DO YOU KNOW YOUR MARKET?
To be able to analyse our business idea, the first thing we have to do is to know the market we are going to address our product or service to. We should collect as much information as possible about the different agents operating on it, to be able to make the correct decisions when designing our offer.
The different aspects we have to take into account when monitoring our market are the following:
We should avoid succumbing into the temptation of thinking about the ensemble of the market as an only group. It is worth knowing that not all the customers have the same purchase behaviour in front of the same product or service. There are conditions that make this behaviour different and that make some customers estimate more some features than others. It is advisable to detect which these conditions are, to divide the market into more homogeneous groups and select one or several of these groups as our priority customers, designing an offer meeting their requirements as well as possible. This strategy is called market segmentation.
Another mistake we have to avoid is thinking that in our market there are no competitors. There might be no companies doing exactly the same as ours, but, without question, before we arrived at the market the consumers were already satisfying the same need our company is going to meet through other services or products. The companies satisfying the same need are the so called indirect competitors.
The competition analysis offers us very valuable information, as it not only allows analysingÂ the present offer in the market in order to detect the possible gaps, it also offers very interesting information about some aspects as the price levels or the composition of the offer our future customers are used to.
Our company is going to enter an activity sector composed, now yes, by companies performing the same activity. Our possibilities to succeed will depend on this sectorâ€™s health.
The factors influencing this sectorâ€™s health are the following:
- The competitive intensity between companies in the sector
- The barriers to have access to it or difficulties a newly created company finds to carry out the activity
- The strength position of the sector customer
- The strength position of the suppliers
- The threat of substitutive products
- The effect of public administrations with their laws.
Last, any company, either an already established one or a newly created one, is influenced by a group of aspects on which it is difficult to act, but which condition its activity. This is what we call the company environment.
This environment should be perfectly controlled, as most of the threats and opportunities for the company come from it. It can be classified into four basic areas:
- Political environment
- Social environment
- Economic environment
- Technological environment
TOOL: CHECK YOUR KNOWLEDGE OF THE MARKET
The following list of questions will allow you identify quickly the lack of information existing in your enterprise idea. Before starting a company, you should be able to answer all the questions, but it is possible that you cannot do it at present.
To proceed to carry out a more exhaustive market research, go to the section â€śMy company step by stepâ€ť, where you will find the steps to follow to know your market better.
- What factors make some customersâ€™ behaviour be different from othersâ€™? (age, sex, purchasing power, family unit compositionâ€¦)
- Which group of customers is the most attractive? Where are they? Where do they purchase? How can I reach them?
- What does this group of customers estimate when making the purchasing decision? (price, brand, design, delivery term, after-sales serviceâ€¦)
- Who makes the purchasing decision? Is it the same person who is going to consume our product, or another one?
- Is it an individual purchaser or a group purchaser (company, community of neighbours, associationâ€¦)?
- Are we able to identify three direct competitors? And three indirect ones?
- What kind of service do they offer? Is it standard or has it got some kind of difference?
- Which is their price, communication, and delivery policy?
- Which are their strong points? And what about the weak points?
- Do any of the competitors hold a leading position? Which competitive advantage does this position offer?
- Which are the main barriers to enter the sector? (economic, getting a certificate or licence, access to distribution channelsâ€¦)
- The customersâ€™ power: Will our entire turnover depend on a few clients or do we have it distributed in a wide group?
- The suppliersâ€™ power: are there enough suppliers to ensure the supply or there are only a few controlling the market?
- Are there any substitutive products or services that can supersede ours in the market?
- Are there any regulations or laws controlling the sector? If affirmative, does this regulation have positive or negative effects?
- Are there any social, political, economic factors or technical evolution affecting our company? Which kind of influence do the existing ones have, positive or negative?