1. Industry and Market Analysis Unit 2

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?

3. Industry Forces that Affect Your Business 1.Barriers to Entry 2.Threats from Substitute Products 3.Sources of Supply 4.Buyer’s Ability to Bargain 5.Technology

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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?

12. 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