1. The Main Idea
To ensure success, entrepreneurs need to understand the industry and the market.
They should define areas of analysis and conduct effective industry and market research.

2. Defining Areas of Analysis
In order to satisfy current customers or attract new ones, an entrepreneur must conduct market 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. Defining Areas of Analysis
Thorough market analysis requires:
Identifying prospective customers and determining their buying habits
Analyzing your industry and assessing your chances for success within it

4. Industry
There are four factors that are useful in understanding the nature of an industry:
carrying capacity
uncertainty
complexity
stage of life cycle

5. Industry
carrying capacity
the ability of industry to support new growth
You will want to find an industry that has carrying capacity so that your new business can expand and prosper.
Uncertainty is the degree of stability or instability in an industry.
Many high-tech ventures are in industries with uncertain climates.

6. Complexity
Some businesses must learn to deal with complexity in many industries.
Firms that operate in complex industries have more suppliers, customers, and competitors than firms in other industries.
complexity
the number and diversity of contacts with which a business must deal

7. There are four stages to the life cycle of an industry.
Stage of Life Cycle
There are four stages to the life cycle of an industry. 1
Birth 2
Growth 3
Maturity 4
Decline 7

8. 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.
target market
a specific group of customers whom a business wishes to reach
market
a group of people or companies who have a demand for a product or service and are willing and able to buy it

9. 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 segments
subgroups of buyers with similar characteristics, segmented by geographics, demographics, psychographics, and buying characteristics
market segmentation
the process of grouping a market into smaller subgroups defined by specific characteristics

10. buying characteristics
Target Market and Customer
Market Segmentation
demographics
geographics
psychographics
buying characteristics 10

11. Target Market and Customer
geographics
the study of the market based on where customers live, including region, state, country, city, and/or area
Information about the geographics of the target market can help an entrepreneur decide on a geographic area to focus marketing efforts.

12. Target Market and Customer
An entrepreneur can study psychographics to learn about target customers’ feelings.
psychographics
the study of consumers based on social and psychological characteristics, including personalities, values, opinions, beliefs, motivations, attitudes, and lifestyle elements

13. Target Market and Customer
Businesses that cater to industrial markets must consider customers’ individual situations.
industrial markets
customers who buy goods or services for business use

14. Target Market and Customer
The target market for your product or service should be: 1
Measurable 2
Large enough to be profitable 3
Reachable 4
Responsive 14

15. Conducting Market Research
Once you know the areas of the market that you need to analyze, you are ready to begin market research.
The marketing research process can be used to identify potential markets, analyze demand, and forecast sales.
market research
the collection and analysis of information aimed at understanding the behavior of consumers in a certain market

16. Select the Type of Market Research
There are three types of market research
exploratory research
descriptive research
historical research 16

17. Select the Type of Market Research
A good way to start exploratory research is to read government or industry publications.
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
Another way to gather information is to form a focus group.

18. Select the Type of Market Research
Descriptive research can be gathered through questionnaires, interviews, or observation.
descriptive research
the collection of information to determine the status of something, such as in developing a customer profile

19. Select the Type of Market Research
You can use historical research to forecast your business’s future potential.
historical research
the study of the past to explain present circumstances and predict future trends

20. Start the Research Process
The Five Steps of an Effective Research Plan 5
Analyze the data. 4
Organize the data. 3
Collect primary data. 2
Obtain secondary resources. 1
Identify your information needs. 20

21. Start the Research Process
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

22. Start the Research Process
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

23. The Main Idea
Studying a company’s industry and market helps an entrepreneur create a product or service that people want.
It also helps the entrepreneur develop a customer profile, estimate demand, and increase the chances for success.

24. Researching the Industry
Look
Look at trends and patterns of change.
Understand industry forces that affect your business.
Understand
Study industry demographics.
Study
Analyze
Analyze the competition. 24

25. Industry Forces That Affect Your Business
barriers to entry
threats from substitute products
sources of supply
buyers’ ability to bargain
technology 25

26. 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

27. Industry Forces That Affect Your Business
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

28. 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

29. 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

30. 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

31. The Competition
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
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

32. The Competition
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

33. Researching the Target Customer
Create a customer profile.
Create
Evaluate customers’ needs.
Evaluate
Conduct research to forecast demand.
Forecast 33

34. 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

35. 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

36. Forecasting Demand Several methods can be used to forecast demand:
Use historical analogy.
Interview prospective customers and intermediaries.
Go into limited production.