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Market Analysis Back to Table of Contents. Market Analysis 2 Chapter 6 Market Analysis Doing Market Research Industry and Market Analysis 6.1 6.2

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Page 1: Market Analysis Back to Table of Contents. Market Analysis 2 Chapter 6 Market Analysis Doing Market Research Industry and Market Analysis 6.1 6.2

Market AnalysisMarket Analysis

Back to Table of Contents

Page 2: Market Analysis Back to Table of Contents. Market Analysis 2 Chapter 6 Market Analysis Doing Market Research Industry and Market Analysis 6.1 6.2

Market Analysis Market Analysis

2

Chapter 6

Market AnalysisMarket Analysis

Doing Market ResearchDoing Market Research

Industry and Market AnalysisIndustry and Market Analysis

6.1

6.2

Page 3: Market Analysis Back to Table of Contents. Market Analysis 2 Chapter 6 Market Analysis Doing Market Research Industry and Market Analysis 6.1 6.2

Market Analysis Market Analysis

3

Define areas of analysis for industry and market research.

Discuss how to conduct effective market research.

Section 6.1 Doing Market Research

6.1

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To ensure success, the entrepreneur needs to understand the industry and the market.

 

He or she should define areas of analysis and conduct effective industry and market research.

Section 6.1 Doing Market Research

6.1

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5

industry

carrying capacity

complexity

market

target market

market segmentation

market segments

geographics

psychographics

Section 6.1 Doing Market Research

6.1

industrial markets

market research

exploratory research

focus group

descriptive research

historical research

secondary data

primary data

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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.

industry a collection of businesses with a common line of products or services

Section 6.1 Doing Market Research

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Defining Areas of Analysis

Thorough market analysis requires :

Section 6.1 Doing Market Research

Identifying prospective customers and determining their buying habits

Analyzing your industry and assessing your chances for success within it

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Industry

There are four factors that are useful in understanding the nature of an industry:

Section 6.1 Doing Market Research

carrying capacity

uncertainty

complexity

stage of life cycle

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Industry

You will want to find an industry that has carrying capacity so that your new business can expand and prosper.

carrying capacity the ability of industry to support new growth

Section 6.1 Doing Market Research

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Uncertainty

Uncertainty is the degree of stability or instability in an industry.

 

Many high-tech ventures are in industries with uncertain climates.

Section 6.1 Doing Market Research

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Complexity

Some businesses must learn to deal with complexity in many industries.

complexity the number and diversity of contacts with which a business must deal.

Section 6.1 Doing Market Research

Firms that operate in complex industries have more suppliers, customers, and competitors than firms in other industries.

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Stage of Life Cycle

Section 6.1 Doing Market Research 12

There are four stages to the life cycle of an industry.

1

2

3

4

Birth

Growth

Maturity

Decline

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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.

market a group of people or companies who have a demand for a product or service and are willing and able to buy it

Section 6.1 Doing Market Research

target market a specific group of customers whom a business wishes to reach

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Target Market and Customer

Consumer market segmentation is based on geographics, demographics, psychographics, and buying characteristics.

market segmentation the process of grouping a market into smaller subgroups defined by specific characteristics

Section 6.1 Doing Market Research

market segments subgroups of buyers with similar characteristics, segmented by geographics, demographics, psychographics, and buying characteristics

A business can select and serve multiple market segments.

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Target Market and Customer

Section 6.1 Doing Market Research 15

Market Segmentation

demographicsdemographics

geographicsgeographics

psychographicspsychographics

buying characteristics

buying characteristics

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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.

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

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Target Market and Customer

An entrepreneur can study psychographics to learn about target customers’ feeling.

psychographics the study of consumers based on social and psychological characteristics, including personality, values, opinions, beliefs, motivations, attitudes, and lifestyle elements

Section 6.1 Doing Market Research

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Target Market and Customer

Businesses that cater to industrial markets must consider customers’ individual situations.

industrial markets customers who buy goods or services for business use

Section 6.1 Doing Market Research

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Target Market and Customer

Section 6.1 Doing Market Research 19

The target market for your product or service should be:

Measurable

Large enough to be profitable

Reachable

Responsive

1

2

3

4

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Conducting Market Research

Once you know the areas of the market you need to analyze, you are ready to begin market research.

market research the collection and analysis of information aimed at understanding the behavior of consumers in a certain market

Section 6.1 Doing Market Research

The marketing research process can be used to identify potential markets, analyze demand, and forecast sales.

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Select the Type of Market Research

Section 6.1 Doing Market Research 21

There are three types of market research

exploratory research

descriptive research

historical research

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Select the Type of Market Research

A good way to start exploratory research is to read government or industry publications.

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

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Select the Type of Market Research

Another way to gather information is to form a focus group.

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

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Select the Type of Market Research

Descriptive research can be gathered through questionnaires, interviews, or observation.

