Market analysis

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A market analysis studies the attractiveness and the dynamics of a special market within a special industry. It is part of the industry analysis and thus in turn of the global environmental analysis. Through all of these analyses the strengths, weaknesses, opportunities and threats (SWOT) of a company can be identified. Finally, with the help of a SWOT analysis, adequate business strategies of a company will be defined. [1] The market analysis is also known as a documented investigation of a market that is used to inform a firm's planning activities, particularly around decisions of inventory, purchase, work force expansion/contraction, facility expansion, purchases of capital equipment, promotional activities, and many other aspects of a company.

Contents

Market segmentation

Market segmentation is the basis for a differentiated market analysis. Differentiation is important. One main reason is the saturation of consumption, which exists due to the increasing competition in offered products. Consumers ask for more individual products and services and are better informed about the range of products than before. As a consequence, market segmentation is necessary. [2] Segmentation includes a lot of market research, since a lot of market knowledge is required to segment the market. Market research about market structures and processes must be done to define the “relevant market”. The relevant market is an integral part of the whole market, on which the company focuses its activities. To identify and classify the relevant market, a market classification or segmentation has to be done. [3]

Dimensions of market analysis

The goal of a market analysis is to determine the attractiveness of a market, both now and in the future. Organizations evaluate the future attractiveness of a market by gaining an understanding of evolving opportunities and threats as they relate to that organization's own strengths and weaknesses. A market analysis investigates among other things the influence of supply and demand on a market. [4]

Organizations use the findings to guide the investment decisions they make to advance their success. The findings of a market analysis may motivate an organization to change various aspects of its investment strategy. Affected areas may include inventory levels, work force expansion/contraction, facility expansion, purchases of capital equipment, and promotional activities. [5]

Elements

Market size

The market size is defined through the market volume and the market potential. The market volume exhibits the totality of all realized sales volume of a special market. The volume is therefore dependent on the quantity of consumers and their ordinary demand. Furthermore, the market volume is either measured in quantities or qualities. The quantities can be given in technical terms, like GW for power capacities, or in numbers of items. Qualitative measuring mostly uses the sales turnover as an indicator. That means that the market price and the quantity are taken into account. Besides the market volume, the market potential is of equal importance. It defines the upper limit of the total demand and takes potential clients into consideration. Although the market potential is rather fictitious, it offers good values of orientation. The relation of market volume to market potential provides information about the chances of market growth. [6] [7] The following are examples of information sources for determining market size:

Market trends are the upward or downward movement of a market, during a period of time. The market size is more difficult to estimate if one is starting with something completely new. In this case, you will have to derive the figures from the number of potential customers, or customer segments.

Besides information about the target market, one also needs information about one's competitors, customers, products, etc. Lastly, you need to measure marketing effectiveness. A few techniques are:

Changes in the market are important because they often are the source of new opportunities and threats. Moreover, they have the potential to dramatically affect the market size.

Examples include changes in economic, social, regulatory, legal, and political conditions and in available technology, price sensitivity, demand for variety, and level of emphasis on service and support.

Market opportunity

A market opportunity product or a service, based on either one technology or several, fulfills the need(s) of a (preferably increasing) market better than the competition and better than substitution-technologies within the given environmental frame (e.g. society, politics, legislation, etc.).

Applications

The literature defines several areas in which market analysis is important. These include: sales forecasting, market research, and marketing strategy. Not all managers will need to conduct a market analysis. Nevertheless, it would be important for managers that use market analysis data to know how analysts derive their conclusions and what techniques they use to do so.[ citation needed ]

See also

Related Research Articles

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Marketing is the act of satisfying and retaining customers. It is one of the primary components of business management and commerce.

Marketing research is the systematic gathering, recording, and analysis of qualitative and quantitative data about issues relating to marketing products and services. The goal is to identify and assess how changing elements of the marketing mix impacts customer behavior.

Positioning refers to the place that a brand occupies in the minds of the customers and how it is distinguished from the products of the competitors. It is different from the concept of brand awareness. In order to position products or brands, companies may emphasize the distinguishing features of their brand or they may try to create a suitable image through the marketing mix. Once a brand has achieved a strong position, it can become difficult to reposition it. To effectively position a brand and create a lasting brand memory, brands need to be able to connect to consumers in an authentic way, creating a brand persona usually helps build this sort of connection.

A marketing plan is a plan created to accomplish specific marketing objectives, outlining a company's advertising and marketing efforts for a given period, describing the current marketing position of a business, and discussing the target market and marketing mix to be used to achieve marketing goals.

In marketing, market segmentation or customer segmentation is the process of dividing a consumer or business market into meaningful sub-groups of current or potential customers known as segments. Its purpose is to identify profitable and growing segments that a company can target with distinct marketing strategies.

Market research is an organized effort to gather information about target markets and customers: know about them, starting with who they are. It is an important component of business strategy and a major factor in maintaining competitiveness. Market research helps to identify and analyze the needs of the market, the market size and the competition. Its techniques encompass both qualitative techniques such as focus groups, in-depth interviews, and ethnography, as well as quantitative techniques such as customer surveys, and analysis of secondary data.

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<span class="mw-page-title-main">Porter's five forces analysis</span> Framework to analyse level of competition within an industry

Porter's Five Forces Framework is a method of analysing the operating environment of a competition of a business. It draws from industrial organization (IO) economics to derive five forces that determine the competitive intensity and, therefore, the attractiveness of an industry in terms of its profitability. An "unattractive" industry is one in which the effect of these five forces reduces overall profitability. The most unattractive industry would be one approaching "pure competition", in which available profits for all firms are driven to normal profit levels. The five-forces perspective is associated with its originator, Michael E. Porter of Harvard University. This framework was first published in Harvard Business Review in 1979.

