Lesson 3: Conducting Market Analysis

A. Market Research
B. Industry Analysis
C. Market Analysis

Overview:
What is market analysis?
Market analysis is a detailed assessment of your business’s target market and
competitive landscape within a specific industry. A market analysis is a thorough
qualitative and quantitative assessment of the current market. It helps us understand
the volume and value of the market, potential customer segments and their buying
patterns, the position of your competition, and the overall economic environment,
including barriers to entry, and industry regulations. Furthermore, market analysis is
the process of examining a specific market or industry to determine various aspects
of it, including its size, growth potential, competition, trends, and customer needs.
This information is then used to make informed decisions about how to enter or
compete in the market.

A. Market Research
Market Research is a process of gathering and analyzing information about a
market, product, or service to help organizations make informed decisions. The goal
of market research is to understand the needs and preferences of potential
customers, assess market demand and competition, and identify opportunities and
challenges for a particular product or service. It is also the process of determining
the viability of a new service or product through research conducted directly with
potential customers. Market research allows a company to discover the target
market and get opinions and other feedback from consumers about their interest in
the product or service.

Market research typically involves several key components, including:

Defining the research objectives: This involves determining the specific

information that needs to be gathered, the target audience for the research, and the
overall purpose of the research.

Designing the research methodology: This involves determining the most

appropriate research approach and data collection methods, such as surveys,
interviews, focus groups, observational studies, or secondary research.
Sampling: This involves selecting a representative sample of the target population
to gather data from. Sampling can be random, stratified, or based on some other
criteria.

Data collection: This involves collecting data using the selected research
methodology and tools. Data can be collected through online surveys, phone
interviews, in-person interviews, or other methods.

Data analysis: This involves analyzing and interpreting the data collected during the
research process. The data can be analyzed using statistical tools, qualitative
analysis techniques, or a combination of both.

Reporting: This involves presenting the research findings in a clear and concise
manner. The report should provide actionable insights and recommendations based
on the research findings.

Follow-up: This involves monitoring the results of the research and evaluating the
effectiveness of any actions taken based on the research findings.

There are two main types of market research: primary research and secondary
research.
 Primary research involves collecting new data through various methods such
as surveys, focus groups, interviews, and observations. Primary research is
often more expensive and time-consuming, but it provides first-hand
information specific to the research question.
 Secondary research involves analyzing existing data such as government
reports, industry publications, and competitor information. Secondary
research is generally quicker and less expensive than primary research, but it
may not provide specific information needed for the research question.

Here are some ways in which market research is related to franchising:

Location analysis: Franchisors need to identify suitable locations for their
franchises. Market research can help them to determine the potential demand for
their products or services in different areas, and identify the demographics and
characteristics of the target market in those areas.

Competitive analysis: Franchisors need to assess the competition in the markets

they are targeting. Market research can help them to identify the strengths and
weaknesses of their competitors, and develop strategies to differentiate their
offering.

Feasibility study: Franchisors need to conduct a feasibility study to determine if

their business model is viable in different markets. Market research can help them to
assess the potential demand, pricing, and revenue projections for their franchise in
different locations.

Brand perception: Franchisors need to maintain the reputation and integrity of their
brand. Market research can help them to assess how their brand is perceived by
customers and identify areas for improvement.

Franchisee recruitment: Franchisors need to recruit suitable franchisees who are a

good fit for their business. Market research can help them to identify potential
franchisees and assess their suitability for the business.

There are many market research firms that specialize in conducting market research
for companies. However, smaller businesses and organizations can also conduct
their own market research by utilizing online survey tools, social media listening
tools, and other free or low-cost resources.

Importance of market research:

Market research helps businesses to make data-driven decisions by understanding
their customers' needs, preferences, and behaviors. It also helps businesses to
assess market demand, competition, and potential opportunities and challenges.
Market research can be used to identify new markets, target audiences, and
customer segments, as well as to develop and test marketing campaigns and pricing
strategies.

Steps involved in market research:

The market research process typically involves several steps, including defining the
research question, identifying the target audience, choosing the research method(s),
collecting and analyzing data, and presenting the findings. Each step of the process
requires careful planning and execution to ensure the accuracy and validity of the
research results.

