Industry and Market Analysis

Unit 2

Researching the Industry

Examine industry trends, demographics, and competition Trends and Patterns of Change

Is it becoming more difficult for new companies to enter? Has the rate of sales growth slowed? How quickly do things change in the industry?

Industry Forces that Affect Your Business

1. Barriers to Entry2. Threats from Substitute Products3. Sources of Supply4. Buyer’s Ability to Bargain5. Technology

1. Barriers to Entry

Barriers to Entry - are conditions or circumstances that make it difficult or costly for outside firms to enter a market to compete with established firms

Economies of Scale – are situations where the cost of producing one unit of a good or service decreases as the volume of production increases

Brand Loyalty – loyalty to or the tendency to buy a particular brand of a product

2. Threats from Substitute Products

If the industry is very competitive you will be competing with those companies that produce products similar to yours

Your business will also be competing with companies that produce substitute products

Most products have substitutes

3. Sources of Supply

Suppliers have an impact on sales You must have access to affordable sources of

Inventory Raw materials Goods

You should also consider Location of suppliers Trade discounts they offer Availability of alternative sources

4. Buyer’s Ability to Bargain

Industries where buyers have bargaining power may make it difficult for new entries

Large discount buyers have enormous bargaining power which allows them to purchase their inventories at deep discounts Wal-Mart Costco Home Depot

Small businesses struggle to compete

5. Technology

Enables companies to improve their business processes Companies that use technology operate effectively and

efficiently Is costly to the business Trade offs can be well worth it

Industry Demographics

Basic characteristics include Number of companies Annual revenues Average size of the companies by number of employees

These facts reveal whether the industry is growing, shrinking, or remaining stable

The Competition

Market share is a portion of the total sales generated by all competing companies in a given market

Niche is a small, specialized segment of the market based on customer needs

Market positioning is the act of identifying a specific market niche for a product or service

Competitive Advantage is a feature that makes a product more desirable than its competitor’s products

Researching the Target Customer

Creating a customer profile – is a complete picture of a business’s prospective customers

When creating a customer profile, ask these questions Who are my customers? What do they generally buy, and how do they hear about

the products and services they buy? How often do they buy? How can my products or services meet their needs, or what

value can I provide?

Evaluating Customers’ Needs

Customer Needs Analysis pinpoints the features and benefits of your goods and services that customers value

You must provide the features and benefits that your target customers want

It creates a better chance that they will choose your product or service over the competitiors