Market analysis - learn the methods, understand the market and grow your business
- Market analysis is called activities that allow us to learn or better understand certain market mechanisms, behaviors and processes.
- Properly conducted analysis allows for informed strategic decision-making, which involves minimizing the risk of error.
- In order to properly interpret the market situation, it is necessary to analyze both the environment closer to the company and the state of the entire region (country or continent).
- Micro-environment analysis includes learning about: competitors, potential buyers, suppliers.
- The study of the macroeconomic situation gives information on aspects: legal, political, technological, social.
- Market analysis is carried out using tools such as Porter's 5 forces method, SWOT analysis, PEST analysis, BCG matrix.
- The time and cost of conducting a market analysis depends on the specific sector you want to study and the method of study.
- A well-developed market analysis positively influences the dynamics of the company's revenues, optimizes costs, and gives a chance to identify opportunities and market niches.
Do you want to expand your business or enter a new market? Or maybe you have an interesting product or unique service you want to introduce, but lack confidence that your idea will succeed. Many people through such doubts do not take action, because they do not know how to deal with them. The solution is trivially simple - a market analysis done with very easy-to-use tools.
Market analysis - what exactly is it?
Market analysis We call activities that allow us to learn or better understand certain market mechanisms, behaviors and processes. Thanks to it, we can learn about the barriers that need to be overcome, adjust the scale of our business to the needs of consumers or develop the right strategy for growth.
Why conduct a market analysis?
Comprehensive analysis of the market, allows you to learn about its specifics and receive information on the situation in the sector. Proper analysis allows you to make informed strategic decisions, which involves minimizing the risk of making a mistake. In addition, knowledge of what a particular market looks like helps in gaining and retaining competitive advantage And the company's stable position.
How to conduct a market analysis?
In order to properly interpret the market situation, it is necessary to analyze both the environment closer to the company and the state of the entire region (country or continent). Conveniently used phrases to describe these areas are the company's micro- and macro-environment.
The former is a narrower concept. Micro-environment analysis includes cognition:
- potential buyers,
The study of the macroeconomic situation gives information on aspects:
All of this data is important when planning one's business, as it allows an entrepreneur to better prepare for market entry and more efficiently obtain the resources needed. Greater knowledge allows for better organization of strategic activities, and this is one of the most important ingredients for success.
If you need a comprehensive market analysis for your business, contact us!
Market analysis methods
As mentioned in the introduction, market analysis is carried out with the help of certain tools. Learning about the macro-environment in terms of political, technological, social, environmental and economic aspects will provide useful information, but it is not enough if you want to possess a comprehensive knowledge of the market. Several analysis tools should be used to look at the market situation from different perspectives. The models used in market analysis are widely known, as the conclusions drawn with them are invaluable.
Porter's 5 forces
One of the tools used to study a company's micro environment is the method of Porter's 5 forces. This concept makes it possible to know the structure and verify the potential of the sector into which the entrepreneur intends to enter. The model developed by Michael E. Porter involves assessing the strength of the influence of buyers and suppliers on the enterprise, the intensity of the competitive struggle in the sector and the threat of new producers or substitutes.
Below is Porter's 5 forces template.
To examine the macroeconomic situation of a company, the following can be used PEST analysis. It involves identifying the political-legal, economic, social and technological factors that are related to our activities. The fruit of using such a tool is a basic but very valuable knowledge of what we can, should and must do.
Below is the PEST analysis template.
Porter's 5 forces or PEST analysis are just examples of tools you can use, as many other methods have been developed that offer slightly different insights. An example is SWOT, which allows you to assess the strengths and weaknesses of an enterprise, as well as the opportunities and threats that affect it. Conducting a SWOT analysis boils down to identifying all the key factors affecting the strategic situation of an enterprise in four analytical categories.
Portfolio analysis - BCG matrix
On the other hand, a tool that gives you the ability to find the position a company is currently in is portfolio analysis otherwise known as. BCG matrix. This method makes it possible to assess the attractiveness and competitiveness of a company's products and services, as well as the possibility of increasing their sales and ability to generate profits.
Below is a template of the BCG matrix.
Example of what a market analysis should include
It is easier to understand the mechanism of conducting a market analysis when we give an example study for a fictional company. First, we will look at the micro-environment of the company, using the method of Porter's 5 forces.
Suppose we want to set up a restaurant in Warsaw offering traditional Polish cuisine. In the vicinity of our establishment, there are not many food outlets offering at least similar products, but there are a lot of suppliers here who are engaged in an intense competitive struggle.
The multitude of supply companies reduces their bargaining power, and the dispersion of establishments means that residents do not have much choice, which nullifies their ability to influence us and the power of competition in the sector. Given the attractiveness of the neighborhood, a major threat is the possibility of new entrants and the emergence of substitutes (coffee shops, fast food).
Once we know what the micro-environment looks like, it is worth conducting a study of the macroeconomic situation. For this, it can be used PEST analysis.
Analyzing the legal and policy aspects will make us aware of what standards our premises must meet and what we need to include in the contracts we sign with suppliers or employees. Further, looking into the economic background will allow us to choose the right financing for the business or match the offer to the financial capabilities of potential customers.
Subsequent stacking of our product list will depend on social factors, i.e. lifestyle, habits or preferences of buyers. The final step in analyzing the market will be to look into examining the technological situation. We don't want to invest in outdated equipment. We are interested in the latest solutions that will allow us to provide quality products in a fast and reliable way.
How long does it take to analyze the market?
It takes from 2 to 10 weeks for several consultants to conduct the analysis, depending on the chosen method of analysis and the availability of the needed data. However, it is hard to give a specific amount of time that is needed to perform a market analysis. The completion time depends on the specifics of the market you want to study.
It is also important how thorough an analysis you want to conduct and how many factors you will take into account. Conducting a comprehensive market analysis on your own is a very time- and labor-intensive activity, so it is worthwhile to use the help of a consulting company whose team will complete the market study in less time.
How much does a market analysis cost?
Just as the timing of a market analysis depends on many factors, so does its cost. In order to adequately prepare for a valuation, it is important to consider the three most important aspects affecting the size of the analysis, these are: the number of factors to be studied, the chosen market and the method of analysis.
However, the final cost of the market analysis will depend on details such as the availability of market data, the emergence of the need for primary research, the size of the research group, the detail of the information the client wants to receive and what elements of the analysis are most important to the client. The cost of a comprehensive analysis by a consulting firm can range from several to tens of thousands of zlotys, depending on, among other things, the aspects of the study mentioned earlier.
Get an edge over your competitors!
Whether you want to start a new business or expand it. Market analysis allows you to build a powerful knowledge base, which in turn will translate into greater freedom when doing business, which will clearly increase your chances in the sector. In addition, a well-developed market analysis positively influences the dynamics of the company's revenues, optimizes costs, and gives you a chance to identify opportunities and market niches. It allows us to better understand the wants and needs of consumers and even develop certain competitive advantages.
The more reliably you use the tools, the more advantage you will get over your competitors. Don't let yourself get ahead of others. Try them out and beat your rivals.