Preparing Effective Business Plans: An Entrepreneurial Approach

Preparing Effective Business Plans: An
Entrepreneurial Approach
Second Edition
Chapter 6
Market Analysis
Chapter Learning Objectives
6.1 Describe Market Segmentation and Target Market
Selection
6.2 Discuss Buyer Behavior
6.3 Develop Competitor Analysis
6.4 Estimate Annual Sales and Market Share
Introduction
• Market is defined as the sum total of all the buyers and
sellers in the area or region under consideration.
• The area may be the earth, or countries, regions, states,
or cities.
Market Analysis
• The market analysis breaks the industry into segments and
zeroes in on the specific segment (or target market) that
the firm will tackle. It describes the firm’s target market,
customers, and competitors, as well as describes how it
will compete.
– Breaks Industry into Segments
▪ Targets a Specific Segment
– Focuses on Describing:
▪ Target Market
▪ Customers
▪ Competitors
▪ How it Will Compete
▪ Potential Sales and Market Share
Market Analysis
• The market analysis is important because it helps define
the nature of the business. It is also important because it
affirms that a company has a well-thought-out target
market, understands it customers, and can generate
sales in the face of competition.
– Defines Nature of the Business
– Affirms That Company Has a Well-Thought-Out Target Market
– Understands Customers and Can Generate Sales
Section 1: Market Segmentation
To succeed, a firm must answer the basic question
1. Who Are Our Customers?
2. How Will We Appeal to Them?
Market Segmentation
• Definition:
– Process of Dividing a Market into Distinct Subsets
– That Behave in Same Way or Have Similar Needs
• Segment Markets By:
– Geography
– Demographic Variables
– Psychographic Variables
– Behavioral Variables
– Product Type
• Can Segment Market on More Than One Dimension
Copyright © 2015 Pearson Education, Inc. All Rights Reserved
How market segment being identified
Markets can be segmented in many ways. such as by
 Geography (city. state. country).
 Demographic variables (age. gen der. Family size.
income) .
 psychographic variables (personality, lifestyle,
values).
 Behavioural variables (benefits sought. product
usage rate. brand loyalty) and
 Product type (variables by product).
Market Segmentation and Target Market
Selection
Market Segmentation Test
• Homogeneity of Needs and
Wants Within Segment?
• Heterogeneity of Needs and
Wants Among Segments?
• Small Differences Within
Segments?
• Distinct?
• Determine the Size?
• Large Enough to be Profitable?

Selecting a Target Market
• Select Segment With Best Prospects for
Entry:
– Sales Growth and Profitability
– Consistent with Founders’ Passion and
Core Competencies
• Typical Mistakes:
– Define Target Market Too Broadly
– Try to Target More Than One Segment
• Goal:
– Become Expert in Specialized Area
Target Market Size and Trends
• Rely on Primary Research When Possible
• Reliability of Assumptions:
– Reasonable
– Degree it is Based on Facts
– Good Faith Effort to be Accurate
• Estimate Size of Similar Businesses
• Review Pertinent Industry Trends
Section 2: Buyer Behavior
• The purchasing habits of individuals and/or groups.
Primarily used for marketing purposes, the analysis
includes an examination of perception, desire, decision-
making and satisfaction. The four models that are often
used include economic model, learning theory model,
psychoanalytic model and information processing model.
Buyer Behavior …con’t
• Why Will Target Customers Buy?
– Motivation to Solve a Problem
• Who Makes Decision to Purchase?
– Individuals or Groups?
• Length of Buying Process?
– Steps in Approval Process
– Buyer’s Need for Information
Degree of Involvement in Purchase Process
• High Involvement
• Medium Involvement
• Low Involvement

Section 3: Competitor Analysis
• Definition:
– Detailed Analysis of Firm’s Competition
• Purpose:
– Understand Positions of Major Competitors
– Opportunities Available to Gain
Competitive Advantage in One or more
Areas
– Tells Reader You Understand Competitive
Environment
Identification of Direct, Indirect, and
Future Competitors
• Direct Competitors
– Similar Products or Services
• Indirect Competitors
– Close Substitutes to Yours
• Future Competitors
– Businesses that Could Move into
Direct or Indirect Competitor Roles
Competitive Analysis Grid (1 of 2)
Definition: Tool for Organizing and
Presenting Information About Competitors
• Lists Primary Sources of Competitive
Advantage and Disadvantage
• Firm Must Have at Least One Key
Success Factor
• Helps to Fine-Tune Your Product Offering
Competitive Analysis Grid (2 of 2)
Factor Comp 1 Comp 2 Comp 3 Me

Location
Services
Quality
Pricing
Section 4: Estimate of Annual Sales and
Market Share
• Four Ways to Estimate Initial Sales
1. Premier Trade Association
2. Comparable Firm
3. Conduct Internet Search
4. Multiplication Method:
▪ Try to Arrive at Reasonable Number
▪ See Figure 6-4 for Example
C:\Users\ASUS User\Pictures\FIG 6.4.jpg
• Use More Than One Method
– Estimate Must be Based on Sound Assumptions
Did You Learn?
1. Describe Market Segmentation and Target Market
Selection
2. Discuss Buyer Behavior
3. Develop Competitor Analysis
4. Estimate Annual Sales and Market Share
End of lecture

Preparing Effective Business Plans: An Entrepreneurial Approach

Uploaded by

Copyright:

Available Formats

Preparing Effective Business Plans: An Entrepreneurial Approach

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Preparing Effective Business Plans: An Entrepreneurial Approach

Uploaded by

Copyright:

Available Formats

Preparing Effective Business Plans: An

• Determine the Size?

• Large Enough to be Profitable?

Copyright © 2015 Pearson Education, Inc. All Rights Reserved

Factor Comp 1 Comp 2 Comp 3 Me

Copyright © 2015 Pearson Education, Inc. All Rights Reserved

You might also like