Whenever you want to enter a new market, you will have to do market analysis. Not only that, whenever you want to introduce a new product in the market, you will be doing market analysis. Market analysis helps you define the current situation of the market. Further to market analysis, industry analysis and finally SWOT analysis can tell you your position in the complete industry, and what decisions you can take about entering with your business model. However, market analysis is the starting process to determine markets attractiveness and also to determine the strategies which might be used in the market.
There are various factors which you need to analyse to complete your market analysis. These factors are as follows –
1) Market size –
Before entering the market, you need to know the market size. Market size is important whether you are going for a niche marketing strategy or a mass marketing strategy. It is also the first step in market analysis because if the market size is not upto mark, then there is no use of entering the market.
2) Growth rate –
The growth rate of different markets are different. The growth rate of USA, UK, India and South Africa, all are different. Thus when doing a geographical market analysis, you will rate USA market above South Africa. Hence, growth rate is considered while doing a market analysis.
3) Profitability –
Profitability depends on a lot of variants like brand equity, competition etc. Thus, what can be your profitability when you enter the market and how will you maintain or increase the profitability of your company once you enter the market? These questions related to profitability are answered by the market analysis.
4) Cost structure –
We can explain the importance of cost structure through an example of Walmart. For any retailer to compete with the likes of Walmart, huge costs control will be required. Else the retailer will not survive. Thus, before entering the market, you have to analyse the cost structure and whether it will be possible for you to survive in the market. The cost structure also helps in determining the profitability.
5) Distribution channels –
The major problems present in African countries like Ghana and Nigeria is lack of distribution channels. Companies are ready to invest. But there is no distribution channel due to rampant thievery and bad business environment. Thus, before entering the market, you need to define a distributors profile and the ideal distribution network that you want. So that you are also able to identify how easy or how difficult it would be to do distribution in this particular market.
6) Market trends –
Do determine market trends you need to ask questions like, is the market seasonal? geographically concentrated? technology friendly? dynamic? or in general, what is the market trend? For example – the market trend in India is change from small retailers to larger distributors and modern retail. Today a CROMA or Reliance digital as well as Ebay, Amazon and Flipkart sell many more units than any local retailer. Thus, there can be many such market trends which need to be documented to carry on with market analysis.
7) Key success factors –
This point is the last one in market analysis and rightly so. This is because the key success factors can only be defined once you have taken all other things of market analysis into consideration. Once you are through with the analysis, you know whether or not it is possible to survive and thrive in the market, and what are the key success factors if you want to be successful in this market.
“Research can only present data about the past. No one seriously believes that people’s answers to hypothetical questions about the future accurately represent their future behavior; they merely represent a current attitude, which may or may not be translated into future behavior.” – Stephen King, former JWT executive
Market research vs Market analysis
Many times, we have heard the confusion between market research and market analysis. Although it might sound the same, the two group of words define different concepts. While market research focuses on the collection of the relevant information, market analysis concentrates on analyzing the new collected knowledge. Market research comes before market analysis and it is a tool for market analysis. In other words, the market analysis is a concept defining at least seven other concepts, depending on the industry you are trying to establish yourself in, and the result you are looking for.
Market analysis and the business plan
Depending on the type of the business plan that you are establishing, the market analysis can cover even more than 30% of your business plan and it represents the foundation on which you are going to base your strategies. However, the quantity of the information contained in a market analysis depends also on what is helping you to take a clear decision. More information in the analysis does not automatically involve more accurate decisions.
Market analysis has roots in both, the analytical part as well as the strategical section of a business plan. We can say that we use a collected set of information to identify which are the potential segments in the market, including analysis on customer behaviours, traits and beliefs.
Despite the need for conducting a market analysis when developing your business, the results with which you will come up do not represent the exact answer for the next steps to follow in your development strategy. A market analysis is providing you with the history of the industry, a present situation and future trends. But in order to get out of the crowd, one has to apply creativity and innovation in their strategy. The best way to explain why is through the words of Steve Jobs.
“Some people say, ‘Give customers what they want.’ But that’s not my approach. Our job is to figure out what they’re going to want before they do. I think Henry Ford once said, ‘If I’d asked customers what they wanted, they would have told me, “A faster horse!”‘ People don’t know what they want until you show it to them. That’s why I never rely on market research. Our task is to read things that are not yet on the page.” – Steve Jobs, Apple.