Market Analysis Glencoe Entrepreneurship: Building a Business Doing Market Research Industry and Market Analysis 6.1 Section 6.2 Section 6 6

MarketMarketAnalysisAnalysis

Glencoe Entrepreneurship: Building a Business

Doing Market ResearchDoing Market Research

Industry and Market AnalysisIndustry and Market Analysis

6.1Section

6.2Section

6

http://www.glencoe.com/


Doing Market Research

SECTIONSECTION 6.1

Chapter 6 Market Analysis

• Define areas of analysis for industry and market research.• Describe how to conduct effective market research.

Section Objectives




SECTIONSECTION 6.1


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.

The Main Idea




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Content Vocabularyindustryvalue chainscarrying capacitycomplexitymarkettarget marketmarket segmentationmarket segmentsgeographics

psychographicsindustrial marketsmarket researchexploratory researchfocus groupdescriptive researchhistorical researchsecondary dataprimary 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




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Thorough market analysis requires:

Identifying prospective customers and determining their buying habitsAnalyzing your industry and assessing your chances for success within it

Defining Areas of Analysis




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

carrying capacityuncertaintycomplexitystage of life cycle

Industry




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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




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Uncertainty is the degree of stability or instability in an industry. Many high-tech ventures are in industries with uncertain climates.

Industry




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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.

complexity

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


Stage of Life Cycle

11

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.

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

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




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Consumer market segmentation is based on geographics, demographics, psychographics, and buying characteristics.A business can select and serve multiple market segments.

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

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



14

Market Segmentation

demographics

geographics

psychographics

buying characteristics



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Information about the geographics of the target market can help an entrepreneur decide on a geographic area to focus marketing efforts.

geographicsthe study of the market based on where customers live, including region, state, country, city, and/or area




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

psychographics

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




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

industrial markets

customers who buy goods or services for business use



18

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 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.

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


Select the Type of Market Research

20

There are three types of market research

exploratory research

descriptive research

historical research



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

exploratory researchthe initial collection and analysis of information used when very little is known about a subject; it forms a foundation for later research




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

focus groupa group of people whose opinions are studied to determine the opinions that can be expected from a larger population




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

descriptive researchthe collection of information to determine the status of something, such as in developing a customer profile




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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


Identify your information needs.

Start the Research Process

25

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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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




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The most common methods of gathering primary data about customers are:• observation• interviews• surveys

primary data

information that is collected for the first time, is current, and relates directly to the collector’s study




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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.




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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.




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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?


Industry and Market Analysis


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• Explain how to research an industry.• Identify a customer profile and customer needs analysis.

Section Objectives




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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 the chances for success.

The Main Idea




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Content Vocabularybarriers to entryeconomies of scalebrand loyaltymass marketingmarket share

nichemarket positioningcompetitive advantagecustomer profilecustomer needs analysis


Look

Researching the Industry

34

Understand

Study

Analyze

Look at trends and patterns of change.

Understand industry forces that affect your business.

Study industry demographics.

Analyze the competition.

Industry Forces That Affect Your Business

35

barriers to entry

threats from substitute products

sources of supply

buyers’ ability to bargain

technology



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

barriers to entryconditions or circumstances that make it difficult or costly for outside firms to enter a market to compete with established firm or firms




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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




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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




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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




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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




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The Competition

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

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




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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




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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


Create

Evaluate

Forecast

Researching the Target Customer

44

Create a customer profile.

Evaluate customers’ needs.

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




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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




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Several methods can be used to forecast demand:

Use historical analogy.Interview prospective customers and intermediaries.Go into limited production.

Forecasting Demand




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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.




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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.


MarketMarketAnalysisAnalysis


Doing Market ResearchDoing Market Research

Industry and Market AnalysisIndustry and Market Analysis

6.1Section

6.2Section

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Chapter 6MarketAnalysis



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Market Analysis Glencoe Entrepreneurship: Building a Business Doing Market Research Industry and Market Analysis 6.1 Section 6.2 Section 6 6