Market research methods:

There are several methods of conducting market research, including surveys, focus
groups, interviews, observations, and experiments. Each method has its own
advantages and disadvantages, and the choice of method depends on the research
question, target audience, and available resources.

Data analysis: After collecting the data, the next step is to analyze it to draw
meaningful insights and conclusions. Data analysis can be done using statistical
software or spreadsheet programs, and may involve various techniques such as
descriptive statistics, regression analysis, and factor analysis.

Ethical considerations: Market research must be conducted in an ethical manner,

respecting the privacy and confidentiality of participants, and avoiding any deceptive
or manipulative practices. Researchers should obtain informed consent from
participants, and ensure that the research is conducted in compliance with relevant
laws and regulations.

Overall, market research is an essential tool for businesses to understand their

customers and the market in which they operate. It helps them to make informed
decisions and improve their products, services, and marketing strategies.

B. Industry Analysis
Industry analysis is a process of evaluating an industry's overall performance,
opportunities, and challenges by analyzing its structure, key players, and trends. It
helps businesses understand the current and potential market demand, competitive
landscape, and consumer behavior within an industry.

How do you do an industry analysis?

Use the following steps to learn how to do an industry analysis for your business or
potential company:
1. Conduct background research
Conduct detailed background research on your industry and competitors to
understand your market. Choose if you want to research your entire industry or look
at a specific subsection. Decide what questions you want your analysis to answer,
such as behaviors of your competitors, market growth or industry standards. Compile
a list of your competitors and look for ways you can access research about them.

2. Collect your data

Collect data that helps answer questions about the market and your competitors.
Look at the most current available industry analysis reports from your company or
others to understand recent market trends. You may also look at competitors'
advertisements, promotional materials, product placement in stores and public
financial data to learn about their profits or target consumer groups. You may also
choose to use secondary sources like government statistics and data, marketing
reports and journal articles to collect additional information about the industry or any
other topics for which you need more data.

3. Analyze your data

Use one type of industry analysis model to analyze the data you collected. In this
step, you may conduct comparisons between your products or marketing campaigns
in relation to a competitor. You may also compare your strengths to those of
competitors and evaluate how they compare. When analyzing data, keep in mind
factors that may affect the figures, such as:

• Impact of globalization on the market

• Consumer preference
• Regulatory conditions
• Impact of technology innovations
• Expected market growth

4. Write your analysis

Present your analysis in a written report to help make your findings easy to read and
share with others. Consider using a template to write and publish your findings,
including:

Introduction: Start with an overview of your industry, competitors, historical findings

or trends compiled during research.
Aim: State the purpose of your analysis and include necessary questions or context
for clarity.
Data: Showcase the data you collected in words, charts and graphs to give context
and reference points for your analysis.
Analysis: Report your findings and answer questions posed in the aim section.
Future: List the long- and short-term impact on the company based on your analysis
and address any potential future challenges that may arise from the findings.
Summary: Include a three- or four-line summary of the entire report.
Edit: Reread and edit your report before publication and distribution.
5. Evaluate your business
Use your report, specifically the analysis section, to decide on the direction of the
company regarding your focus area. For example, if you conducted an industry
analysis to find out how fast a competitor is growing their business and you find they
are growing at a rate of 12% per year, you may look for ways to exceed that growth
in your own company. If you find after completing your analysis that you still have
questions, you may run a second analysis that focuses on another industry factor

What to include in a market analysis?

