2. Defining Areas of Analysis
The entrepreneur will want
to understand the nature of
the industry he or she is
analyzing.
industry
a collection of businesses with a
common line of products or
services
3. Industry – four factors effect the nature of
the industry
carrying capacity
the ability of industry to support
new growth
uncertainty
the degree of stability or instability
in a given industry
complexity
the number and diversity of
contacts with which a business
must deal
1
2
3
4
Birth
Growth
Maturity
Decline
industry life cycle
the current stage of an industry
4. Target Market and Customer
After first identifying your
market, you will then need
to select a target market to
be the focus of your
company’s efforts.
market
a group of people or companies
who have a demand for a product
or service and are willing and able
to buy it
target market
a specific group of customers
whom a business wishes to reach
5. Target Market and Customer
Consumer market
segmentation is based on
geographics, demographics,
psychographics, and buying
characteristics.
A business can select and
serve multiple market
segments.
market segmentation
the process of grouping a market
into smaller subgroups defined by
specific characteristics
market segments
subgroups of buyers with similar
characteristics, segmented by
geographics, demographics,
psychographics, and
buying characteristics
7. Target Market and Customer
geographics
the study of the market based on
where customers live, including
region, state, country, city, and/or
area
psychographics
the study of consumers based on
social and psychological
characteristics, including
personalities, values, opinions,
beliefs, motivations, attitudes,
and lifestyle elements
industrial markets
customers who buy goods or
services for business use
8. Target Market and Customer
The target market for your product
or service should be:
Measurable
Large enough to be profitable
Reachable
Responsive
1
2
3
4
9. Select the Type of Market Research
There are three types of market research
exploratory research
descriptive research
historical research
market research
the collection and analysis of
information aimed at
understanding the behavior of
consumers in a certain market
10. Doing Market Research
Select the Type of Market Research
exploratory research
the initial collection and analysis
of information used when very
little is known about a subject; it
forms a foundation for later
research
focus group
a group of people whose opinions
are studied to determine the
opinions that can be expected
from a larger population
descriptive research
the collection of information to
determine the status of
something, such as in developing
a customer profile
historical research
the study of the past to explain
present circumstances and predict
future trends
11. Start the Research Process
The Five Steps of an Effective Research Plan
Identify your information needs.
1
2
3
4
5
Obtain secondary resources.
Collect primary data.
Organize the data.
Analyze the data.
12. Start the Research Process
Types of Data Collection
Research secondary data
before researching primary
sources because it is easily
obtained and inexpensive.
secondary data
information that has already been
collected by someone else
The most common methods
of gathering primary data
about customers are:
• observation
• interviews
• surveys
primary data
information that is collected for the
first time, is current, and relates
directly to the collector’s study
14. Industry Forces That Affect Your Business
barriers to entry
threats from substitute products
sources of supply
buyers’ ability to bargain
technology
Industry and Market Analysis
15. Industry Forces That Affect Your Business
In established businesses,
the dominant businesses
have advantages that are
barriers to entry to
smaller, new ventures.
barriers to entry
conditions or circumstances that
make it difficult or costly for
outside firms to enter a market to
compete with established firm or
firms
Established businesses
have achieved economies
of scale in production,
marketing, and distribution.
economies of scale
situations where the cost of
producing one unit of a good or
service decreases as the volume
of production increases; the
decrease of production costs
relative to the price of goods and
services
16. Industry Forces That Affect Your Business
Customers with brand
loyalty do not easily switch
to a new company that
enters the industry.
brand loyalty
the tendency to buy a particular
brand of a product
Issues in Entrepreneurship
In the past, businesses
used mass marketing to
sell products with universal
appeal and few features to
differentiate them from
competitors’ products.
mass marketing
the attempt to reach all customers
with a single marketing plan
17. The Competition
Usually, competing
products are already
established in the market.
