6
Market
Analysis
Section
6.1
Doing Market Research
Section
6.2
Industry and Market Analysis
Glencoe Entrepreneurship: Building a Business
SECTION
6.1
Doing Market
Research
Section Objectives
•
•
Define areas of analysis for industry and market research.
Describe how to conduct effective market research.
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business
SECTION
6.1
Doing Market
Research
The Main Idea
To ensure success, entrepreneurs need to understand the industry and
the market.
They should define areas of analysis and conduct effective industry and
market research.
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business
SECTION
6.1
Doing Market
Research
Content Vocabulary
industry
value chains
carrying capacity
complexity
market
target market
market segmentation
market segments
geographics
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business
psychographics
industrial markets
market research
exploratory research
focus group
descriptive research
historical research
secondary data
primary data
SECTION
6.1
Doing Market
Research
Defining Areas of Analysis
In order to satisfy current
customers or attract new
ones, an entrepreneur must
conduct market analysis.
The entrepreneur will want
to understand the nature of
the industry he or she is
analyzing.
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business
industry
a collection of businesses with a
common line of products or
services
SECTION
6.1
Doing Market
Research
Defining Areas of Analysis
Thorough market analysis requires:
Identifying prospective customers and determining their
buying habits
Analyzing your industry and assessing your chances for
success within it
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business
SECTION
6.1
Doing Market
Research
Industry
There are four factors that are useful in understanding the nature of an
industry:
carrying capacity
uncertainty
complexity
stage of life cycle
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business
SECTION
6.1
Doing Market
Research
Industry
You will want to find an
industry that has carrying
capacity so that your new
business can expand and
prosper.
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business
carrying capacity
the ability of industry to support
new growth
SECTION
6.1
Doing Market
Research
Industry
Uncertainty is the degree of stability or instability in an industry.
Many high-tech ventures are in industries with uncertain climates.
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business
SECTION
6.1
Doing Market
Research
Complexity
Some businesses must
learn to deal with
complexity in many
industries.
Firms that operate in
complex industries have
more suppliers, customers,
and competitors than firms
in other industries.
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business
complexity
the number and diversity of
contacts with which a business
must deal
Stage of Life Cycle
There are four stages to the life cycle of
an industry.
1
Birth
2
Growth
3
Maturity
4
Decline
11
SECTION
6.1
Doing Market
Research
Target Market and Customer
After first identifying your
market, you will then need
to select a target market to
be the focus of your
company’s efforts.
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business
marketmarket
target
a specific
group ofgroup
peopleofor
customers
companies
who have
whom
a business
a demand
wishes
for a to
product
reach
or service and are willing and able
to buy it
SECTION
6.1
Doing Market
Research
Target Market and Customer
Consumer market
segmentation is based on
geographics, demographics,
psychographics, and buying
characteristics.
A business can select and
serve multiple market
segments.
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business
market segments
segmentation
subgroups
the
processofofbuyers
grouping
witha similar
market
into smaller subgroups
characteristics,
segmented
defined
by by
specific characteristics
geographics,
demographics,
psychographics, and
buying characteristics
Target Market and Customer
Market Segmentation
geographics
demographics
buying
characteristics
psychographics
14
SECTION
6.1
Doing Market
Research
Target Market and Customer
Information about the
geographics of the target
market can help an
entrepreneur decide on a
geographic area to focus
marketing efforts.
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business
geographics
the study of the market based on
where customers live, including
region, state, country, city, and/or
area
SECTION
6.1
Doing Market
Research
Target Market and Customer
An entrepreneur can study
psychographics to learn
about target customers’
feelings.
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business
psychographics
the study of consumers based on
social and psychological
characteristics, including
personalities, values, opinions,
beliefs, motivations, attitudes,
and lifestyle elements
SECTION
6.1
Doing Market
Research
Target Market and Customer
Businesses that cater to
industrial markets must
consider customers’
individual situations.
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business
industrial markets
customers who buy goods or
services for business use
Target Market and Customer
The target market for your product
or service should be:
1
Measurable
2
Large enough to be profitable
3
Reachable
4
Responsive
18
SECTION
6.1
Doing Market
Research
Conducting Market Research
Once you know the areas of
the market that you need to
analyze, you are ready to
begin market research.
The marketing research
process can be used to
identify potential markets,
analyze demand, and
forecast sales.
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business
market research
the collection and analysis of
information aimed at
understanding the behavior of
consumers in a certain market
Select the Type of Market Research
There are three types of market research
exploratory research
descriptive research
historical research
20
SECTION
6.1
Doing Market
Research
Select the Type of Market Research
A good way to start
exploratory research is to
read government or
industry publications.
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business
exploratory research
the initial collection and analysis
of information used when very
little is known about a subject; it
forms a foundation for later
research
SECTION
6.1
Doing Market
Research
Select the Type of Market Research
Another way to gather
information is to form a
focus group.
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business
focus group
a group of people whose opinions
are studied to determine the
opinions that can be expected
from a larger population
SECTION
6.1
Doing Market
Research
Select the Type of Market Research
Descriptive research can
be gathered through
questionnaires, interviews,
or observation.
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business
descriptive research
the collection of information to
determine the status of
something, such as in developing
a customer profile
SECTION
6.1
Doing Market
Research
Select the Type of Market Research
You can use historical
research to forecast your
business’s future potential.
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business
historical research
the study of the past to explain
present circumstances and predict
future trends
Start the Research Process
The Five Steps of an Effective Research Plan
5
4
3
2
1
Analyze the data.
Organize the data.
Collect primary data.
Obtain secondary resources.
Identify your information needs.
25
SECTION
6.1
Doing Market
Research
Start the Research Process
Research secondary data
before researching primary
sources because it is easily
obtained and inexpensive.
