1. Session
Market Scanning

2. Session Outline Micro-environment Factor Analysis
Market Build-up Method
Market Share Analysis

3. This Session Weekly Activity: ANZSIC Codes
Visit the Australian Bureau of Statistics website ( and find out what are the 2 digit codes for each of the industry group categories
Also determine what are the additional digit codes for the particular industry
Using your business idea, match this with an industry code
Locate an ABS publication that lists these codes for you
If you have problems try searching under Catalogue number
Report on your research (Word Count: 200 – 300).

4. Microenvironment
The forces close to the organization that impact on marketing decisions and affects its ability to serve its customers:
Organization itself
Direct suppliers
Market channel members
Customer markets
Direct competitors

5. Topic Example Video
The following video outlines how the Micro-environment relates to the Macro-environment.
Take note of the key points.

6. Market
Definition—A place where buyers and sellers meet, products or services are offered for sale, and transfer of ownership occurs.
Demand made by a group of potential buyers for a product or service.
Market demand factors:
People or firms with needs and wants.
Their purchasing power.
Their buying behaviour.

7. Total Market Potential
It is the maximum number of sales that might be available in an industry for a given period.
A common way to estimate this is as follows:
Q = n x q x p
where
Q = total market demand
n = number of buyers in the market
q = quantity purchased by an average buyer in one year
p = price of an average unit

8. Topic Example Video
The following video outlines how you can calculate market potential.
Take note of the key points.

9. Activity: Book Buyers Team-based exercise: Potential Book Buyer Market
Estimate the number of book buyers in a year
In groups of 3 – 4, estimate the number of people you believe would buy books each year in Brisbane.
Issues you might want to consider would include:
Total population less “non buyers” (suspect pool)
Average number of books purchased per person
Average price per book
Discuss the accuracy of this estimate and how you might verify your estimate with other methods
Time: 15 – 20 minutes.

10. Current Market Demand
There are three aspects of current market demand that should be estimated:
total market demand
area market demand
actual sales and market share

11. Market Demand
The total volume for a specific product, purchased by a given market segment, from a defined geographical area where maximum output and set environmental conditions exist.

12. Market share
The proportion of the business’ sales compared with the total industry.
Usually expressed as a percentage.

13. Topic Example Video
The following video explains how to calculate market share.
Take note of the key points.

14. Forecasting Market Share
1. Calculate market demand
2. Determine number of competitors
3. Estimate market share
Industry averages method
Pareto principle method
4. Set yearly market share targets.

15. Example: Coffee Shop
Using the Industry Averages Method to estimate market share:
1. Determine if there are any statistics specifically relating to coffee shops.
Australian Bureau of Statistics – Cafes and Restaurants (8655.0)
2. Review what statistics are provided.

16. Example: Coffee Shop Cafes and Restaurants: No. of businesses
No. of persons employed
Income
Expenses
Operating profit before tax
Operating profit margin
Periods: and
Is there enough data provided to a market share average?
Can a forecast trend be calculated?

17. Example: Coffee Shop Specific business: Unlicensed café and restaurant
3167/15083 (21%) businesses
$ M x 21% = $2126.9M incomes
$2126.9M/3167 = $671,600 per business PA
2861/12845 (22.3%) businesses
$7174.3M x 22.3% = $1599.9M income
$1599.9M/2861 = $559,200 per business PA

18. Example: Wine in China
Obtain information from various websites to estimate market share:
1. Determine if there are any statistics specifically relating to importing Australian wine into China.
2. Review what statistics are provided.

19. Example: Wine in China Available data: market growth
main consumption areas
major importing countries
total market size
import wine market size
major Australian suppliers
Chinese wine drinker preferences
Chinese wine drinker profile
product preferences

20. Pareto Principle Application
Using the Pareto Principle
From ABS, all that is required are:
No. of Businesses
Income
Pareto Principle
Large: 80% revenue/20% businesses
Medium: 15% revenue/30% businesses
Small: 5% revenue/50% businesses

21. Example: Coffee Shop 1998-99 Large: Medium: Small 2003-04 Large:
($7174.3M x .8) / (12845 x .2) = $2.24M per business
Medium:
($7174.3M x .15) / (12645 x .3) = $283,700 per business
Small
($7174.3M x .05) / (12845 x .5) = $55,900 per business
Large:
($ M x .8) / (15083 x .2) = $2.69M per business
Medium
($ M x .15) / (15083 x .3) = $335,600 per business
Small
($ M x .05) / (15083 x .5) = $67,200 per business

