For entrepreneurs who are buzzing with enthusiasm about their business idea, it can be tempting to just jump in and start in the hope that pure hard work and enthusiasm about the product will translate into success.
The chances are, however, that the business will stand a much better chance of succeeding by really studying the market first.
If you can do a thorough, deliberate analysis of the industry you intend to enter, absolutely do it. There are many free tools that can guide you through the process, and in 2018, we will be producing a series of videos from the experts on this topic, but here are three simple business analysis methods to help you identify what distinguishes your brand from your competitors:
PEST is a way to analyse the big picture environment within your industry to identify your growth opportunities. PEST stands for:
Another variation of PEST is PESTLE, which includes the legal and environmental considerations. If you’re stuck on where to begin, start by segmenting each factor into the five Ws - who, what, when, where and why – these questions should guide your research and thinking.
While PEST offers a macro-level view of the competitive landscape, SWOT is typically used at a more micro level to analyse a specific business, product or service. This is how SWOT adds value:
• Strengths. These are your competitive strengths - the skills that work to your advantage, the resources, capital, network or value that distinguishes your brand from your competitors. These should form the basis of why customers buy from you
• Weaknesses. If you are unsure about what your weaknesses are, take your strengths and think of the opposite. Weaknesses are where your competitors have the edge over your business – issues such as inefficient bureaucracy or processes, inadequate technology, or external factors to do with the market or the economy.
• Opportunities. This is where you can use your strengths, such as lower prices than your competitor, seasonal changes or consumer trends.
• Threats. Threats will revealing your current state and highlight where you are ill-prepared. developmental opportunities.
3. 7S model
Unlike the above tools that are generally used for external analysis, the 7S model looks inward at your own company.
Developed by McKinsey & Company, the seven S’s of strategy, structure, systems, style, shared values, staff and skills demonstrate the value of the company operating as a network of interconnected parts.
The simple act of writing out your business plan through these seven values will reveal insights that will set you up for success.
Regardless of whether you are seeking funding, a key part of your business plan and route to success is the market analysis. In this section of your business plan, you really need to demonstrate that you understand your market – who will be your customers - and how attractive this market is from a financial perspective.
What is a market analysis?
A market analysis is a quantitative and qualitative assessment of a market. It looks into the size of the market both in volume and in value, the various customer segments and buying patterns, the competition, and the economic environment in terms of barriers to entry and regulation.
How to conduct a market analysis?
As well as giving you the great benefits of insight into your own operating environment, another objective of the market analysis is to show to investors that you know your market and to demonstrate that is the is large enough to build a sustainable business.
As a very basic measure, your analysis should consist of the following:
Demographics and Segmentation
When assessing the size of the market, your approach will depend on the type of business you are selling to investors.
This is where you describe who your customer is within the market.
This section is very important as it is where you must demonstrate to potential investors that you have a detailed knowledge of your market. Go into the details of the drivers of demand for your product or services.
This section needs to give a fair and honest inventory of your competitors, their strengths and weaknesses.
Barriers to Entry
Your ability to answer the questions above will be totally dependent on your type of business and your management team.
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