Market penetration refers to the successful selling of a good or service in a specific market. It involves using tactics that increase the growth of an existing product in an existing market. It is measured by the amount of sales volume of an existing good or service compared to the total target market for that product or service. Market penetration is the key for a business growth strategy stemming from the Ansoff Matrix (Richardson, M., & Evans, C.. H. Igor Ansoff first devised and published the Ansoff Matrix in the Harvard Business Review in 1957, within an article titled "Strategies for Diversification". The grid/matrix is utilized across businesses to help evaluate and determine the next stages the company must take in order to grow and the risks associated with the chosen strategy. With numerous options available, this matrix helps narrow down the best fit for an organization.

In strategic management, situation analysis refers to a collection of methods that managers use to analyze an organization's internal and external environment to understand the organization's capabilities, customers, and business environment. The situation analysis can include several methods of analysis such as the 5C analysis, SWOT analysis and Porter's five forces analysis.

In marketing, segmenting, targeting and positioning (STP) is a framework that implements market segmentation. Market segmentation is a process, in which groups of buyers within a market are divided and profiled according to a range of variables, which determine the market characteristics and tendencies. The S-T-P framework implements market segmentation in three steps:

The target audience is the intended audience or readership of a publication, advertisement, or other message catered specifically to the previously intended audience. In marketing and advertising, the target audience is a particular group of consumer within the predetermined target market, identified as the targets or recipients for a particular advertisement or message.

Industrial market segmentation is a scheme for categorizing industrial and business customers to guide strategic and tactical decision-making. Government agencies and industry associations use standardized segmentation schemes for statistical surveys. Most businesses create their own segmentation scheme to meet their particular needs. Industrial market segmentation is important in sales and marketing.

The following outline is provided as an overview of and topical guide to marketing:

Market environment and business environment are marketing terms that refer to factors and forces that affect a firm's ability to build and maintain successful customer relationships. The business environment has been defined as "the totality of physical and social factors that are taken directly into consideration in the decision-making behaviour of individuals in the organisation."

A target market, also known as serviceable obtainable market (SOM), is a group of customers within a business's serviceable available market at which a business aims its marketing efforts and resources. A target market is a subset of the total market for a product or service.

A go-to-market strategy, or GTM strategy, is the plan of an organization, utilizing their outside resources, to deliver their unique value proposition to customers ("go-to-market") and to achieve a competitive advantage. The goal is to enhance the overall customer experience by not only offering a superior product and/or more competitive pricing, but also creating a clear framework and plan to penetrate a defined market and/or target audience.

Firmographics are sets of characteristics to segment prospect organizations.

The analysis of the global environment of a company is called global environmental analysis. This analysis is part of a company's analysis-system, which also comprises various other analyses, like the industry analysis, the market analysis and the analyses of companies, clients and competitors. This system can be divided into a macro and micro level. Except for the global environmental analysis, all other analyses can be found on the micro level. Though, the global environmental analysis describes the macro environment of a company. A company is influenced by its environment. Many environmental factors, especially economical or social factors, play a big role in a company's decisions, because the analysis and the monitoring of those factors reveal chances and risks for the company's business. This environmental framework also gives information about location issues. A company is thereby able to determine its location sites. Furthermore, many other strategic decisions are based on this analysis. One may also apply the BBW model. In addition, the factors are analyzed to evaluate external business developments. It is finally the task of the management to adapt the firm to its environment or to influence the environment in an adequate way. The latter is mostly the more difficult option. There are different instruments to analyze the company's environment which are going to be explained afterwards.

Product strategy defines the high-level plan for developing and marketing a product, how the product supports the business strategy and goals, and is brought to life through product roadmaps. A product strategy describes a vision of the future with this product, the ideal customer profile and market to serve, go-to-market and positioning (marketing), thematic areas of investment, and measures of success. A product strategy sets the direction for new product development. Companies utilize the product strategy in strategic planning and marketing to set the direction of the company's activities. The product strategy is composed of a variety of sequential processes in order for the vision to be effectively achieved. The strategy must be clear in terms of the target customer and market of the product in order to plan the roadmap needed to achieve strategic goals and give customers better value.

References

  1. ↑ Dillerup, R., Stoi, R. (2006). Unternehmensführung. München: Vahlen.{{cite book}}: CS1 maint: multiple names: authors list (link)
  2. ↑ Unger, F., Fuchs, W. (2005). Management der Marketing-Kommunikation. Berlin Heidelberg: Springer.{{cite book}}: CS1 maint: multiple names: authors list (link)
  3. ↑ Bruhn, M. (2009). Marketing – Grundlagen für Studium und Praxis. Wiesbaden: Gabler.
  4. ↑ "Market Equilibrium via the Excess Demand Function" (PDF). ACM Digital Library.
  5. ↑ "Market Analysis". NeMBA. Archived from the original on 17 May 2012. Retrieved 3 August 2012.
  6. ↑ Dillerup, R., Stoi, R. (2006). Unternehmensführung. München: Vahlen.{{cite book}}: CS1 maint: multiple names: authors list (link)
  7. ↑ Aaker, D. A., McLoughlin, D. (2010). Strategic Market Management – Global Perspectives. West Sussex: John Wiley & Sons Ltd.{{cite book}}: CS1 maint: multiple names: authors list (link)
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