BUSINESS ENTREPRENEURSHIP

(CUN704)
Module 4
Market Analysis
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OVERVIEW
Module Four discusses the importance of market research and analysis, as well
as knowing your target market.
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OVERVIEW (CONT.)
Once an entrepreneur has identified an opportunity, which is based upon an idea
that has potential to be profitable as a new business, the business plan is
written. In the previous module you learned about three important sections:
Company Description, Service or Product, and Organization & Management.

Next it is important to conduct a market analysis:

"Before launching your business, it is essential for you to research your business
industry, market and competitors."

Source: https://www.sba.gov/writing-business-plan
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WHAT IS A MARKET ANALYSIS?

Here is one helpful perspective about a market analysis:

“The market analysis is one of the most important parts of any startup strategy.
Do it right, and you will have a clear idea of the path down which you are
headed. A good market analysis will enable you to lure investors, sidestep
pitfalls, and most importantly, attract customers.
If you are seeking funding, market analysis is going to be key data to convince
your audience that your business idea has the facts and hard numbers to back it
up. With that said, let’s explore the details of writing a market analysis.”

Source: http://articles.bplans.com/how-to-write-a-market-analysis/
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WHAT IS A MARKET ANALYSIS? (CONT.)
What is a market analysis? (continued)
“Market analysis is anything but empty lingo. It’s really exactly what it sounds
like: determining the characteristics unique to your particular market and
analyzing this information, which will help you make decisions for your business.
By conducting a market analysis, you will be able to gather valuable data that
will help you get to know your customers, determine appropriate pricing, and
figure out your competitors’ vulnerabilities.”
Source: http://articles.bplans.com/how-to-write-a-market-analysis/
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MARKET ANALYSIS AND THE ENTREPRENEUR
A market analysis serves an important purpose for the entrepreneur:
“A market analysis forces the entrepreneur to become familiar with all aspects of
the market so that the target market can be defined and the company can be
positioned in order to garner its share of sales. A market analysis also enables
the entrepreneur to establish pricing, distribution and promotional strategies
that will allow the company to become profitable within a competitive
environment. In addition, it provides an indication of the growth potential within
the industry, and this will allow you to develop your own estimates for the future
of your business.”

Source: http://articles.bplans.com/how-to-write-a-market-analysis/
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MARKET ANALYSIS AND THE BUSINESS PLAN

A market analysis is one of the key reasons why an investor would choose to
contribute financially to the business, including a bank.

“The market analysis isn’t just one part of a successful business plan—it’s one of
the best reasons to write one.

If you do need banks to lend you money or investors to jump on board, a

market analysis section is required, as savvy lenders or investors will need to
know that the business you’re pitching has viable market appeal. Either way, a
solid business plan complete with market analysis will be invaluable. You’ll need
to identify your potential customers and attract investors, and it will help you to
be clear about what you want to do with your business, both now and in the
future.”

Source: http://articles.bplans.com/how-to-write-a-market-analysis/
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MARKET ANALYSIS COMPONENTS
While there isn’t a specific set of rules for what needs to be included in a market
analysis, here is one set of suggestions.

“Your market analysis should include an overview of your industry, a look at your
target market, an analysis of your competition, your own projections for your
business, and any regulations you’ll need to comply with.

Industry description and outlook

This is where you’ll discuss the current state of your industry overall and where
it’s headed. Relevant industry metrics like size, trends, life cycle, and projected
growth should all be included here. This will let banks or investors see that you
know what you’re doing, and have done your homework and come prepared with
the data to back up your business idea.” (continued on the next slide)

Source: http://articles.bplans.com/how-to-write-a-market-analysis/
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MARKET ANALYSIS COMPONENTS

Target market

“In the previous section of your market analysis, you were able to look at the
general scope. In this section, you’ve got to be specific. It’s important to
establish a clear idea of your target market early on. A lot of new entrepreneurs
make the rookie mistake of thinking that everyone is their potential market. To
put it simply, they’re not.

This is a good thing—by narrowing in on your real customers, you’ll be able to

direct your marketing dollars efficiently while attracting loyal customers who will
spread the word about your business.” (continued on the next slide)

Source: http://articles.bplans.com/how-to-write-a-market-analysis/
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MARKET ANALYSIS COMPONENTS
Competitive Analysis

“This is the section in which you get to dissect your competitors, which is
important for a couple of reasons. Obviously, it’s a good idea to know what
you’re up against, but it also lets you spot the competition’s weaknesses. Are
there customers out there being underserved? What can you offer that similar
businesses aren’t offering?”
Source: http://articles.bplans.com/how-to-write-a-market-analysis/
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WHAT TO INCLUDE IN YOUR MARKET ANALYSIS
According to the Small Business Administration, the following components are
recommended for inclusion in the market analysis.

