1. Chapter Six Market Analysis Dr. Bruce BarringerBy
Bruce R. Barringer, PhD
Department of Management
University of Central Florida
Orlando, FL 32816
Dr. Bruce Barringer
University of Central Florida
6-1

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Introduction
Market analysis
Breaks the industry into segments and specifies a segment or target market that the firm will tackle
The market analysis breaks the industry into segments and zeroes in on the specific segment (or target market) that the firm will tackle.
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Market Analysis
Firm’s target market
Its customers
Its competitors
How it will compete in the marketplace
Its potential sales and market share
The market analysis section focuses on describing a firm’s target market, its customers, its competitors, how it will compete in the marketplace, and its potential sales and market share.
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Market Analysis
Helps define the nature of the business
Affirms that a company has a well thought out target market
Understands its customer and can generate sales
The market analysis section helps define the nature of the business, affirms that a company has a well thought out target market and understands its customer and can generate sales.
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Market Segmentation
Markets can be segmented by
Geography
Demographic variables
Psychographic variables
Behavioral variables
Product type
Markets can be segmented in many ways, such as by geography (city, state, country), demographic variables (age, gender, family size, income), psychographic variables (personality, life style, values), behavioral variables (benefits sought, product usage rate, brand loyalty), and product type (this varies by product).
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6. Market Segmentation and Target Market Selection
Homogeneity of needs and wants within the segment
Heterogeneity of needs and wants among the segments
Small differences within segments
Distinct
Size
Profitable
To test whether you have segmented your market successfully, the requirements for successful market segmentation are as follows:
Homogeneity of needs and wants within the segment
Heterogeneity of needs and wants between the segments
Differences within the segment should be small compared to differences across segments
The segment should be distinct enough so that its members can be easily identified
It should be possible to determine the size of the segment
The segment should be large enough to be profitable
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7. Selecting a Target Market
Once a firm segments its market, it selects a segment within the market to target
Focus on a single market
Once a firm segments its market, it selects a segment within the market to target.
Startups are usually best served by segmenting their industry carefully and zeroing in on a specific market segment intently on a single market rather than several markets.
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8. Target Market Size and Trends
Estimate size of similar businesses
Examine industry trends
Estimating the size of a target market for a market that doesn’t exist, or a market that is specific to a particular location or geographic area, is harder. You will probably need to do some marketing research yourself.
Along with reporting the approximate size of a firm’s target market, the market analysis should also comment on industry trends that have the potential to affect the target market positively or negatively, if the information has not already been sufficiently reported.
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Buyer Behavior
Decision making
Who makes the decision to purchase?
Individuals
Groups
There are many other issues pertaining to buyer behavior that may be important to cover in this section, depending on the nature of your business. For example, in many business-to-business startups it’s important to discern specifically who the “decision makers” are in the businesses you’ll be trying to sell to.
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Involvement
High involvement
Medium involvement
Low involvement
It’s also important to know whether your product is a high, medium, or low involvement purchase.
A high involvement purchase is one for which the buyer is prepared to spend a considerable amount of time and effort searching.
In contrast, a low involvement purchase is one that a buyer makes with minimum thought because it does not have much impact on his or her life
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Competitor Analysis
Detailed analysis of a firm’s competition
Understand positions of major competitors and the opportunities that are available to gain a competitive advantage in one or more areas
A competitor analysis is a detailed analysis of a firm’s competition. It helps a firm understand the positions of its major competitors and the opportunities that are available to gain a competitive advantage in one or more areas
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12. Direct, Indirect, and Future Competitors
Direct competitors
Businesses that offer a product similar to yours
Indirect competitors
Businesses that offer close substitutes to your product
Future competitors
Businesses that could move into direct or indirect competitor roles
Direct competitors: These are businesses that offer a product that is very similar to yours. These competitors are the most important because they are going after the same customers that you are.
Indirect competitors: These competitors offer close substitutes to the product you will be offering. These firm’s products are important in that they target the same basic need that will be met by your product. For example, when people told Roberto Goizueta, the late CEO of Coca-Cola, that Coke’s market share was at a maximum, he countered by saying that Coke accounted for less than 2% of the 64 ounces of fluid that the average person drinks each day. “The enemy is coffee, milk, tea [and] water,” he once said.
Future competitors: These are companies that are not yet direct or indirect competitors but could move into one of these roles at any time. .
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13. Competitive Intelligence
The process of gathering information about your competitors
This requires you to engage in competitive intelligence, which is the process of gathering information about your competitors.
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14. Competitive Analysis Grid
A tool for organizing and presenting information you collect about your competitors
Competitive Analysis Grid
A competitive analysis grid is a tool for organizing and presenting the information you collect about your competitors. It can help you to see how you stack up against your competitors in key areas and illustrate your primary sources of competitive advantage.
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15. Estimate of Annual Sales and Market Share
Four ways to estimate initial sales
Contact premier trade associations in your industry
Find a comparable firm
Conduct Internet searches
Use a multiplication method to try to arrive at a reasonable number
There are four basic ways for a new firm to estimate its initial sales.
The first way to estimate the sales for a new business is to contact the premier trade associations in your industry and ask if they track the sales numbers for businesses that are similar to the business you plan to start.
The second way to estimate a new firm’s sales is to find a comparable firm, or a company that’s selling a comparable product.
The third way to try to estimate sales is to conduct Internet searches to try to find magazine and newspaper articles that focus on firms in your industry.
The fourth way to estimate a startup’s sales is to use a multiplication method and try to arrive at a reasonable number.
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