The Market

The market is the arena in which the plan of campaign is to be fought out. It is therefore necessary to define the market for the new product in terms of its size, its state of development, the types of customers and the competitors.

How many customers are there and what is their influence in the market? There many only be one customer for a titanium submarine and the price is therefore likely to be high but there are many thousands of customers for carbon fibre tennis rackets.

The market size, or annual consumption of the product, will be defined in terms of the scope of the business venture under consideration. The market size could therefore range from the annual consumption of the product in a given city, to a country, to a group of countries or to the whole world. If the company only has the resources to market in one country it would not be relevant to consider the world market and thought should be given to licensing or joint ventures.

In addition to the total size of the market, it will be important to know the stage of development it has reached.

There is a natural pattern for the evolution of almost any market and the stage of the cycle at which the market is entered will significantly affect the business strategy which must be adopted. These phases can be summarised as follows:

- Embryonic
- Growth
- Maturity
- Decline

Many high technology firms are researching areas which come under the first two phases but high tech markets can reach phase 4 fairly rapidly e.g. the electronic typewriter which as been superseded by the word processor.

The customers

In addition to the geographical size of the market it will be relevant to a particular business venture to segment the market by end use customers. This will break down the consumption of the particular product among these types of customers. Thus if the company planned to market its product only to the automotive industry it would ignore the consumption of the product in other sectors such as aviation, civil engineering, shipbuilding etc.

There are many other possible segmentations of the whole market which could be applied in order to arrive at the size of the market which is relevant to the enterprise being planned. The segmentations selected will reflect the decision on who are to be the prime target clients. It may be relevant to segment the market by size of customer in terms of turnover if it is considered that the clients will be either predominantly large companies or, alternatively, predominantly small companies.

The profile of the customers will also require a listing of their needs. There will probably be several important customer needs but it is likely that it will be necessary to concentrate on a limited number, in order to focus the company’s resources to the best advantage and to emphasise the product’s USP (unique selling proposition).

Separately from customer needs, it will be important to identify purchasing criteria. While the two may coincide, it is likely that other factors are important such as credit rating, status and reputation of the supplier, technical service facilities available from the supplier, bulk purchasing discounts, delivery speed, the desirability or necessity for the product to meet international performance specifications.

Competitors

Information on the number and capabilities of the competitors to the new enterprise will be most important. The new company will not have the luxury of operating in a vacuum. The better the new business idea, the stronger will be the possibility of retaliation from those companies already in the market or the stimulation of new entrants. The easiest response from existing participants would be price cutting but a number of other tactics are available depending on circumstances resources and expertise.

Knowledge of the mix of competitors already in the market will be vital in order to involve a credible business strategy. Convenient classification of competitors could be:

- Dominant / Leader
- Secondary / Strong
- Niche / Fair
- Minor / Weak

The dominant company, as the name suggests, dictates the key market indicators such as price and performance quality. The company has the most comprehensive product range and its pricing structure sets the standard for the rest of the industry. The dominant company is able to charge premium prices due to its widely perceived position of leadership. The secondary company has a lightly smaller product range but in some sectors may offer serious competition to the dominant company. The niche company will be a well run small company which does not have the product range or resources to compete head-on with the dominant or secondary companies; Its strategy is to be market leader in small, specialised market niches. The minor company has no particular strengths and is at the mercy of commercial current created by other players but may have an underlying sound control of its manufacturing costs.

CHECK LIST
- What is the geographical scope of the market: World? Europe? Local?
- What is the market value in terms of units and value?
- How fast is the market growing and where are the opportunities? Which market segment will you concentrate on and why?
- What market share are you aiming for?
- If there is no existing market or if the market is being developed what are the expected breakthrough dates?
- How would your company’s entry affect the market?
- What is the market structure? Are there many small customers or a few large customers? What do the customers do with the product and how much is their business worth?
- What are the key requirements of your customers?
- How will your company meet these needs? Current and future?
- Who are your major competitors? What are their strengths end weaknesses? What are their patent positions, potential, operating methods and profitability?
- How will they react to another player in the market?
- What is unique about your business?