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Defining Areas of Analysis

The entrepreneur will want to understand the nature of the industry he or she is analyzing.

industry

a collection of businesses with a common line of products or services

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industry life cycle

Industry four factors effect the nature of the industry

carrying capacity the ability of industry to support new growth

the current stage of an industry

1
uncertainty the degree of stability or instability in a given industry

Birth Growth

3
complexity

Maturity
Decline

the number and diversity of contacts with which a business must deal Chapter 6 Market Analysis
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Target Market and Customer

market a group of people or companies who have a demand for a product or service and are willing and able to buy it

After first identifying your market, you will then need to select a target market to be the focus of your companys efforts.

target market
a specific group of customers whom a business wishes to reach

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market segmentation

Target Market and Customer

Consumer market segmentation is based on geographics, demographics, psychographics, and buying characteristics. A business can select and serve multiple market segments.

the process of grouping a market into smaller subgroups defined by specific characteristics

market segments subgroups of buyers with similar characteristics, segmented by geographics, demographics, psychographics, and buying characteristics

Chapter 6 Market Analysis Glencoe Entrepreneurship: Building a Business

Target Market and Customer

Market Segmentation

geographics

demographics

buying characteristics

psychographics

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Target Market and Customer

geographics the study of the market based on where customers live, including region, state, country, city, and/or area psychographics the study of consumers based on social and psychological characteristics, including personalities, values, opinions, beliefs, motivations, attitudes, and lifestyle elements

industrial markets customers who buy goods or services for business use

Chapter 6 Market Analysis Glencoe Entrepreneurship: Building a Business

Target Market and Customer

The target market for your product or service should be:
1 2 3 4 Measurable Large enough to be profitable Reachable Responsive
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Select the Type of Market Research There are three types of market research
exploratory research
market research the collection and analysis of information aimed at understanding the behavior of consumers in a certain market

descriptive research

historical research
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focus group a group of people whose opinions are studied to determine the opinions that can be expected from a larger population

Select the Type of Market Research

exploratory research the initial collection and analysis of information used when very little is known about a subject; it forms a foundation for later research

descriptive research the collection of information to determine the status of something, such as in developing a customer profile
Chapter 6 Market Analysis Glencoe Entrepreneurship: Building a Business

historical research the study of the past to explain present circumstances and predict future trends

Start the Research Process The Five Steps of an Effective Research Plan
5
Analyze the data.

4
3

Organize the data.

Collect primary data.

2
1

Obtain secondary resources.

Identify your information needs.

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Start the Research Process

Research secondary data before researching primary sources because it is easily obtained and inexpensive.

secondary data

information that has already been collected by someone else

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Start the Research Process

The most common methods of gathering primary data about customers are: observation interviews surveys

primary data

information that is collected for the first time, is current, and relates directly to the collectors study

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Time for a break

Researching the Industry

Look at trends and patterns of change. Understand industry forces that affect your business. Study industry demographics.

Analyze the competition.

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Industry Forces That Affect Your Business

barriers to entry threats from substitute products sources of supply

buyers ability to bargain

technology

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Industry and Market Analysis

Industry Forces That Affect Your Business

In established businesses, the dominant businesses have advantages that are barriers to entry to smaller, new ventures.

barriers to entry conditions or circumstances that make it difficult or costly for outside firms to enter a market to compete with established firm or firms

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Industry Forces That Affect Your Business

Established businesses have achieved 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; the decrease of production costs relative to the price of goods and services

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Industry Forces That Affect Your Business

Customers with brand loyalty do not easily switch to a new company that enters the industry.

brand loyalty

the tendency to buy a particular brand of a product

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Industry and Market Analysis

Issues in Entrepreneurship

In the past, businesses used mass marketing to sell products with universal appeal and few features to differentiate them from competitors products.

mass marketing

the attempt to reach all customers with a single marketing plan

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Industry and Market Analysis

The Competition

Usually, competing products are already established in the market. To succeed, you must be able to capture market share by differentiating your business.

market share

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

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Industry and Market Analysis

The Competition

Many entrepreneurial companies succeed by studying the competition to define a niche in the market.

niche
a small, specialized segment of the market based on customer needs discovered in market research

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The Competition

An entrepreneur who wishes to capture market share can use market positioning.

market positioning

the act of identifying a specific market niche for a product

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The Competition

You can create a competitive grid to help define your competitive advantage.

competitive advantage

a feature that makes a product more desirable than its competitors

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Researching the Target Customer

Create a customer profile.

Evaluate customers needs.

Forecast research to forecast demand. Conduct

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Creating a Customer Profile

Creating a customer profile is the first step in targeting your marketing efforts.

customer profile a complete picture of a ventures prospective customers, including geographic, demographic, and psychographic data

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Evaluating Customers Needs

In order to provide what the customer wants, you should prepare a customer needs analysis.

customer needs analysis

a study that pinpoints the features and benefits of goods or services that customers value

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Industry and Market Analysis

Forecasting Demand
Several methods can be used to forecast demand:

Use historical analogy. Interview prospective customers and intermediaries. Go into limited production.

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