To establish the attractiveness of a market and to undertake its SWOT analysis, firms must undertake market analysis. Market analysis gives insights into the market situations and helps the firms to establish a strong hold. Market Analysis is a process that aims to identify and enumerate the important characteristics of a market by using a range of Market Research techniques. Such analysis provides a clear insight into the consumer requirements, competitors, and distribution channels etc, which help the business to market more effectively.
Market analysis has following dimensions:
a. Market Size: With the help of various sources such as government data, customer surveys etc, the size of the market can be evaluated. This would help the firms to determine the potential sales for a particular product if its use were expanded. One can calculate the Market Size by measuring the total volume of all sales in the market.
b. Market Trends: Market trends help the firms to determine new opportunities and threats. Some examples of useful trends are price sensitivity, demand for innovation, and quality emphasis etc.
c. Market Segmentation: Market segmentation is the process of dividing the market into a number of portions that are different from one another, while individuals exhibiting similar traits fall under one group. With the help of segmentation firms can anticipate the needs of its potential customers to a greater extent, by determining the group of people best suited for a particular product or service offering.
d. Market Profitability: While different firms in a market will have different levels of profitability, the average profit potential for a market can be used as a guideline for knowing how difficult it is to make money in the market. Michael Porter suggested a framework, known as Porter’s five forces that influence the market profitability. These factors are:
- Buyer power
- Supplier power
- Barriers to entry
- Threat of substitute products
- Rivalry among firms in the industry
e. Distribution Channels: In a market analysis information related to distribution system is useful for company to devise new improved methods. Information on the following is helpful:
Existing distribution channels: In case the existing channel is sufficient or not?
Trends and emerging channels: Information on new emerging channels t gain the first mover advantage.
f. Key Success Factors: In order to achieve its marketing objectives a firm has to consider few critical elements. These are called the key success factors. A few examples of such factors include:
- Capability to attain economies of scale
- Innovation capability
- Technological advancement etc
These success factors change over a period of time and are not the same during the different stages of the product life cycle.