SUMMARY

Market Situation Analysis

Analyzing markets and competition is essential to making sound business and marketing
decisions. The uses of product market analyses are many and varied. An important aspect
of market definition and analysis is moving beyond the product focus by incorporating
market needs into the analysts viewpoint.

Business strategies and markets are interrelated, and companies which do not understand
their markets and how those markets are likely to change in the future are at a
competitive disadvantage. Effective market sensing is essential in guiding businesses and
marketing strategies. Value migration – the process of customers shifting their purchases
to new business designs – needs to be anticipated and counter strategies must be
developed. An essential part of becoming market oriented is anticipating future directions
of market change.

When different levels of aggregation (generic, product-type and product-variant) are

used, products and brands are positioned within more aggregate categories, providing a
better understanding of customers, product interrelationships, industry structure,
distribution approaches and key competitors. This approach to product market analysis
offers a consistent guide to needed information regardless of the type of product-market
being analyzed. Analyzing market opportunity includes (a) defining (mapping) product
markets, (b) describing and analyzing end users (c) conducting industry and value added
chain analyses (d) evaluating key competitors and (e) estimating market size and growth
rates.

After the product market boundaries and structure have been determined, information on
various aspects of the market is collected and examined. First, it is useful to study the
people or organizations that are the end-users in the product-market at each level
(generic, product-type and variant). These market profiles of customers make it easier to
evaluate opportunities and guide market targeting and positioning strategies. Next, we
identify and analyze the firms that market products and services at each product market
level to aid in strategy development, Industry and key competitor analysis considers that
firms that compete with the company performing the market opportunity analysis. Thus
industry analysis for a personal computer producer would include the producers that
make up the industry. The analysis should also include the firms operating at all stages
(levels) in the value added system, such as suppliers, manufacturers, distributors and
retailers.

The next step is a comprehensive assessment of the major competitors. The key
competitor analysis should include both actual and potential competitors that
management considers important. Competitor analysis includes (a) describing the
company (b) evaluating the competitors, and (c) anticipating the future actions of the
competitors. It is also important to identify possible new competitors. Competitor
analysis is an ongoing activity and requires coordinated information and collection and
analysis

The mounting evidence about markets points to the critical importance of understanding
and anticipating changes in the markets. In gaining these insights, it is useful to view
competition as a three stage process of experimenting, partnering to set industry
standards, and then pursuing market share and profits. Analyzing the forces of change
provides for a basis for anticipating the future.

An important part of product-market analysis is estimating potential and forecasting

sales. The forecasts often used in product-market analysis include estimates of market
potential, sales forecasts of total sales by firms competing in the product market, and
sales forecast for the firm of interest. This information is needed for various purposes and
is prepared for different units of analysis, such as product category, brands, geographical
areas. The forecasting approach and techniques should be matched to the organizations
needs.