The Market Analysis section should illustrate your knowledge about the particular industry your business is in. It should also present general highlights and conclusions of any marketing research data you have collected. However, the specific details of your marketing research studies should be moved to the appendix section of your business plan.
This section should include: an industry description and outlook; target market information; market test results; lead times; and an evaluation of your competition.
Industry Description and Outlook
This overview section should include: a description of your primary industry; the current size of the industry as well as its historic growth rate; trends and characteristics related to the industry as a whole (ie. what life cycle stage is industry in? what is its projected growth rate, etc.); as well as the major customer groups within the industry (ie., businesses, governments, consumers, etc).
Identifying Your Target Market
Your target market is simply the market (or group of customers) that you want to target (or focus on and sell to). When you are defining your target market, it is important to narrow it to a manageable size. Many businesses make the mistake of trying to be everything to everybody. Often times, this philosophy leads to failure.
In this section, you should gather information which identifies the:
Market Tests
When you are including information about any of the market tests you have completed for your business plan, be sure to focus only on the results of these tests. Any specific details should be included in the appendix of your business plan. Market test results might include: the potential customers who were contacted; any information or demonstrations that were given to prospective customers; how important it is to satisfy the target market's needs; and the target market's desire to purchase your business's products or services at varying prices.
Lead Times
Lead time is the amount of time between when a customer places an order and when the product or service is actually delivered. When you are researching this information, you need to determine what your lead time will be for the initial order, for reorders, and for volume purchases.
Competitive Analysis
When you are doing a competitive analysis, you need to identify your competition by product line or service as well as by market segment, assess their strengths and weaknesses, determine how important your target market is to your competitors, and identify any barriers which may hinder you as you are entering the market.
Be sure to identify all of your key competitors for each of your products or services. For each key competitor, determine what their market share is. Then, try to estimate how long it will take before new competitors will enter into the marketplace. In other words, what is your "window of opportunity"? Finally, identify any indirect or secondary competitors which may have an impact on your business's success.
The strengths of your competitors are also competitive advantages which you, too, can provide. The strengths of your competitors may take many forms, but the most common include:
Weaknesses are simply the flip side of strengths. In other words,
analyze the same areas as you did before to determine what your
competitors' weaknesses are. Are they unable to satisfy their customers'
needs? Do they have poor market penetration? Is their track record
or reputation not up to par? Do they have limited financial resources?
Can they not retain good people? All of these can be red flags for
any business. If you find weak areas in your competition, be sure
to find out why they are having problems. This way, you can avoid
the same mistakes they have made.
If your target market is not important to your competition, then you will most likely have an open field to run in if your idea is a good one. That is, at least for a while. However, if the competition is keen for your target market, be prepared to overcome some barriers. Barriers to any market might include:
Regulatory Restrictions
The final area that you should look at as you're researching this section is regulatory restrictions. This would include information related to current customer or governmental regulatory requirements as well as to any changes that may be upcoming in regards to regulatory requirements. Specific details that you need to find out include: the methods for meeting any of the requirements which will effect your business, the timing involved (ie., how long do you have to comply, when do the requirements go into effect, etc.), and the costs involved.
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