Market analysis is generally essential for any business. Here we examine how to use it during market research while creating a business plan.
What is Market Analysis?
A market analysis is a criterion used to describe the environment around a business venture in terms of finance, corporate relation, lifestyle, and technical aspects. While coming up with a business plan, market analysis becomes a significant part of vetting the business venture's viability. It aims to check the size of the market, the value of the market, market trends, and competitive analysis. An important question to ask in market analysis is why SWOT is a critical part of market analysis?
How Do You Come Up with a Comprehensive Market Analysis?
In this subsection, we are going to illustrate the significance of SWOT as a tool in market analysis and discuss other common components in market analysis.
SWOT analysis
Why SWOT is a critical part of market analysis? A SWOT analysis is a technique employed in market research to assess both internal and external factors that may affect a business venture. Internal factors in a business involve your strength and weakness, while external factors are threats and opportunities.
Building on strengths
When you perform a SWOT analysis, you will understand the areas in your business that are doing well. All these areas form the basis for the success of your business and give you a competitive factor in the market. The strength factors in the business might include staff, customers, services, profits, and finances.
If you find a clear way to identify these strengths, you gain a tremendous competitive advantage. Succeeding in the industry involves knowing how to recognize these strengths and then build on them.
Minimizing weaknesses
Weaknesses are the factors that put your business at risk of failure. Therefore, conducting a SWOT analysis helps you to know these weaknesses that rank your business in a disadvantaged position in the market. When you understand these factors, you either minimize or improve them. The weaknesses in the business might include staff, market position, customer base, financial resources, and low profits.
Seizing opportunities
Conducting a SWOT analysis can help you understand the business opportunities and take advantage of these opportunities. Opportunities exist from external factors such as funding, sales, and market trends. SWOT will reveal ideas on the internal factors that will help take advantage of the new opportunities.
Defending against threats
Threats are external factors that, if they enter your business, will cause big harm. Carrying out a SWOT analysis will help you identify potential threats to the business and the means to counter the effects of these threats. The threats that might attach to your business include increased competition, technology, lack of finances, falling sales, loss of staff, and government policies.
Overview of the Industry
Overview of the industry is carried out to analyze the state of the industry where the business operations take place. It includes the size of the market, market trends, and life cycle.
Target market research
In target market research, you are obliged to find out the most likely customers in the market. It can be carried in three components;
Qualitative research
It is mainly employed to understand customers' attitudes concerning a new product. It can be carried out through interviews or focus groups to distinguish between products.
Quantitative research
It is conducted using a significant number of people to have overview information on the ideal offerings for the customers.
Buyer persona
It is an analysis that focuses on the representation of a typical customer. It looks at aspects such as age and income.
Competitive analysis
In every market, there must be competition. When you carry out the competitive analysis, you will understand the magnitude of the competition, both direct and indirect competitors. It will also help you know your competitors' strengths and weaknesses.
Projections
The market analysis section focuses on aspects that affect performance, such as drivers, restraints, opportunities, and threats. This section details where offerings will fall in terms of price and perceived quality, customer behavior, growth rate, and market share projections. While many new business owners make the mistake of presuming that a small portion of a vast market can be readily acquired, it's critical to explain how that business will be gained.
How to Build a Forecast Model for Market Analysis?
Sales forecasting is a significant section of the market analysis procedure. It helps in knowing the sales present in the market and any potential customers for the products you are offering. There are three significant components in sales forecast such as;
- Labour and production cost
- Features and benefits of a product
- Distribution channel costs
Conclusion
The above illustration clearly explains why SWOT is critical for market analysis. Keep in mind that strength for one issue could be a weakness for another when doing an individual SWOT analysis. Market analysis is generally essential for any business in operation or starting.
