Business Plan- Market Analysis

Image Courtesy:

89studio

Why Business Plan?

Business Plan is a document to be prepared by the entrepreneurs themselves and not outsourced as they are giving shape to their ideas and they have to execute their plans. Planning is an essential part of any business activity. The entrepreneur should plan how much of each resource is required to convert his idea into a viable business.

A detailed  plan is required especially if you want to source external funding. Further, if you are a B-B supplier your customers may want to look at your plans before they can commit for  long term relationship.

ELEMENTS OF THE PLAN

  1. Executive Summary
  2. Product or service
  3. Management Team
  4. Market and Competition
  5. Marketing and Sales
  6. Technology and Operations
  7. Business system and schedule and risk mitigation
  8. Financial Planning and Financing

Image Courtesy:

kittijaroon

Why Market analysis?

Market and customers are synonymous. You should have an in-depth understanding of the customer needs and also how their needs are currently being fulfilled by your competitors. Why will customers switch over to your product or services and what is your unique selling proposition?

This is required even if you are a startup entrepreneur and not planning to have a formal plan document. A good market analysis will help you with a clear vision while attracting investors. It helps you avoid pitfalls and bring in more customers. Thus market analysis is one of the critical components of any business plan. 

MARKET ANALYSIS

The following factors have to be taken into account for preparing a detailed market analysis.

  1. Size , growth trends and forecasts (Smart phones growth in India & China- A plethora of new entrants)
  2. Maturity of the industry (Watch Industry)
  3. Vulnerability to economic factors (Home sales)
  4. Seasonality factors (Ice cream)
  5. Technological factors ( e-commerce)
  6. Regulatory issues (Uber taxi in developed and developing countries)
  7. Supply and distribution requirements (marketing channels)
  8. Influencing factors that will have an impact on your business  (Apps on smart phones)

“If there is no competition, there is possibly no market”.-   ---- Brian Wood

  1. Show how sustainable your competitive advantage is
  2. Competing products/services
  3. Competitive position, market share distribution ( Apple vs Rest of the competition)
  4. Strengths and weaknesses of competitors
  5. Barriers to enter your target markets
  6. Possible future competition
  7. Positioning vis-à-vis the competition 

“One of the most critical sections of your business plan is your market analysis”- Tim Berry

Thanks to Prof.Ramachandran, Kavil-Clinical Professor-Executive Director, Thomas Schmidheiny Centre for Family Enterprise, ISB Hyderabad for some of the inputs.

#link_2764067

http://www.isb.edu/faculty-research/faculty/directory/ramachandran-kavil

Industry Examples

1. Shampoos in Sachets

This was launched by an Indian company pricing it at 2 cents as their market analysis showed that people earning less than $2 per day could not afford to buy a bottle of shampoo. This idea revolutionized the entire industry across all segments. Further this has become an important concept. The late Prof. CK. Prahalad propounded this idea in his book   – “ Fortune at the bottom of the pyramid” .

#link_2764070

http://ptgmedia.pearsoncmg.com/images/9780137009275/samplepages/0137009275.pdf 

2. Play School:

An entrepreneur wanted to setup a second play school in another part of the same metro. She wanted to fix annual fees at INR 50000. She did a market analysis and to her surprise found that market was willing to pay only  INR 30000


Exception to Market Analysis

However for a startup business, industry analysis may not be needed but the competitor’s analysis will be required

Nuggets

  1. Market analysis is critical for preparing business plan.
  2. Startup entrepreneurs also need to have a knowledge of their competitors
  3. Business Plan is required if you are seeking external funds.