1. Industry and Market Analysis
Chapter 6
Section 2

2. Researching an Industry
Trends and Patterns of Change
Has the rate of sales growth slowed
How volatile is the industry
Volatility refers to how quickly things change in the industry.
Industry Forces that Affect Your Business
Barriers to Entry: conditions or circumstances that make it difficult or costly for outside firms to enter a market to compete with the established firm or firms.
Established businesses have created 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. This means that production costs decline relative to the price of goods and services.

3. Researching an Industry
Industry Forces that Affect Your Business
Barriers to Entry (Cont.)
Brand Loyalty: loyalty to or the tendency to buy a particular brand of a product.
Existing businesses may prevent new businesses from entering distribution channels.
Threats from Substitute Products
Sources of Supply
Must have access to affordable sources of inventory, raw materials, and goods.
Consider suppliers’ location
Trade discounts
Availability of alternate sources

4. Researching an Industry
Industry Forces that Affect Your Business
Buyer’s Ability to Bargain
Technology
Industry Demographics
Number of companies
Annual revenues
Average size of companies by number of employees
These facts reveal whether the industry is growing, shrinking, or remaining stable

5. Researching an Industry
The Competition
Must be able to capture market share by differentiating your business.
Market share: portion of the total sales generated by all competing companies in a given market
Many entrepreneurial companies attempt to locate a niche within the market.
Niche: small, specialized segment of the market based on customer needs discovered in market research
Marketing positioning: the act of identifying a specific market niche for a product or service
Create a Competitive Matrix to identify what is unique about your business and define your competitive advantage

6. Researching the Target Customer
Market penetration strategy is a plan to reach initial customers and grow
Creating a Customer Profile
Customer profile: a complete picture of a business’s prospective customers.
Includes: geographic, demographic, and psychographic data, such as age, income level, education, buying habits, places customers typically shop, and method of purchase.
Helps develop a marketing concept: strategy for how you will reach the customer

7. Researching the Target Customer
Evaluating Customers’ Needs
Customer needs analysis: pinpoints the features and benefits of your goods and services that customers value.
Forecasting Demand
Use analogous products
Analogous: comparable in certain respects, typically in a way that makes clearer the nature of the things compared.
Interview prospective customers and intermediaries
Go into limited production to test the market