This section of the business plan, namely the “Market Analysis”, is probably seen by most people as the hardest part of doing the business plan. It involves a lot of research and digging for facts and information.
The Purpose of Doing the Market Analysis
It must be clear from the outset what you are really trying to achieve with doing the market analysis. The primary objective is to prove to the audience of the plan that there is indeed a “need that you can fill.”
Questions You Must Answer to Achieve the Purpose
Knowing what the primary purpose of this section is you can probably complete a list of questions that you will need to answer yourself.
• What need are you filling? (The offer)
• Who have this need? (The target market)
• Description (demographic, geographic, psychographic)
• Growth rate
• Buying behaviour
• Problems they have with current offerings
• Who else is servicing this need? (The competitors)
• Number and sizes, including market shares
• Marketing strategies including product / service, pricing, promotional and channel strategies
• Who else is involved with fulfilling this need? (Other stakeholders?)
• Government or regulatory bodies
Where to Get the Information
It may at first look like an impossible task to get proper information, but there are many sources that you can explore. We name but a few here:
1. Government data – Explore sources such as sensus information.
2. Trade associations – Normally have industry related information. You can also look at local chambers of commerce.
3. Research reports – There are many companies that do regular industry research. Some of these reports may be too expensive, but if no other data is available you will have no other option than to buy them.
4. Desk research – Use the search engines to look for information. You will be surprised at the wealth of information hidden on the Net.
5. Library – Go to your local library and ask the librarian to assist you to find information. You will be equally surprised at what is hidden there.
6. Specialist magazines – There are many specialist magazines who these days can also be found on the Internet. It may require that you subscribe to the magazine in order to get hold of member-only information but the investment will be worth your while.
7. Advertising agencies – Advertising agencies, especially the bigger players, all have strategy units and they are supposed to have the latest consumer survey data. Some may charge you to put together an analysis for you, but it is worth investigating.
Management Tools to Analyse the Market
We will not go into too much detail here but there are “sophisticated” tools that you can explore to help you in analysing the market and competitors.
• The Product Life Cycle – Most products move through several stages (Product Life Cycle or PLC) characterized by the revenue generated by the product, including the following stages:
• Porter’s Five Forces – Michael Porter developed a framework to evaluate the attractiveness of an industry or market. The five forces that influence the market profitability according to him are:
• Power of buyers
• Power of supplier
• Entry Barriers
• Threat of substitute products
• Rivalry within the industry
• Porter’s Generic Value Chain – As far back as 1985 Michael Porter identified a generic value chain model that consists of a sequence of activities used by companies to develop a competitive advantage and to create owner value. It may be useful to analyse your potential competitors according to how they create advantages and value along the chain.
There are other tools that can be used, and we’ll have a look at those at a later stage. If you use a software package to compile your plan you will find that they provide a market and industry analysis wizard that may save you a lot of time.
Happy planning. Make it a challenging, exciting and creative experience.
Rian Malan, Founder of MindMaps ZA
About MindMaps ZA
MindMaps ZA is a business and marketing consultancy specialising in empowering SMEs (Small to Medium Enterprises) http://mindmapsza.com
You can also find a free download of the consolidated articles we have written on business planning. This is an ongoing process and the document will be updated as we go along. This is available here: http://mindmapsza.com/research-and-resources/business-plans/business-plan-meals/