Chapter 6
Unit 2
Industry and Market
Analysis
Researching the Industry
A. Trends and Patterns of ChangeYou can find opportunity in an industry by
looking at trends and patterns of change.
B. Industry forces that affect your businessA number of forces will affect your ability to do
business
Researching the Industry
1.
Barriers to EntryIn established industries, the
dominate businesses have advantages
called barriers to entry. They are
conditions or circumstances that make
it difficult or costly for outside firms to
enter a market to compete with the
established firms.
Researching the Industry
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Economies of Scale- are situations
where the cost of producing one unit of
a good or service decreases as the
volume of production increases. This
means that the production costs decline
relative to the price of goods and
services.
Researching the Industry

Brand Loyalty- is loyalty to or the
tendency to buy a particular brand of
product.
Researching the Industry
2. Threats from substitute productsyour company competes with other
companies that make the same product
as you, and also competes against
other companies that produce
substitutes also. Most products have
substitutes.
Researching the Industry
3. Sources of Supply- your supplies will
have an impact on your sales. You must
find affordable sources of inventory,
raw materials, and goods.
Researching the Industry
4. Buyers’ ability to bargain- in
industries where buyers have
bargaining power, a new business may
have difficulty gaining a foothold.
Stores such as Wal-Mart and Toy’s R Us
have enormous buying power.
Researching the Industry
5. Technology- allows companies to
improve their business processes.
Without it, your company will go
bankrupt.
Researching the Industry
C. Industry Demographics- each
industry has basic characteristics or
demographics. These include the
number of companies, annual revenues,
and the size of the companies by
number of employees. These facts
reveal whether the industry is growing,
shrinking, or remaining stable.
Researching the Industry
D. The Competition- outstanding sales
potential does not always equate to a
successful business. Usually competing
products are already well established in
the market. To succeed, you must be
able to capture market share by
differentiating your business.
Researching the Industry
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Market Share- is a portion of the total
sales generated by all competing
companies in a given market. Companies
succeed by finding different niches in the
market.
Niche- is a small, specialized segment of
the market, usually based on customer
needs discovered in market research.
Researching the Industry
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Market Positioning- is the act of
identifying a specific market niche for a
product.
Competitive Advantage- is a feature
that makes a product more desirable
than its competitors’ products. Study
your competition to get on an even
playing field. See page 127, figure 6.2.
Researching the Industry
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Visit competitors’ outlets
Buy your competitors products
Search the Internet and your
competitors’ Web Sites.
Researching the Industry

Mass Marketing- is a process of
advertising to reach all customers with
a single marketing plan. The advantage
of mass marketing is that the costs are
less because only one theme is used.
The disadvantage is that the theme
must be very general or it may not be
understood by all potential customers.
Researching the Target
Customer
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No matter how large the target market,
you must know your customer and have
a market penetration strategy.
Market Penetration- is a strategy
used to reach initial customers and
increase market share. You must
establish relationships with customers
and target your marketing efforts.
Researching the Target
Customer
A. Creating a Customer Profile- A
customer profile is a complete picture of
a venture’s prospective customers. It
includes geographic, demographic, and
psychographic data, such as age
income level, education, buying habits,
places customers usually shop, and
method of payment.
Researching the Target
Customer

The four questions to ask are1. Who are my customers?
2. what do they generally buy, and how
do they hear about the products and
services they buy?
3. How often do they buy?
4. How can my business meet their
needs?
Researching the Target
Customer
B. Evaluating Customers’ Needs- you
have to know what your customer
needs are in order to capture their
business. You do this by completing a
customer needs analysis.
Customer Needs Analysis- pinpoints
the features and benefits of your goods
and services that customers value.
Researching the Target
Customer
An example may be a breakfast bar.
You know your customers are high
school students. They like a crunchy,
tasty breakfast bar. They also do not
have much time to eat. So the feature
of the bar is that it is crunchy and the
benefit of the bar is convenience.
Researching the Target
Customer
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C. Forecasting Demand- it is difficult
with certainty how much of a product or
service customers will buy. Several
methods can be used to forecast a
demand figure.
Researching the Target
Customer
1.The first way to forecast demand is to
use historical analogy products. You
must be able to predict the demand for
your product or service based on
demand for another one. Compact discs
vs. tapes and records
Researching the Target
Customer
2. The second way to forecast demand is
to interview prospective customers and
intermediaries. No one knows the
market better than the people who
work in it. By talking with these people
you can come up with a good estimate
for demand.
Researching the Target
Customer
3.The third way to forecast demand is to
go into limited production to test the
market. The only way to test the
reaction of potential customers is to get
the good or service into their hands.