A market analysis includes information about your industry, your target market, your
business goals and external factors. Your market analysis should offer answers to
the following questions:
• Industry
• Target market
• Business goals
• External factors

 Industry
You should think about and include:
Market share: What is your company's share of the market? This is best illustrated
with a graph or chart.
Competitors: Who are your direct competitors? What is their share of the market?
Projected growth: How quickly and broadly do you expect your business to grow?
What data do you have to support this forecast?
Life cycle: Where is your industry in the overall industry life cycle? Does the life cycle
support a move at this time?
Industry updates: Is there anything new happening in the industry? If so, how will the
changes impact your overall industry and your individual business?
Expectations: How do you expect your total industry to grow and change in the
future? How will that growth affect your business?
 Target market
You should think about and include:
Market size: How large is the market? How has it grown in the last few years?
Market customer: Who is the target customer? Where do they live? How old are
they? What is their income level? Be as specific as you can.
Market health: Is the target market large enough or growing quickly enough to
support your entry into the market?
 Business goals
You should think about and include:

Growth: What is your anticipated percentage of growth? What data do you have to
support this estimation?
Profits: How do you expect profits to change as a result of entering a new market? If
you anticipate an initial decline in profits, when do you expect revenue to exceed
expenses?
Product expansion: Will this growth allow for higher production? Will this growth
allow for the introduction of a new product to the market?
 External factors
You should think about and include:
Taxes: How will the shift in the market affect your taxes?
Interest rates: Is your business stable enough to handle shifting interest rates?
Technology: Do you anticipate society-wide technological advances to positively or
negatively impact your business? What plans do you have in place to support these
changes?
Regulatory changes: Are there any forecasted regulatory changes that might impact
your business? Could these regulatory changes impact your bottom line?
Environment: Do you foresee any environmental changes that might change your
business outcomes?
Types of industry analysis
The type of industry analysis you choose may depend on your focus questions or
desired outcomes. Many types of industry analysis can be quantitative using
mathematical forecasting to analyze data or qualitative, which is using experience
and individual judgement to analyze data.

Three popular types of industry analysis include:

1. Competitive Forces Model
The Competitive Forces Model, also known as Porter's Five Forces, is one of the
most famous industry analysis models. Its nickname comes from its creator,
business professor Michael Porter. This model analyzes five external forces that may
influence a market rather than the direct actions of a competitor.
The five factors include:
Competitive analysis of rivals: This factor looks at the competitiveness among
companies within an industry and how the differentiation of products can add to it.
New threat potential: This factor looks at how easy or difficult it is for a new
company to enter the industry market. Easy entry may mean the constant risk of new
competitors, but difficult entry may mean one or few companies receive the most
business or benefits for a longer time.
Supplier bargaining power: This factor focuses on the number of suppliers to an
industry and how much bargaining power they have with companies. Industries with
little supplier competition may include high supplier bargaining power.
Buyer bargaining power: This factor focuses on the bargaining power of
consumers within an industry. When consumers have more market power, they can
negotiate lower prices, ask for additional services or discounts and push for better
quality products and services.
Substitution threat: This factor focuses on the threat of competition from similar
substitute products outside of the primary industry. This may include identical
products at a lower price or higher-quality products at a lower price.
2. Broad Factor Analysis
The Broad Factor Analysis is used to assess four specific external factors that may
affect the market value of a business. Some refer to this type as the PEST Analysis,
an acronym for the factors it examines: political, economic, social and technological.

Political - The term “political” in the context of business refers to the influence of
government policies, regulations and laws on business operations and decision-making.
Examples: tax policies, trade agreements, labor laws, environmental regulations

Economic - refers to the outside economic issues that can play a role in a
company’s success.
Social - relates to the socioeconomic environment of a given industry’s market for a
business to understand how consumer needs are shaped and what brings them to
the market for a purchase.
Technological - include advancements in technology, innovation, and automation.
Technological factors can have a significant impact on industries and businesses,
leading to changes in business models, new products, and services

Examples of these factors include:

Political: Taxes, tariffs, trade policies, political stability, environmental regulation and
labor laws
Economic: Refers to the various elements of the broader economic environment that can
impact the performance of businesses.

These factors can include macroeconomic trends and economic growth, as

well as microeconomic factors such as supply and demand, market structure and
consumer behavior.

Social: Refer to the broader social and cultural environment in which businesses operate.
Social factors can include health trends, social movements, population growth, fashion
trends and demographic statistics

Technological: Refers to the various technological advancements and innovations that

impact the performance of businesses.

These factors can include new technologies such as artificial intelligence,

robotics, and automation as well as advancements in communication and
information technology.