“Industry Description and Outlook – Describe your industry, including its

current size and historic growth rate as well as other trends and characteristics
(e.g., life cycle stage, projected growth rate). Next, list the major customer
groups within your industry.

Information About Your Target Market – Narrow your target market to a

manageable size. Many businesses make the mistake of trying to appeal to too
many target markets. Research and include the following information about
your market: (continued on the next slide)

Source: https://www.sba.gov/writing-business-plan
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WHAT TO INCLUDE IN YOUR MARKET ANALYSIS
According to the Small Business Administration, the following components are
recommended for inclusion in the market analysis.

“Distinguishing characteristics – What are the critical needs of your

potential customers? Are those needs being met? What are the demographics
of the group and where are they located? Are there any seasonal or cyclical
purchasing trends that may impact your business?

Size of the primary target market – In addition to the size of your market,
what data can you include about the annual purchases your market makes in
your industry? What is the forecasted market growth for this group? For more
information, see our market research guide for tips and free government
resources that can help you build a market profile.” (continued on the next
slide)

Source: https://www.sba.gov/writing-business-plan
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WHAT TO INCLUDE IN YOUR MARKET ANALYSIS
According to the Small Business Administration, the following components are
recommended for inclusion in the market analysis.

“How much market share can you gain? – What is the market share
percentage and number of customers you expect to obtain in a defined
geographic area? Explain the logic behind your calculation.

Pricing and gross margin targets – Define your pricing structure, gross
margin levels, and any discount that you plan to use. When you include
information about any of the market tests or research studies you have
completed, be sure to focus only on the results of these tests. Any other details
should be included in the appendix.” (continued on the next slide)

Source: https://www.sba.gov/writing-business-plan
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WHAT TO INCLUDE IN YOUR MARKET ANALYSIS
According to the Small Business Administration, the following components are
recommended for inclusion in the market analysis.

“Competitive Analysis – Your competitive analysis should identify your

competition by product line or service and market segment. Assess the following
characteristics of the competitive landscape:
• Market share
• Strengths and weaknesses
• How important is your target market to your competitors?
• Are there any barriers that may hinder you as you enter the market?
• What is your window of opportunity to enter the market?
• Are there any indirect or secondary competitors who may impact your
success?
• What barriers to market are there (e.g., changing technology, high investment
cost, lack of quality personnel)?” (continued on the next slide)

Source: https://www.sba.gov/writing-business-plan
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WHAT TO INCLUDE IN YOUR MARKET ANALYSIS
According to the Small Business Administration, the following components are
recommended for inclusion in the market analysis.

“Regulatory Restrictions – Include any customer or governmental regulatory

requirements affecting your business, and how you’ll comply. Also, cite any
operational or cost impact the compliance process will have on your business.”

Source: https://www.sba.gov/writing-business-plan
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OTHER BENEFITS OF A MARKET ANALYSIS
As a wrap up to this module, there are other benefits for a market analysis:

“A market analysis also enables the entrepreneur to establish pricing,

distribution and promotional strategies that will allow the company to become
profitable within a competitive environment. In addition, it provides an
indication of the growth potential within the industry, and this will allow you to
develop your own estimates for the future of your business.”

Source: https://www.entrepreneur.com/article/38308
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SUMMARY
This module discussed the importance
of market research and analysis, as
well as knowing your target market.
A definition of a market analysis was
presented, along with an explanation
of why it is important for an entrepreneur
to conduct this analysis. The components of
a market analysis were provided, along
with the essential items to include in this analysis.
The module concluded with other benefits of the market analysis.
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RESOURCES
Elements of a Business Plan
https://www.entrepreneur.com/article/38308
How to Write a Market Analysis
http://articles.bplans.com/how-to-write-a-market-analysis/
Writing a Business Plan
https://www.sba.gov/writing-business-plan
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You have completed Module 4.
Once you close out of this Module you will see your assignment for
Module 4.

Module 4 Assignment:

In 2-3 paragraphs, explain the importance of conducting market

WHAT IS research prior to the launch of a new business, and include why it is
important to understand your business environment and competition.

NEXT? This will be included in the Market Analysis section of your Business Plan
Template.

Submit your template as a Word document and upload it for the

Module 4 Assignment.
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Module 4 Quiz:

WHAT IS After you complete the assignment for Module 4, close out of the
assignment section and you will see the Module 4 Quiz. After you
complete your quiz, please review it thoroughly and press SUBMIT.
NEXT? If you do not press SAVE, you may lose everything. You must complete
the Module 4 quiz before you can move on to Module 5.
 Next is Module 5:
WHAT IS • Marketing Strategy

NEXT? You’ll begin by reviewing the presentation for Module 5.