MODULE ON GEC ELEC 13A

ENTREPRENEURSHIP

UNIT 2: DEVELOPING A BUSINESS PLAN

Lesson 2: Market Analysis

Learning Outcomes:

• Describe the unique selling proposition and value proposition that

differentiates one’s product/service from existing
products/services.
• Determine who the customers are in terms of:
o Target Market
o Customer requirements
o Market size
• Validate customer-related concerns through:
o Interview
o Focused Group Discussion
o Survey

Introduction

To start a business, the first thing to do is to find out what is the demand for the
product by conducting a short market survey.

It is better to do market survey (if necessary with assistance from partners or

advisers) because they will then properly understand their customers' needs and
how their business should operate. If an idea is found to be feasible, this knowledge
will in turn give the confidence to go ahead when problems are encountered,
knowing that their product is in demand.

It is important to think in advance about the type of information that is needed

and to ask people the same questions each time, so that their answers can be
compared and summarized. This should be a short exercise to keep the costs low
and in-depth market research is not necessary for most products. A convenient
way of doing this is to prepare simple questionnaires which can be used by
entrepreneurs to remind themselves of which questions to ask.

REY D. VILORIA, CPA, MBA

MODULE ON GEC ELEC 13A
ENTREPRENEURSHIP

Sample Questionnaire for a new product (Tomato Jam)

Activity 1: Prepare a Survey Questionnaire for a new product you want to

introduce in Activity 1 Lesson 1.

Sources of New Products/Service

1. Consumer

Monitor potential ideas and needs from customers and formally arrange
for consumers to express their opinions.

2. Existing Products and Services

Analysis of products and services uncovers ways to improve offerings that

may result in a new product or service.

3. Distribution Channels

Channel members can help suggest and market new products.

4. Government (Patent Office)

Files of the Patent Office can suggest new product possibilities.

New product ideas can come in response to government regulations.

5. Research and Development

Conduct research on your market and your customer needs. This results
to the development and identification of new and improved product
and services.

REY D. VILORIA, CPA, MBA

MODULE ON GEC ELEC 13A
ENTREPRENEURSHIP

Methods of Generating New Products/Services

1. Focus Group

A moderator leads a group of 8 to 14 participants through an open, in-

depth discussion in a directive or nondirective manner. This is an excellent
method for generating and screening ideas and concepts. It allows
people to be stimulated to greater creativity.

2. Brainstorming
Good ideas emerge when the brainstorming effort focuses on a product
or market area.

Rules of brainstorming:

a. No criticism of ideas or suggestions. Every idea even the wildest,

non-feasible idea is accepted.
b. Freewheeling discussion is encouraged.
c. Quantity of ideas is desired.
d. Combinations and improvements of ideas are encouraged.

3. Problem Inventory Analysis

Consumers are provided with a list of problems and are asked to identify
products that have those problems. Results must be carefully evaluated
as they may not actually reflect a new business opportunity.

Generating New Product/Services for Conventional or Innovative Businesses

Conventional ideas can be taken from tried and tested business models like
opening up a snack bar in competition with almost 100 others in a particular
city. For the innovative businesses, however, a product can be introduced that
is not yet known to the market. Needless to say, it is where experimentation and
boldness in business come in.

1. Conventional business scenario

Below are ways to start conventional business.

a. Start a business that you are familiar with.

b. Start a business due to the needs of existing business contacts.

REY D. VILORIA, CPA, MBA

MODULE ON GEC ELEC 13A
ENTREPRENEURSHIP

c. Gain business inspiration from your hobby or interest.

d. Gain inspiration from an imported item.
e. Explore the possibility of import business.

2. Innovative business scenario

Here are some ways to introduce an innovative business.

a. Gain inspiration from the needs and wants of customers.

b. Gain an inspiration from the problems and issues that bothered you
and your peers.
c. Study the usual or existing solutions and venture in the alternative
solution.
d. List down existing products and find out their other uses aside from

what was stated.

Activity 2

1. Identify the product you wanted to introduce in Lesson 1 of Unit II.

2. Classify whether the product is a conventional or an innovative
business.

Survey of Market Size and Value

A different set of questions is needed when assessing the size of the market
for a particular type of product and the value of the market (the amount of
money spent on that product each month or year).

