Knowing the market in detail provides you with key information that is essential in developing you product/services and marketing plan. The analisis is a crutial assessment of the target nitch, competitors and the need to market that product or services.
To an investor the primary reason for this analisis is to determin if there is a market for your product or services.
Elements of Market Analysis
Market Size and Trends
Market size refers to the number of buyers and sellers in a particular market. The sales values and volumes makes up the total market size. Market trend refers to the general movement of a market.Market size and trend are very important to an investor because it makes the understanding of the total market of goods or services easy.
Let us look at this extract from the Executive Summary of a Euromonitor Report on 'Books and Publishing in the United Kingdom', and see how the market size and market trend make simple our understanding of the Book and publishing market.
* The UK book market is a healthy and dynamic one, and saw volume and value gains of 12.1% and 16.8% respectively over the review period, reaching a value of almost £2.5 billion in 2002.
* The consumer market is the main driver of growth, and as such is highly competitive, with publishers and retailers promoting both bestsellers and new titles by lesser-known authors which have captured the public imagination. The consumer market accounted for 80.4% of sales in volume terms in 2002, compared with a 19.6% share for the institutional market.
* The institutional market saw slower gains over the review period, and in the case of sales to libraries saw decreases some years. Institutional sales by value increased by 4.9% in 2002, and educational sales accounted for 63.4% of this market in that year.
* Paperbacks are the dominant format in the book market and saw an 18.4% growth in volume terms over the review period. In contrast, the hardback share of the total market fell to 22.6%. In particular, this format lost ground in the educational market, where schools and libraries found paperbacks to be the most cost-effective way of increasing book volume.
* Fiction was the fastest growing category, with a 13.8% rise in volume sales over the period, and an even bigger 24.1% rise in value. Quality fiction, thrillers and science fiction and children's novels are the main market drivers.......
Source : Euromonitor
You can see that the extract makes us understand better and have detailed information about the size of 'Books and Publishing in the United Kingdom', and how the Book publishing market have been moving.
Market growth rate
Market growth rate is an annual increase in sales for a product. It is that movement in the rate of sales for a product or services. An increase in the market growth rate for a product is an indicator of an health market or product. A decrease in the growth rate is not health for that product.
When designing a business plan the market growth rate should be included. This provide information for the investor or other users of the plan about the health of the product or services on the market.
Market segment is a sub-set of a market, Markket segmentation is the breaking up or dividing of the market into subset. Market segmentation is dividing the market into groups of individual market with similar wants or needs. Market can be segmented based on ages, gender, price and interests. Once this segmentation is made the investor focuse on a particular segment and try to create utility for it (selected segment).
When writing on market segmentation in your business plan, you should be able to explain to the users why you choose a particular segment of the market and the benefit of your product or services to that segment.
The average profit potential for a particular market is a useful tool in determining the profitability of a product. When preparing your business plan you should have it in mind that the profitability of the market will be very useful to an investor.
The investor will use the information on market profitability to make investment decission. You can prepare your market profitability with the aid of Michael Porter tool for determining the attractiveness of market. This is known as Porter's five forces. They identify factors that influence the market profitability.
Porter's five forces
# Buyer power
# Supplier power
# Barriers to entry
# Threat of substitute products
# Rivalry among firms in the industry
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