Chapter 6 Unit 2 Industry and Market Analysis

Researching the Industry A. Trends and Patterns of Change- You can find opportunity in an industry by looking at trends and patterns of change. B. Industry forces that affect your business- A number of forces will affect your ability to do business

Researching the Industry 1. Barriers to Entry- In established industries, the dominate businesses have advantages called barriers to entry. They are conditions or circumstances that make it difficult or costly for outside firms to enter a market to compete with the established firms.

Researching the Industry Economies of Scale- are situations where the cost of producing one unit of a good or service decreases as the volume of production increases. This means that the production costs decline relative to the price of goods and services.

Researching the Industry Brand Loyalty- is loyalty to or the tendency to buy a particular brand of product.

Researching the Industry 2. Threats from substitute products- your company competes with other companies that make the same product as you, and also competes against other companies that produce substitutes also. Most products have substitutes.

Researching the Industry 3. Sources of Supply- your supplies will have an impact on your sales. You must find affordable sources of inventory, raw materials, and goods.

Researching the Industry 4. Buyers’ ability to bargain- in industries where buyers have bargaining power, a new business may have difficulty gaining a foothold. Stores such as Wal-Mart and Toy’s R Us have enormous buying power.

Researching the Industry 5. Technology- allows companies to improve their business processes. Without it, your company will go bankrupt.

Researching the Industry C. Industry Demographics- each industry has basic characteristics or demographics. These include the number of companies, annual revenues, and the size of the companies by number of employees. These facts reveal whether the industry is growing, shrinking, or remaining stable.

Researching the Industry D. The Competition- outstanding sales potential does not always equate to a successful business. Usually competing products are already well established in the market. To succeed, you must be able to capture market share by differentiating your business.

Researching the Industry Market Share- is a portion of the total sales generated by all competing companies in a given market. Companies succeed by finding different niches in the market. Niche- is a small, specialized segment of the market, usually based on customer needs discovered in market research.

Researching the Industry Market Positioning- is the act of identifying a specific market niche for a product. Competitive Advantage- is a feature that makes a product more desirable than its competitors’ products. Study your competition to get on an even playing field. See page 127, figure 6.2.

Researching the Industry Visit competitors’ outlets Buy your competitors products Search the Internet and your competitors’ Web Sites.

Researching the Industry Mass Marketing- is a process of advertising to reach all customers with a single marketing plan. The advantage of mass marketing is that the costs are less because only one theme is used. The disadvantage is that the theme must be very general or it may not be understood by all potential customers.

Researching the Target Customer No matter how large the target market, you must know your customer and have a market penetration strategy. Market Penetration- is a strategy used to reach initial customers and increase market share. You must establish relationships with customers and target your marketing efforts.

Researching the Target Customer A. Creating a Customer Profile- A customer profile is a complete picture of a venture’s prospective customers. It includes geographic, demographic, and psychographic data, such as age income level, education, buying habits, places customers usually shop, and method of payment.

Researching the Target Customer The four questions to ask are- 1. Who are my customers? 2. what do they generally buy, and how do they hear about the products and services they buy? 3. How often do they buy? 4. How can my business meet their needs?

Researching the Target Customer B. Evaluating Customers’ Needs- you have to know what your customer needs are in order to capture their business. You do this by completing a customer needs analysis. Customer Needs Analysis- pinpoints the features and benefits of your goods and services that customers value.

Researching the Target Customer An example may be a breakfast bar. You know your customers are high school students. They like a crunchy, tasty breakfast bar. They also do not have much time to eat. So the feature of the bar is that it is crunchy and the benefit of the bar is convenience.

Researching the Target Customer C. Forecasting Demand- it is difficult with certainty how much of a product or service customers will buy. Several methods can be used to forecast a demand figure.

Researching the Target Customer 1.The first way to forecast demand is to use historical analogy products. You must be able to predict the demand for your product or service based on demand for another one. Compact discs vs. tapes and records

Researching the Target Customer 2. The second way to forecast demand is to interview prospective customers and intermediaries. No one knows the market better than the people who work in it. By talking with these people you can come up with a good estimate for demand.

Researching the Target Customer 3.The third way to forecast demand is to go into limited production to test the market. The only way to test the reaction of potential customers is to get the good or service into their hands.