At the same time it is possible to gather information about the types of

people who buy a particular food and where they buy it.

The information gathered from potential consumers can be analyzed by the

entrepreneur to get a good idea of the quality characteristics of the
product that consumers prefer, the total demand for the product and the
total value of the market.

This involves making a number of assumptions and it is important to consider

the following:

1) Are the people interviewed really representative of all potential

consumers?

REY D. VILORIA, CPA, MBA

MODULE ON GEC ELEC 13A
ENTREPRENEURSHIP

2) Was the number of people interviewed enough?

3) Were people giving accurate information?

Sample Questionnaire about market size and value

Activity 3: Prepare a Survey Questionnaire for the product you want to

introduce in Activity 2 Lesson 1.

REY D. VILORIA, CPA, MBA

MODULE ON GEC ELEC 13A
ENTREPRENEURSHIP

Market share and competition

Market surveys and the calculation of market size and value are important to find
out whether the demand for a product really exists.

It is therefore important from the outset, to estimate the proportion of the total
market that a new business could reasonably expect to have. This is referred as
the market share.

It is often difficult to estimate a realistic market share. The figure depends on a

large number of variables.

In many cases, new entrepreneurs over-estimate the share that they could expect,
with the result that production operates at only a small proportion of the planned
capacity.

These figures should not be assumed to represent the scale of production that
could be expected. Even if no one else is currently making a product locally, it is
likely that once a new business starts production and is seen by others to be
successful, they too will start up in competition.

Example – Estimates of market share for a new food business with different levels
of competition

No. of other Many Few One None

producers

Size of Large Small Large Small Large Small

competitors

Product range S D S D S D S D S D S D

Market share 0- 0-5 5- 10- 0- 5- 10- 20- 0-5 10- 30- 40- 100
(%) 2.5 10 15 2.5 10 15 30 15 50 80

S=similar product D= dissimilar product

Activity 4: Prepare an estimate of market share for the product you want
to introduce in Unit II, Lesson 1 using the above template.

REY D. VILORIA, CPA, MBA

MODULE ON GEC ELEC 13A
ENTREPRENEURSHIP

Competitors

Competitors are very important to the success or failure of a new business. The
entrepreneur should recognize that there are different types of competitors,

A competitor is a firm that has potential to take your customers. The products,
positioning, distribution, promotion, reputation, brand identity, business model,
costs and pricing of competitors is a key concern of strategic planning and
operations for many firms. The following are the basic types of competitors.

1. Direct
➢ A firm that sells the same products and services as you in the same
markets.
2. Indirect
➢ Indirect that sells different categories of products and services but are in
the same industry and same markets. For example, a café and restaurant
in the same city are indirect competitors.
3. Replacement
➢ A firm that sells products and services that are in a different industry that
could be used as a substitute for your products. For example, a restaurant
and a supermarket in the same city.
4. Potential
➢ A direct, indirect or replacement competitor that currently has no
distribution in your markets. For example, an organic cosmetics company
that is popular in Europe but that has no sales capabilities in the United
States represents a potential competitor for American cosmetic firms.
5. Future
➢ A firm that has business capabilities that would allow them to quickly take
market share if they entered your markets. For example, a large
technology company may be perceived as a competitor of smaller
technology firms even if they haven’t entered their market yet.

Competitors also compete with the profit margin and level of service that they
offer to retailers and with special offers or incentives to customers.

New entrepreneurs must therefore assess each of these factors using a strengths,
weaknesses, opportunities and threats (SWOT) analysis.

REY D. VILORIA, CPA, MBA

MODULE ON GEC ELEC 13A
ENTREPRENEURSHIP

Activity 5: Prepare a SWOT analysis of the product you want to introduce

in Unit II, Lesson 1 using the format above.

Activity 6:

Satisfy the demands of the following.

1. What do you mean by determining who are your customers are in terms of
a. Target market
b. Customer requirements
c. Market size
2. Discuss the methods you used in generating new products/services.

REY D. VILORIA, CPA, MBA