
Identify company in your marketplaceIdentify company in your marketplace Different segment, products, target marketDifferent segment, products, target market Done just what you want to doDone just what you want to do Provides credibilityProvides credibility
23Market Analysis
Business PlansBusiness Plans
Metal Removal TechnologyMetal Removal Technology Hecho en CasaHecho en Casa
24Market Analysis
FeaturesFeatures
Describe the product or service - range, environment, Describe the product or service - range, environment, employeesemployees
What are the key product/service attributes What are the key product/service attributes (performance, cost, quality, social, availability, service, (performance, cost, quality, social, availability, service, and environment)?and environment)?
How is the product/service produced and delivered? How is the product/service produced and delivered? Does the process provide a competitive advantage?Does the process provide a competitive advantage?
25Market Analysis
Target MarketTarget Market
Who is the target market? Why? Who is the target market? Why? DemographicsDemographics Psychographics or life stylePsychographics or life style Social status: infers certain behaviorSocial status: infers certain behavior
How are buying decisions made? What are the How are buying decisions made? What are the criteria? Who makes the decision? Who influences the criteria? Who makes the decision? Who influences the decision? decision?
26Market Analysis
What Are the Benefits?What Are the Benefits? Emotional: ambition, power, independence, achievement, Emotional: ambition, power, independence, achievement,
ambition, pride of ownership, comfort, love, friendship, security, ambition, pride of ownership, comfort, love, friendship, security, style, self Improvement, etc.style, self Improvement, etc.
Social: status, image, popularity with friends or family members, Social: status, image, popularity with friends or family members, reputation of brand, personal relationships, style, fashionable, reputation of brand, personal relationships, style, fashionable, etc.etc.
Health: stress, fitness, mental capacity, strength, sex life, quality Health: stress, fitness, mental capacity, strength, sex life, quality of life, muse, etc.of life, muse, etc.
Financial: revenue, costs, savings, productivity, pricing, Financial: revenue, costs, savings, productivity, pricing, profitability, market share, save time, productivity, etc.profitability, market share, save time, productivity, etc.
Life style: convenience, saves timeLife style: convenience, saves time