22. Example: Coffee Shop Conclusions:
Growth market: $22,480 average growth per year.
Business Income Projection
Large: $2.69M
Medium: $335,600
Small: $67,200
Average: $671,600
What would be other factors that could influence revenue projection?
Floor space
Location

23. Example: Coffee Shop
So what does this all mean when it comes to making a forecast?
Use your judgement!
The revenue projection for a small coffee shop appears to be quite low.
5 years time: medium size business
Revenue $335,600 PA
Start up: $223,200 PA ($335,600 – $112,400)
Average growth per year: $22,480

24. Example: Wine in China Conclusions:
Growth market: 1.3M litres average growth per year.
Australian Wine Sales Revenue: $86M ($4 per 1 litre)
Chinese Target Market Cities: Shenzhen & Chenghu
Red Wine Flavour Preference: fruity, berry, vanilla with a touch of sweetness (50% preference for light flavours)
Target customer: middle class Chinese
Major Australian player: Orlando
What would be other influence factors?
Screw caps - better for premium and aged wines.

25. Example: Wine in China
So what does this all mean when it comes to making a forecast?
Use your judgement!
Can I get a list of Australian wine exporters into China?
What about promoting Queensland wines, ie Granite Belt? (suit Chinese wine preferences)
What import requirements are there for wine into China? (check with Austrade)
Can I calculate my market share?

26. Activity: Data Projector Market
In groups of 3 – 4,
Discuss how you might calculate the size of the data projector market.
What factors do you think need to be considered to arrive at an accurate estimate?
Comment on the use of ABS statistics in this scenario and explain your options.
Each group to explain their reasoning.
Time: 10 – 15 minutes.

27. International Statistics
It is important to cross-reference international statistics with other sources.
For example, you visited the Chinese Government website ( for statistics and it directed you to the statistics website:
Statistics from a country’s government website needs to be compared against other countries foreign trade statistics to determine accuracy.

28. Foreign Trade Statistics
Australia
USA
United Kingdom
Foreign Trade Portal

29. International Statistics
Australia
USA
United Kingdom
United Nations
China

30. Foreign Language Websites
Make a note (save or copy) of the Foreign Language website URL that requires translation.
In the internet browser bar, enter:
This will bring up the Google Translate website. In the Google Translate toolbar, enter in the Foreign Language website URL details and select the language that it needs to be translated into. Briefly wait until the website appears in the language selected.

31. Activity: Floor Cleaner Suppliers
Using at least 2-3 of Yellow Pages directories determine how many Floor Cleaner Liquid suppliers there are in South Korea.
Try using as references:
and
Were you successful? Consider how difficult or easy it was.
Now use the supplier database ( for local suppliers in South Korea
Use Boolean Operators to narrow your search
Analyse your search results and list organisations.

32. Estimating Area Market Demand
There are two major methods or approaches to estimate market potential in different cities, states or countries:
market buildup method
is used primarily by business goods firms
market factor index method
is used primarily by consumer goods firms

33. Chain Ratio Method
This method involves multiplying a base number by several adjusting percentages.
It provides a rough estimate of potential demand however using additional qualifying factors will yield more accurate refined estimates.

34. Activity: Light Beer Drinkers
Team-based exercise: Potential Light Beer Market
Estimate the market potential for a new light beer
In groups of 3 – 4, determine what you might use as your base number and then decide what qualifying factors you would consider to estimate.
Qualifying factors might include:
Discretionary income
Alcoholic beverage expenditure
Light beer consumption comparisons
Discuss what other qualifying factors you additional consider to improve the accuracy of your estimate
Time: 15 – 20 minutes.

35. Market Build-up Method
A forecasting method that calls for identifying all the potential buyers in each market and estimating their potential purchases.

36. Market Build-up Method
This is often referred to as zero-based sales forecasting.
1. Market identification
Define market for product/service being researched by checking all the applicable industries (ANZSIC manual).
2. Market diagnosis
(a) Diagnose the basis for estimating the number of organisations within that industry that are likely to use the product/service.

37. Market Build-up Method
(b) Estimate the extent of market saturation:
User industry
Number of competitors
Market growth rate.
3. Market demand
Determine the product/service business potential, ie. (no. of units) an organisation of a particular sized should have in their possession or consume within a given timeframe.

38. Market Build-up Method
4. Market potential
(a) compute the market potential for each size of organisation
(b) compute the total market potential by totalling up all the different organisational size market potentials
When working out market potential, it should be calculated both by:
Number of units and
Dollar value (average $ value per unit).

39. Market Build-up Method
5. Sales potential
(a) estimate the total replacement sales potential (existing user survey, ABS census, industry information )
(b) estimate the total number of new sales potential (marketing intelligence information)
6. Compare market potential with sales potential
This provides useful information for future planning.

