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The Main Idea. 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. . Defining Areas of Analysis . - PowerPoint PPT Presentation
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Glencoe Entrepreneurship: Building a Business
Doing Market Research
SECTION 6.1
Chapter 6 Market Analysis
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
Glencoe Entrepreneurship: Building a Business
Doing Market Research
SECTION 6.1
Chapter 6 Market Analysis
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.
industrya collection of businesses with a common line of products or services
Glencoe Entrepreneurship: Building a Business
Doing Market Research
SECTION 6.1
Chapter 6 Market Analysis
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
Glencoe Entrepreneurship: Building a Business
Doing Market Research
SECTION 6.1
Chapter 6 Market Analysis
There are four factors that are useful in understanding the nature of an industry:
carrying capacityuncertaintycomplexitystage of life cycle
Industry
Glencoe Entrepreneurship: Building a Business
Doing Market Research
SECTION 6.1
Chapter 6 Market Analysis
IndustryYou will want to find an industry that has carrying capacity so that your new business can expand and prosper.
carrying capacitythe ability of industry to support new growth
Uncertainty is the degree of stability or instability in an industry. Many high-tech ventures are in industries with uncertain climates.
Glencoe Entrepreneurship: Building a Business
Doing Market Research
SECTION 6.1
Chapter 6 Market Analysis
ComplexitySome 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.
complexitythe number and diversity of contacts with which a business must deal
6.1
Stage of Life Cycle
7
There are four stages to the life cycle of an industry.
1
2
3
4
Birth
Growth
Maturity
Decline
Glencoe Entrepreneurship: Building a Business
Doing Market Research
SECTION 6.1
Chapter 6 Market Analysis
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
Glencoe Entrepreneurship: Building a Business
Doing Market Research
SECTION 6.1
Chapter 6 Market Analysis
Target Market and Customer
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
6.1
Target Market and Customer
10
Market Segmentation
demographics
geographics
psychographics
buying characteristics
Glencoe Entrepreneurship: Building a Business
Doing Market Research
SECTION 6.1
Chapter 6 Market Analysis
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.
geographicsthe study of the market based on where customers live, including region, state, country, city, and/or area
Glencoe Entrepreneurship: Building a Business
Doing Market Research
SECTION 6.1
Chapter 6 Market Analysis
Target Market and Customer
An entrepreneur can study psychographics to learn about target customers’ feelings.
psychographicsthe study of consumers based on social and psychological characteristics, including personalities, values, opinions, beliefs, motivations, attitudes, and lifestyle elements
Glencoe Entrepreneurship: Building a Business
Doing Market Research
SECTION 6.1
Chapter 6 Market Analysis
Target Market and Customer
Businesses that cater to industrial markets must consider customers’ individual situations.
industrial marketscustomers who buy goods or services for business use
6.1
Target Market and Customer
14
The target market for your product or service should be:
Measurable
Large enough to be profitable
Reachable
Responsive
1
2
3
4
Glencoe Entrepreneurship: Building a Business
Doing Market Research
SECTION 6.1
Chapter 6 Market Analysis
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
6.1
Select the Type of Market Research
16
There are three types of market research
exploratory research
descriptive research
historical research
Glencoe Entrepreneurship: Building a Business
Doing Market Research
SECTION 6.1
Chapter 6 Market Analysis
Select the Type of Market Research 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
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
Glencoe Entrepreneurship: Building a Business
Doing Market Research
SECTION 6.1
Chapter 6 Market Analysis
Select the Type of Market Research
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
Glencoe Entrepreneurship: Building a Business
Doing Market Research
SECTION 6.1
Chapter 6 Market Analysis
Select the Type of Market Research
You can use historical research to forecast your business’s future potential.
historical researchthe study of the past to explain present circumstances and predict future trends
6.1
Identify your information needs.
Start the Research Process
20
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.
Glencoe Entrepreneurship: Building a Business
Doing Market Research
SECTION 6.1
Chapter 6 Market Analysis
Start the Research Process
Research secondary data before researching primary sources because it is easily obtained and inexpensive.
secondary datainformation that has already been collected by someone else
Glencoe Entrepreneurship: Building a Business
Doing Market Research
SECTION 6.1
Chapter 6 Market Analysis
Start the Research Process
The most common methods of gathering primary data about customers are:• observation• interviews• surveys
primary datainformation that is collected for the first time, is current, and relates directly to the collector’s study
Industry and Market Analysis
Glencoe Entrepreneurship: Building a Business
SECTION 6.2
Chapter 6 Market Analysis
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
6.1
Look
Researching the Industry
24
Understand
Study
Analyze
Look at trends and patterns of change.
Understand industry forces that affect your business.
Study industry demographics.
Analyze the competition.
6.1
Industry Forces That Affect Your Business
25
barriers to entry
threats from substitute products
sources of supply
buyers’ ability to bargain
technology
Industry and Market Analysis
Glencoe Entrepreneurship: Building a Business
SECTION 6.2
Chapter 6 Market Analysis
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 entryconditions or circumstances that make it difficult or costly for outside firms to enter a market to compete with established firm or firms
Industry and Market Analysis
Glencoe Entrepreneurship: Building a Business
SECTION 6.2
Chapter 6 Market Analysis
Industry Forces That Affect Your Business
Established businesses have achieved economies of scale in production, marketing, and distribution.
economies of scalesituations 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
Industry and Market Analysis
Glencoe Entrepreneurship: Building a Business
SECTION 6.2
Chapter 6 Market Analysis
Industry Forces That Affect Your Business
Customers with brand loyalty do not easily switch to a new company that enters the industry.
brand loyaltythe tendency to buy a particular brand of a product
Industry and Market Analysis
Glencoe Entrepreneurship: Building a Business
SECTION 6.2
Chapter 6 Market Analysis
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 marketingthe attempt to reach all customers with a single marketing plan
Industry and Market Analysis
Glencoe Entrepreneurship: Building a Business
SECTION 6.2
Chapter 6 Market Analysis
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 sharea portion of the total sales generated by all competing companies in a given market
Industry and Market Analysis
Glencoe Entrepreneurship: Building a Business
SECTION 6.2
Chapter 6 Market Analysis
The CompetitionMany 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
An entrepreneur who wishes to capture market share can use market positioning.
market positioningthe act of identifying a specific market niche for a product
Industry and Market Analysis
Glencoe Entrepreneurship: Building a Business
SECTION 6.2
Chapter 6 Market Analysis
The Competition
You can create a competitive grid to help define your competitive advantage.
competitive advantagea feature that makes a product more desirable than its competitors
6.1
Create
Evaluate
Forecast
Researching the Target Customer
33
Create a customer profile.
Evaluate customers’ needs.
Conduct research to forecast demand.
Industry and Market Analysis
Glencoe Entrepreneurship: Building a Business
SECTION 6.2
Chapter 6 Market Analysis
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
Industry and Market Analysis
Glencoe Entrepreneurship: Building a Business
SECTION 6.2
Chapter 6 Market Analysis
Evaluating Customers’ Needs
In order to provide what the customer wants, you should prepare a customer needs analysis.
customer needs analysisa study that pinpoints the features and benefits of goods or services that customers value
Industry and Market Analysis
Glencoe Entrepreneurship: Building a Business
SECTION 6.2
Chapter 6 Market Analysis
Several methods can be used to forecast demand:
Use historical analogy.Interview prospective customers and intermediaries.Go into limited production.
Forecasting Demand