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business
secondary data
information that has already been
collected by someone else
SECTION
6.1
Doing Market
Research
Start the Research Process
The most common methods
of gathering primary data
about customers are:
• observation
• interviews
• surveys
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business
primary data
information that is collected for the
first time, is current, and relates
directly to the collector’s study
SECTION
6.1
Doing Market
Research
After You Read
1.
Define areas of analysis for industry and market research.
Areas of analysis for industry research include carrying capacity,
uncertainty, complexity, and stage of life cycle. Areas of analysis for
market research include identifying the target market through
market segmentation and conducting target marketing.
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business
SECTION
6.1
Doing Market
Research
After You Read
2.
Discuss how to conduct effective market research.
First, identify the focus of the research. Next, select the type of
market research—exploratory, descriptive, or historical. Finally,
start the research process by identifying your information needs,
obtaining secondary resources, collecting primary data, organizing
the data, and analyzing the data.
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business
SECTION
6.1
Doing Market
Research
Quiz
1. What are two examples of buying characteristics ?
2. What are four guidelines to use when segmenting the target
market?
3. Explain the term carrying capacity and why it is important in market
research?
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business
SECTION
6.2
Industry and
Market Analysis
Section Objectives
•
•
Explain how to research an industry.
Identify a customer profile and customer needs analysis.
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business
SECTION
6.2
Industry and
Market Analysis
The Main Idea
Studying a company’s industry and market helps an entrepreneur
create a product or service that people want.
It also helps the entrepreneur develop a customer profile, estimate
demand, and increase the chances for success.
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business
SECTION
6.2
Industry and
Market Analysis
Content Vocabulary
barriers to entry
economies of scale
brand loyalty
mass marketing
market share
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business
niche
market positioning
competitive advantage
customer profile
customer needs analysis
Researching the Industry
Look at trends and patterns of change.
Understand industry forces that affect your business.
Study industry demographics.
Analyze the competition.
34
Industry Forces That Affect Your Business
barriers to entry
threats from substitute products
sources of supply
buyers’ ability to bargain
technology
35
SECTION
6.2
Industry and
Market Analysis
Industry Forces That Affect Your Business
In established businesses,
the dominant businesses
have advantages that are
barriers to entry to
smaller, new ventures.
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business
barriers to entry
conditions or circumstances that
make it difficult or costly for
outside firms to enter a market to
compete with established firm or
firms
SECTION
6.2
Industry and
Market Analysis
Industry Forces That Affect Your Business
Established businesses
have achieved economies
of scale in production,
marketing, and distribution.
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business
economies of scale
situations where the cost of
producing one unit of a good or
service decreases as the volume
of production increases; the
decrease of production costs
relative to the price of goods and
services
SECTION
6.2
Industry and
Market Analysis
Industry Forces That Affect Your Business
Customers with brand
loyalty do not easily switch
to a new company that
enters the industry.
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business
brand loyalty
the tendency to buy a particular
brand of a product
SECTION
6.2
Industry and
Market Analysis
Issues in Entrepreneurship
In the past, businesses
used mass marketing to
sell products with universal
appeal and few features to
differentiate them from
competitors’ products.
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business
mass marketing
the attempt to reach all customers
with a single marketing plan
SECTION
6.2
Industry and
Market Analysis
The Competition
Usually, competing
products are already
established in the market.
To succeed, you must be
able to capture market
share by differentiating
your business.
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business
market share
a portion of the total sales
generated by all competing
companies in a given market
SECTION
6.2
Industry and
Market Analysis
The Competition
Many entrepreneurial
companies succeed by
studying the competition to
define a niche in the
market.
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business
niche
a small, specialized segment of
the market based on customer
needs discovered in market
research
SECTION
6.2
Industry and
Market Analysis
The Competition
An entrepreneur who
wishes to capture market
share can use market
positioning.
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business
market positioning
the act of identifying a specific
market niche for a product
SECTION
6.2
Industry and
Market Analysis
The Competition
You can create a
competitive grid to help
define your competitive
advantage.
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business
competitive advantage
a feature that makes a product
more desirable than its
competitors
Researching the Target Customer
Create a customer profile.
Evaluate customers’ needs.
Forecast research to forecast demand.
Conduct
44
SECTION
6.2
Industry and
Market Analysis
Creating a Customer Profile
Creating a customer
profile is the first step in
targeting your marketing
efforts.
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business
customer profile
a complete picture of a venture’s
prospective customers, including
geographic, demographic, and
psychographic data
SECTION
6.2
Industry and
Market Analysis
Evaluating Customers’ Needs
In order to provide what the
customer wants, you should
prepare a customer needs
analysis.
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business
customer needs analysis
a study that pinpoints the features
and benefits of goods or services
that customers value
SECTION
6.2
Industry and
Market Analysis
Forecasting Demand
Several methods can be used to forecast demand:
Use historical analogy.
Interview prospective customers and intermediaries.
Go into limited production.
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business
SECTION
6.2
Industry and
Market Analysis
After You Read
1.
Explain how to research an industry.
To research an industry, look at trends and patterns of change,
industry forces that affect your business, industry demographics,
and the competition.
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business
SECTION
6.2
Industry and
Market Analysis
After You Read
2.
Describe a customer profile and customer needs analysis.
A customer profile is a complete picture of a venture’s prospective
customers. It includes geographic, demographic, and
psychographic data. A customer needs analysis pinpoints the
features and benefits of your goods or services that customers
value so you can provide them with what they want.
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business
6
Market
Analysis
End of
Chapter 6
Section
6.1
Market
Doing Market Research
Analysis
Section
6.2
Industry and Market Analysis
Glencoe Entrepreneurship: Building a Business