40. Market Build-up Method
7. Sales forecast
(a) estimate market share positions (own and competition)
(b) assess competitor’s marketing efforts
(c) set organisational marketing strategy
(d) forecast organisation’s market share for next period (13 months)
(e) forecast organisation sales (eg. Sales potential x market share %)
(f) prepare detailed sales forecast (monthly sales)
(g) incorporate sales forecast into business plan.

41. Market Build-up Method
Source
ANZSIC codes, ABS
User surveys, experience
ABS data, user surveys
Marketing intelligence, sales reports
Phases
Market identification
Market diagnosis
Market demand
Market potential
Sales potential
Potential comparison
Sales forecast

42. Market Build-up Method

43. ANZSIC Categories

44. ANZSIC Codes ANZSIC range Industry group
Division A Agriculture, forestry & mining
Division B Mining
Division C Manufacturing
Division D Electricity, gas & water supply
Division E Construction
Division F Wholesale trade
Division G Retail Trade
Division H Accommodation, cafes and restaurants

45. ANZSIC Codes ANZSIC range Industry group
Division I Transport & storage
Division J Communication services
Division K Finance & insurance
Division L Property & business services
Division M Government administration & defence
Division N Education
Division O Health & community services
Division P Cultural & recreational services
Division Q Personal & other services

46. ANZSIC Codes
ANZSIC code sub-classification for the clothing and footwear category:
ANZSIC code Industry group
22 Textile & footwear, leather
224 Clothing
Men’s trousers & shorts; work wear
Men’s suits & coats; waterproof clothing

47. Identify Market (Mining)

48. Market Diagnosis (Mine Types)

49. Market Demand (Location)

50. Market Potential

51. Activity: Wood Lathe Buyers
Team-based exercise: Potential Wood Lathe Buyers
Estimating the market potential for wood lathes
In groups of 3 – 4, map out the approach you would adopt to determine the market potential for a wood lathe manufacturer based on the east coast of Australia.
What strategy would your group recommend to the manufacturer?
Discuss the various options.
Time: 15 – 20 minutes.

52. Market factor-index method
A forecasting method that identifies market factors that correlate with market potential and combines them into a weighted index.

53. Topic Example Video
The following video provides some tips on analysing buying power.
Take note of the key points.

54. Buying Power Index
A buying power index is based on three factors: the areas share of the nations disposable personal income, , retail sales and population.
Each factor is weighted in accordance with it’s impact or the strength of the characteristic.
Each weighting is made relative to the other factors and is therefore proportional.
B% = (x)Y% + (y)R% + (z)P%

55. Buying Power Index B% = (x)Y% + (y)R% + (z)P%
B% = % of total national buying power in area
Y% = regional income / national income %
R% = regional retail sales/national retail sales %
P% = regional population/national population %
(x) = product category $ / disposable income $
(y) = product category $ / retail sales $
(z) = product user population / product category user population

56. Buying Power Index

57. Example: Business Shirts
A business shirt manufacturer wants to determine the Victorian market share.
The estimate of the national market for business shirts is about $150M.
The manufacturer’s current nationwide sales is $20M, about 16.7% of total potential market.

58. Example: Business Shirts
To calculate the regional market potential for a location in question. (ie. Victoria) need to:
1. Determine the buying power index for business shirts. This is done using “household expenditure information or syndicated market research from research firms.
2. Use the BPI to calculate the regional market potential (ie. Victoria)
The regional market potential is then used to calculate an organisation’s regional market share, ie. % of actual $ sales / regional market potential.

59. Example: Business Shirts
B% = (x)Y% + (y)R% + (z)P%
B% = % of total national buying power in area
Y% = 24.8% = $1,151.5M / $4,649.0M
R% = 14% = $100.0M / $715.6M
P% = 25.2% = 1,617,281/6,430,171 males > 14
(x) = 0.5 (clothing $ / disposable income $)
(y) = 0.3 ($1.65M / $7.16M) retail clothing
(z) = 0.2 white collar workers / workers

60. Example: Business Shirts
If the assumption is that the total national potential for business shirt sales in Australia is $150 Million, then Victoria’s share would be $32.46M. ($150M x 21.64%)

61. Next Session Weekly Activity: Understanding Markets
Select a category of passenger car from the list used by VFACTS.
To find this list, go to and click on “sales”, “cars” & “segmentation criteria” in the top menu
With this category as a basis, describe (or profile) a market segment that would be interested in buying a new vehicle, using each of the segmentation approaches discussed as sub-headings.
Explain your approach for each sub-heading.