The process of constructing a competitor analysis requires extensive research and a

thorough, structured approach. This market analysis template provides a starting point
and a structure for the due diligence required when analyzing the competition and
coming up with a plan to overcome the obstacles.

Importance of Market Analysis

Whether you own a small or big business for a short or long period of time, market
analysis is important to ensure that you are staying on top of current market trends. It
gives you an in-depth perception of what drives demand, of what strategies your
competitors are using, of what marketing techniques best fit your products and
services, etcetera. It also helps you reevaluate your current business plan and
strategies so you can maximize business growth.

In other words, market analysis is the cornerstone of any successful business. You
need to perform a market analysis on a regular basis so that you can stay ahead of the
game.

Market Analysis Template Components

Different industries require different types of market analysis. At the same time,
different businesses within the same industry will have to perform different types of
market analysis. But the basic elements of market analysis that you can find in our
market analysis template include the following:

MARKET DESCRIPTION

Your market description will detail the type of market your operating in. For instance,
what is your target market? What is the demographics of your target market? What
are their needs? What is their purchasing behavior? Etcetera. At the same time, you
need to discuss your market size so that you can have an overview of how profitable
your target market will be. Speaking of profitability, you also need to include this in
your market description. Based on the characteristics of your target market and its size,
how profitable will it be to sell products and services to this set of customers?

PORTER'S FIVE FORCES

After describing your market, its characteristics, size, and profitability, you will have
to discuss Porter's Five Forces. Porter's Five Forces is a framework used to analyze
the market competition. These include 1) the bargaining power of suppliers, 2) the
bargaining power of buyers, 3) the competitive rivalry, 4) the threat of substitute
products, and 5) the threat of new entrants.
Bargaining Power of Suppliers

The bargaining power of suppliers refers to how easy it is for your suppliers to
increase their prices. You need to determine this power because, with every increase
in your supplier's prices, your net inflow will be affected. Therefore, you also need to
consider the number of potential suppliers you can do business with, the uniqueness
of the products and services they provide, and the cost of switching your supplier.

Bargaining Power of Buyers

The bargaining power of buyers refers to how easy it is for your buyers to influence
your prices to drop. Market research comes into play when you analyze the bargaining
power of your buyers. You need to determine the number of your buyers and of their
orders. You also need to consider how much it will cost them to switch from your
products and services to a rival's. Lastly, do you have the power to influence your
buyers' purchasing behavior, or does their purchasing behavior dictate terms to you?

Competitive Rivalry

Just like your suppliers and buyers, you also need to familiarize yourself with your
rivals. How many rivals currently exist in the market? What is the quality and
quantity of their products and services compared to what you're offering? Getting to
know your rivals also means analyzing their aggressive price cuts and marketing
strategies as these factors can greatly influence the market's behavior.

Threat of Substitute Products

Say you provide banks a software that automates an important financial process. How
easy is it for your customers (in this case, banks) to perform the process by
themselves? How easy is it for your customers to replicate your software? How easy
is it for your customers to outsource this service? These are questions that you'll need
to answer when you analyze the threat of substitute products. Clients will often find a
substitute because it will cut their expenses. If they find a cheaper substitute, then you
will experience a huge decline in your profitability.

Threat of New Entrants

How easy is it for new businesses to enter your market? If your business is in the
clothing industry, it may be relatively easier for new businesses to enter the market
than if your business is providing an automating software to banks. You have to
analyze the threat of new entrants because more competitors mean you'll get a smaller
share of the market. You want to enter a business that is not that easy to enter, but also
not that difficult for you with your expertise. Analyze the cost of starting a business in
your industry and how regulated your sector is.
MARKET TRENDS

After studying Porter's Five Forces, you need to analyze market trends, which means
you have to determine your customer's purchasing behavior, your supplier's influence
over prices, the market's price sensitivity, etcetera. These are just some examples of
market trends that you need to keep an eye out for.

COMPETITIVE LANDSCAPE

Analyzing the competitive landscape will give you a clearer idea of what you're up
against. By knowing your competitors' product quality, pricing, marketing strategy,
etcetera, you can determine the areas in your business that need improvement, so that
you can remain a top contender within the industry.

KEY SUCCESS FACTORS

Lastly, you need to discuss key success factors. How can you ensure the success and
continued growth of your business? Which areas are your strength and where do you
need improvements? How do you reach your business goals and objectives?
Reevaluation will come in this part of the market analysis, so you have to have an
open mind when deciding on the steps you will take moving forward.