You might know that market analysis is an extremely powerful business tool, but what exactly is the market analysis definition?
You might know that market analysis is an extremely powerful business tool, but what exactly is the definition of market analysis?
In short, market analysis is a complete assessment of the size and nature of a given market or industry. It takes into account both quantitative factors, such as the volume and value of the market, and qualitative factors, such as the competition and regulation of the market.
Want to know more about market analysis? Read on to find out the exact, dictionary definition of market analysis, which we'll analyze with a helpful explanation and several great examples!
Definition of Market Analysis
So what exactly is the definition of market analysis? To answer this, we took definitions from two reputable sources — including a major US dictionary!
According to Merriam-Webster, market analysis is:
"a phase of marketing research conducted to determine the characteristics and extent of a market"
On the other hand, Alexa defines market analysis as:
"a quantitative and qualitative assessment of a market. It examines the market size, various market segments, customer buying patterns, the competition, and the economic environment"
In both cases, it's clear that market analysis is a tool used to assess or characterize a market.
What's more, both sources refer to the size of the market as a key variable in market analysis: in the case of Merriam-Webster, they explicitly refer to the "extent of [the] market", while Alexa refers to the "market size." Beyond that, the Merriam-Webster definition leaves the scope of market analysis to your imagination, while Alexa lists specific assessment criteria:
- Market segments
- Customer buying patterns
- Competition
- Economic environment
Explanation of Market Analysis
Definitions are one thing, but what does market analysis actually mean? We'll break down everything you need to know about market analysis in this comprehensive explanation.
What Is Market Analysis?
Market analysis is a research tool — often presented in the form of a report — that helps you better understand a given market or industry. Market analysis is most often used by enterprises of all sizes who are thinking about venturing into a new market. For these businesses, market analysis can be an extremely valuable tool to establish whether the new venture is a smart business decision.
Whether you refer to it as a tool, an assessment, a report, or something else, the basic principle of market analysis is the same: you collect up data about a given market and present it in some meaningful way.
What Does Market Analysis Include?
Market analysis can take into account a whole variety of factors, but there are a few key points we suggest you focus on. They are:
- Market volume
This refers to the size of the given market in terms of the number of participants or units sold per year. Together with market value, it helps illustrate the scale of a market.
- Market value
This refers to the size of the given market in terms of the monetary value of goods or services exchanged per year. Considered alone, market value gives a better insight into the size of a market than volume.
- Market need
This refers to the consumer need for particular goods or services within the given market. Typically, the higher the need, the more attractive the market.
- Competition
This refers to the competition created by other businesses offering the same goods or services in the given market.
- Regulation
This refers to the government regulation affecting entry to and operation within the given market.
The first two of those factors are described as quantitative, since they're easy to measure. The remaining factors — like market need — are described as qualitative, since they can't really be measured (instead, they can only be described).
Why Conduct Market Analysis and When to Do It
So what's the point of all of this tough research? After all, it can be tough to decide which factors to include, and — even then — it can be difficult and/or costly to find the data.
Market analysis is conducted for two main reasons, one of which we touched upon earlier. They are:
- To assess viability of a new market
Market analysis is most often used to assess whether a business should enter a new market. Entering a new market or industry can be an extremely costly and time-consuming process, so it's important to know (with as much certainty as possible) that your new venture will succeed.
- To thrive in an existing market
Market analysis can also be used to assess a market in which you already operate. In this case, market analysis can allow a business to better perform in its market, especially by uncovering previously unnoticed factors. Also, market analysis can be a good indicator of whether a business needs to invest more or less resources in a given market, as it can help predict the future of that market.
Market Analysis Examples
Now that you have a good grasp of the definition of market analysis (and what that definition really means), you might be curious to see some real examples of market analysis. Unfortunately, market analysis reports are extremely difficult to find, since they're often created by businesses for internal use only. After all, why share your extensive research with competitors?
Even on the internet, it's extremely difficult to find examples of market analysis. That's why we created this handy market analysis example for the smartphone industry. In the example, you'll find a ton of great information, including:
- The research factors for a market analysis of the smartphone industry
- How to summarize market analysis in a single sentence
- How to correctly interpret and use market analysis
Final Thoughts
Market analysis is nothing too difficult! It's simply a tool for finding out the different characteristics of a chosen market or industry, however dictionaries choose to define it. For more information about market analysis, definitely check out our post What Is Market Analysis?, review the key factors for market analysis, and see our real example of market analysis for the smartphone industry.
Photo by Eliott Reyna on Unsplash