3. SWOT Analysis
SWOT analysis stands for strengths, weaknesses, opportunities and threats. This
type of analysis summarizes four industry forces to show their direct impact on a
company. This type of analysis looks at the components of just one company. If you
choose to compare SWOT analyses of your business to a competitor, you can create
two industry analyses, one for each. Items to include within each category may be:
 • Strengths: Strengths
Characteristics of your business that make it competitive within the industry or
market.
Examples:
1. Strong brand recognition and customer loyalty
2. Experienced and knowledgeable employees
3. Strong financial position
4. High-quality products or services
5. Innovative and forward-thinking leadership

Weaknesses:
Identifying the internal weaknesses or challenges faced by the organization such as
lack of resources, outdated technology, or inefficient processes that need to be
addressed to improve business performance.
Examples:
1. Poor brand recognition and weak customer loyalty
2. Inexperienced or unskilled employees
3. Weak financial position
4. Poor quality products

Opportunities:
• Opportunities
External elements that may allow for an increase in profitability.
Examples:
- Changes in customer behavior or preferences that favor the business’s
products or services
- Technological advancements that can improve the business’s operations.
- Changes in regulations
Availability of financing
Threats:
• Threats
External elements that may impede profitability.
Examples:
- Intense competition from other businesses in the same industry.
- Changes in customer behavior
- Supply chain disruptions
- Natural disasters

Industry Analysis in Franchising

Industry analysis is important in franchising because it helps both the franchisor and
franchisee to assess the viability and potential success of the business in a particular
market. Some of the key benefits of industry analysis in franchising include:

Identifying the best market for the franchise: Industry analysis can help the
franchisor to identify the best markets for the franchise, based on factors such as
customer demand, competition, and regulatory environment.

Assessing the potential revenue and profitability: Industry analysis can help both
the franchisor and franchisee to estimate the potential revenue and profitability of the
business in a particular market, based on market size, competition, and consumer
behavior.

Understanding the competitive landscape: Industry analysis can help both the
franchisor and franchisee to identify the key competitors in the market and develop
strategies to compete effectively.

Tailoring the business model to local needs: Industry analysis can help the
franchisor and franchisee to understand the unique needs and preferences of
customers in a particular market, allowing them to tailor the business model to meet
those needs and maximize success.

Evaluating potential risks and challenges: Industry analysis can help both the
franchisor and franchisee to identify potential risks and challenges in a particular
market, such as legal or regulatory issues, that could impact the success of the
business.
Overall, Industry analysis is a critical tool for businesses to assess their competitive
position and develop effective strategies. It involves a thorough evaluation of the
industry's market, competition, and trends to identify opportunities and challenges for
growth and success.

C. Market Analysis
A market analysis helps businesses make sure they understand how increasing
volume, location or another aspect will impact their bottom line. Conducting a market
analysis involves research into many aspects of a business's industry and the overall
market. In this article, we explain what a market analysis is, what you can learn from
a market analysis, what to include in a market analysis and the data resources you
need.

Here are some common parts of market analysis:

Market Size and Growth: This includes an assessment of the current size of the
market, its historical growth rate, and future growth projections.

Market Segmentation: This involves dividing the market into different segments
based on factors such as demographics, geographics, psychographics, and
behaviors.

Market Trends: This includes analyzing changes in consumer preferences,

technology, and regulatory developments that impact the market.

Competitive Analysis: This involves evaluating the strengths and weaknesses of

competitors in the market, identifying their market share, and assessing their
strategies and offerings.

Customer Analysis: This involves understanding the needs and preferences of

customers in the market, including their demographics, purchasing habits, and
buying behaviors.
Distribution Channels: This involves examining the various channels through which
products and services are sold to customers, such as online sales, retail stores, or
direct sales.

Market Opportunities: This includes identifying potential areas for growth or new
opportunities in the market.

Threats: This includes analyzing potential risks or challenges that could negatively
impact the market, such as economic downturns, changes in regulations, or
disruptive technologies.

Market Positioning: This involves determining how a company's products or

services are positioned within the market compared to competitors.