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

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Select the Type of Market Research

You can use historical research to forecast your business’s future potential.

historical research the study of the past to explain present circumstances and predict future trends

Section 6.1 Doing Market Research

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Identify your information needs

Start the Research Process

Section 6.1 Doing Market Research 26

The Five Steps of an Effective Research Plan

1

2

3

4

5

Obtain secondary resources

Collect primary data

Organize the data

Analyze the data

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Start the Research Process

Research secondary data before researching primary sources because it is easily obtained and inexpensive.

secondary data information that has already been collected by someone else

Section 6.1 Doing Market Research

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Start the Research Process

The most common methods of gathering primary data about customers are:

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

observation

interviews

surveys

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1. Define areas of analysis for industry and market research.

Section 6.1 Doing Market Research

6.1

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.

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2. Discuss how to conduct effective market research.

Section 6.1 Doing Market Research

6.1

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.

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Explain how to research an industry

Describe a customer profile and customer needs analysis.

Section 6.2 Industry and Market Analysis

6.2

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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 his or her chances for success.

Section 6.2 Industry and Market Analysis

6.2

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barriers to entry

economies of scale

brand loyalty

mass marketing

market share

Section 6.2 Industry and Market Analysis

6.2

niche

market positioning

competitive advantage

customer profile

customer needs analysis

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LookLook

Researching the Industry

Section 6.2 Industry and Market Analysis 34

UnderstandUnderstand

StudyStudy

AnalyzeAnalyze

Look at trends and patterns of change. Look at trends and patterns of change.

Understand industry forces that affect your business. Understand industry forces that affect your business.

Study industry demographics.Study industry demographics.

Analyze the competition.Analyze the competition.

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Industry Forces That Affect Your Business

Section 6.2 Industry and Market Analysis 35

barriers to entry

threats from substitute products

sources of supply

buyers’ ability to bargain

technology

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Industry Forces That Affect Your Business

In established businesses, the dominant businesses have advantages that are barriers to entry to smaller, new ventures.

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

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Industry Forces That Affect Your Business

Established businesses have achieved economies of scale in production, marketing, and distribution.

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

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Industry Forces That Affect Your Business

Customers with brand loyalty do not easily switch to a new company that enters the industry.

brand loyalty the tendency to buy a particular brand of a product

Section 6.2 Industry and Market Analysis

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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.

mass marketing the attempt to reach all customers with a single marketing plan

Section 6.2 Industry and Market Analysis

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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.

market share a portion of the total sales generated by all competing companies in a given market

Section 6.2 Industry and Market Analysis

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The Competition

Many entrepreneurial companies succeed by studying the competition to define a niche in the market.

niche a small, specialized segment of the market based on customer needs discovered in market research

Section 6.2 Industry and Market Analysis

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The Competition

An entrepreneur who wishes to capture market share can use market positioning.

market positioning the act of identifying a specific market niche for a product

Section 6.2 Industry and Market Analysis

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The Competition

You can create a competitive grid to help define your competitive advantage.

competitive advantage a feature that makes a product more desirable than its competitors

Section 6.2 Industry and Market Analysis

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CreateCreate

EvaluateEvaluate

ForecastForecast

Researching the Target Customer

Section 6.2 Industry and Market Analysis 44

Create a customer profile. Create a customer profile.

Evaluate customers’ needs.Evaluate customers’ needs.

Conduct research to forecast demand.Conduct research to forecast demand.

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Creating a Customer Profile

Creating a customer profile is the first step in targeting your marketing efforts.

customer profile a complete picture of a venture’s prospective customers, including geographic, demographic, and psychographic data

Section 6.2 Industry and Market Analysis

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Evaluating Customers’ Needs

In order to provide what the customer wants, you should prepare a customer needs analysis.

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

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Forecasting Demand

Several methods can be used to forecast demand:

Section 6.2 Industry and Market Analysis

Use historical analogy.

Interview prospective customers and intermediaries.

Go into limited production.

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1. Explain how to research an industry

Section 6.2 Industry and Market Analysis

6.2

To research an industry, look at trends and patterns of change, industry forces that affect your business, industry demographics, and the competition.

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2. Describe a customer profile and customer needs analysis.

Section 6.2 Industry and Market Analysis

6.2

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.

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A company’s domain name is much more than the way customers can get to its Web site.

 

Domain names have become a crucial component of companies’ marketing and branding plans.

Domain Names

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Tech Termscountry code top-level domain (ccTLD)

the part of the TLD that indicates the country of the Internet address, such as .us for United States and .fr for France

 

generic top-level domain (gTLD)

the part of a TLD that indicates the type of Web site on the Internet address, such as .com for commercial, .edu for educational, .org for organization, .gov for government, .mil for military, and .biz for business

 

Internet Corporation for Assigned Names and Numbers (ICANN) a nonprofit regulatory body that oversees domain name registration

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Tech Termsregistrar

a company that registers and sells Web site domains

 

top-level domain (TLD)

the most general part of a domain name in an Internet address

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