To succeed, you must be
able to capture market
share by differentiating
your business.
market share
a portion of the total sales
generated by all competing
companies in a given market
Many entrepreneurial
companies succeed by
studying the competition to
define a niche in the
market.
niche
a small, specialized segment of
the market based on customer
needs discovered in market
research
18. An entrepreneur who
wishes to capture market
share can use market
positioning.
market positioning
the act of identifying a specific
market niche for a product
You can create a
competitive grid to help
define your competitive
advantage.
competitive advantage
a feature that makes a product
more desirable than its
competitors
19. Researching the Target Customer
Create
Evaluate
Forecast
Create a customer profile.
Evaluate customers’ needs.
Conduct research to forecast demand.
20. Creating a Customer Profile
Creating a customer
profile is the first step in
targeting your marketing
efforts.
customer profile
a complete picture of a venture’s
prospective customers, including
geographic, demographic, and
psychographic data
Evaluating Customers’ Needs
In order to provide what the
customer wants, you should
prepare a customer needs
analysis.
customer needs analysis
a study that pinpoints the features
and benefits of goods or services
that customers value
21. Forecasting Demand
Several methods can be used to forecast demand:
Use historical analogy.
Interview prospective customers and intermediaries.
Go into limited production.
22. Market Analysis
A market, refers either to a place where goods can be sold, or to a
particular class of buyers.
Do it right, and you will have a clear idea of the path down which you
are headed.
A good market analysis will enable you to lure investors, sidestep
pitfalls, and most importantly, attract customers.
23. What should you include in the Market Analysis
section of your business plan?
Size of the Market
- The first number you need to identify is the total annual
sales, of the market you serve. If you are selling cars, state
the total sales of cars in your geographical area for the most
recently ended year.
- This number will be important later when you forecast your
sales because it will enable you to calculate what share of the
market you expect to capture
24. Market Segments
- who the potential customers are.
i) Geography and Location
- If you are an international company, then describe the
size and characteristics of the international market.
- If, you only sell to customers within 10 miles of your
location, then provide information about this local
segment.
25. ii) Customer Segments
- The more detail you can provide about the customer segments
that you target, the better.
- This section is also an appropriate place to provide a profile of
your target customer.(number of employees, location, or industry)
iii) Market Trends and Needs
- Once you have described the segments of your product's market,
explain the trends, growth, and needs of the market.
- If your market segment is growing and is projected to continue to
grow, talk about it and back it up with numbers. Same to new
products.
26. iv) Industry Analysis
- The final section of the Market Analysis is the Industry
Analysis.
- The earlier sections of the Market Analysis dealt with issues of
who buys the product and where they are located, the
Industry Analysis addresses the making and selling of the
product:
4.1) Industry Participants
- Industry participants are those firms and individuals that are
involved in at least one aspect of bringing the industry's
product to its customers. Examples include manufacturers,
suppliers, service providers, wholesalers, distributors,
dealers, and reps.
- For example, an analysis of the book publishing industry
would identify participants such as authors, agents,
publishers, book manufacturers, book wholesalers,
bookstores, and book clubs.
27. 4.2) Distribution Patterns
- If you are dealing with a physical product you will probably want to
describe how it is distributed, from the time it is created until it
makes its way into a customer's hands. Explain the various ways that
finished products are distributed, whether directly to end users,
through wholesalers, from wholesalers to retailers, and so on.
- Eg: Dell prepare its products to its customers' specifications and sold
them direct.
4.3) Competition
- Any smart venture capitalist, angel investor, or lending officer
recognizes that every business has competition.
- By avoiding this topic in your business plan you will show your
reader one of two things: either you are naïve about your
competition and have not done your homework, or you are less than
forthcoming and are hiding something.
- The most important to show exactly how your proposition is unique
and different from your competitors'.
28. Customer Decision-Making
Awareness of a need or want.
Information search.
Evaluation of alternatives.
Decision to purchase.
Evaluation of purchase.
29. Market Positioning
Distinguish your product/service from others
offered to your market segment.
Clearly communicate your competitive
advantage.
Task 1:
Write a positioning statement. Sample format:
[Your business name/brand] is the [competitive
industry/category] that [provides these benefits, or
points of difference] to [audience/target market].
30. Conclusion
The Market Analysis section of your business plan
is a great place to show that you know your
business inside and out.
Stick to the concept of describing the market and
the industry as they exist today, a sort of situation
analysis.