Marketing Strategies: This includes identifying strategies for promoting and selling
products or services in the market, such as advertising, promotions, or public
relations.
Methods and Tools used for a market analysis for a better understanding:

Surveys: Surveys are widely used tools for market analysis. Companies can send
questions to their target audience through various methods, such as email, in-
person, mail, online, and telephone surveys, to gather information about their tastes,
preferences, and opinions.
Focus Groups: Focus groups are a method of gathering a small group of individuals
to discuss a product or service, providing companies with a broader perspective of
their target audience’s views and opinions. However, focus groups can be limited in
size and more expensive than other methods.
Field Trials: Field trials are tests where a company takes a group of products and
tests them in selected areas to observe consumers’ reactions and understand
market behavior towards their products. Field trials can be highly expensive
compared to other market analysis tools.
Personal Interviews: Involve one-on-one interactions with individuals to gather
information about their preferences and opinions. Companies can conduct personal
interviews in a specific region to identify behavioral patterns toward a product.
Observations: Observations are a cost-effective method of market analysis, where
companies can manually observe the market and audience to understand their
tastes and preferences. However, this method is limited in providing quantitative data
and may need to be combined with other methods to get a complete market picture.
Social Media: Social media platforms, such as Instagram, provide companies with
opportunities to engage with their target audience through polls, insights, and
questions, offering a broad perspective on customers’ preferences and opinions.

Example:
Suppose ice cream maker Ben and Jerry’s is thinking of launching a new range of
flavored ice creams. However, they doubt its popularity. Therefore, the management
decides to conduct a market analysis to understand the possible future trends.

They prepare a list of questions and conduct surveys and field groups. Besides, the
management prepared a report on the same. From the findings, they interpreted that
out of 10,000 respondents, 50% liked the first flavor, 30% favored the third flavor,
and 20% on the rest.

As a result, they could easily interpret the findings and curate their new products in
the market. Thus, from the majority of votes, they launched a flavor that is a mixture
of cookie dough, chocolate, vanilla, and fudge brownie.
Importance:
Let us look at the importance of market analysis in the decision-making process:

Understanding Customers: It helps understand target customers’ tastes and

preferences for better marketing campaigns and future market predictions.
Tracking Competition: Competitive analysis tracks competitors and helps identify
weaknesses for strategy development.
Testing Products: It provides demographic and product insights through surveys,
polls, etc., to predict product popularity before launch.
Predicting Future: It predicts opportunities and threats for informed decision-
making and proactive measures.

In franchising, market analysis can help both franchisors and franchisees to:

Identify the best markets for the franchise: Market analysis can help franchisors
to identify the best markets for their franchise, based on factors such as customer
demand, competition, and regulatory environment.
Assess the potential revenue and profitability: Market analysis can help both
franchisors and franchisees to estimate the potential revenue and profitability of the
business in a particular market, based on market size, competition, and consumer
behavior.

Understand the competitive landscape: Market analysis can help both

franchisors and franchisees to identify the key competitors in the market and develop
strategies to compete effectively.

Tailor the business model to local needs: Market analysis can help the franchisor
and franchisee to understand the unique needs and preferences of customers in a
particular market, allowing them to tailor the business model to meet those needs
and maximize success.

Evaluate potential risks and challenges: Market analysis can help both
franchisors and franchisees to identify potential risks and challenges in a particular
market, such as legal or regulatory issues, that could impact the success of the
business.

Develop effective marketing strategies: Market analysis can help both franchisors
and franchisees to develop effective marketing strategies that are tailored to the
needs and preferences of customers in a particular market.

Overall, Market analysis is a comprehensive assessment of the various quantitative

and qualitative factors at play in a target market or entire industry. Market analysis is
typically used to evaluate the viability and profitability of a new market, but they can
also be used to better perform in an existing market.

Market Analysis vs Market Research vs Industry Analysis

Overall, Market analysis is a comprehensive assessment of the various quantitative
and qualitative factors at play in a target market or entire industry. Market analysis is
typically used to evaluate the viability and profitability of a new market, but they can
also be used to better perform in an existing market.

Members:
Leader: Gorero, Ronaline Rose
Members: Jugarap, Rosemarie
 Villa, Maria Fe
Pabuaya, Jengky