Recent Project and Job Topics > Market Research
Market Analysis
Market Analysis
A market analysis is a study undertaken to determine the attractiveness of a market, and to assess the opportunities and threats that exist in the market, for a particular product in an industry. It can be used when preparing to enter a new market, launching a new product or service and is an integral component of a business plan.
Market Research must be undertaken as part of a market analysis. A consultant researching the market can use primary and secondary forms of data. Many secondary resources are available online, and can be in the form of market reports which can often come with large a price tag. Primary research involves the systematic gathering, recording, and analysis of data relevant to the product. This may involve focus groups, qualitative surveys and phone interviews to learn the habits and preferences of target customers, or to gather information from competitors.
David A. Aker outlined the following dimensions of a market analysis:
1) Market Size (current and future)
2) Market growth rate
3) Market trends
4) Market profitability
5) Industry cost structure
6) Distribution channels
7) Key success factors
The target market must initially be determined. When defining the target market, it is important to narrow it to a manageable size. Many businesses make the mistake of trying to sell everything to everybody. As you deal with segmentation, you should also introduce the strategy behind it and your choice of target markets. Define the number of potential customers in your market, the number of annual purchases they make in products or services similar to your own, and the geographic area they reside in. Explain why your business is focusing on these specific target market groups. When it comes to market growth, you need to think about percentage change as a market forecast. Market forecasts start with the total numbers of possible purchasers in each market segment, then project percentage change over the next three to five years. A simple method to do so to use extrapolation, however it is important to examine growth drivers and market trends, and to look at where the product lies on the product life-cycle curve. To what extent do you think you will be able to gain market share and why? What do you see having an influence on your market segments? Include factors such as regulatory, social and price sensitivity.
For market profitability, describe your pricing and gross margin targets, levels of pricing and gross margin levels. The average profit potential of a market can be used as a guideline. Using the well known Porter's Five Forces framework, it is possible to analyse the five factors influencing the profitability of the market: buyer and supplier power, barriers to entry, threat of substitutes, and rivalry amongst firms in the industry. Cost structure in the industry can be examined using Porter's value chain model. Describe the existing distribution channels in the market analysis, and any new trends and emerging channels. New channels can offer the opportunity to develop a competitive advantage.
To conclude the market analysis, outline the key success factors on which the company should focus to achieve success. These can include access to unique resources, technological developments and access to certain distribution channels.
