Key Elements in Market Analysis

by Charles Pearson - Updated September 26, 2017
Businesses must have adequate distribution channels to get products to consumers.

As markets constantly change, businesses must analyze various aspects of the market to make changes to marketing strategies that allow them to remain on top. Also, newer businesses must perform adequate research so that they can know what products will provide the highest benefits to customers.

Market Size

Businesses must know the market size. They can determine the market size based off information collected from trade associations, customer surveys and market information from major businesses and government data.

Market Trends

Market trends give businesses opportunities to make a huge profit on these trends by creating products that fulfill new desires. However, trends can also lead to new threats, especially if the trends are alternatives to products that the company normally sells.

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Market Growth Rate

Companies must predict how much a market will grow. They can do this by looking at the current market growth rate and estimating the future growth rate based off of this. Companies can also look at growth data from complementary markets to guess the growth rate of the targeted market. Business growth can peak when businesses have marketed to all of the customers willing to purchase the product. Market growth can also decline due to increasing competition, decreasing customer brand identification and technological innovations replacing older products.

Distribution Channels

Businesses must understand the distribution channels available to them to get products to the consumer in the first place. Businesses that notice emerging channels can identify and tap into the channels before competitors get inside. As businesses develop more brand value, they can ask for a higher profit margin from the distributor, since distributors will want to sell products that will draw in customers.

Profit Potential

Before selling a specific product, businesses must understand the profit potential for the product. Products won't be profitable if consumers purchasing the product lack the buying power to buy the product. Products also won't be profitable when there's a high barrier to entry, making the product too expensive to release.

Business Strategies

Depending on the business's market, various factors can cause the business to come out on top. For example, some businesses will dominate the market when they achieve technological superiority. Other businesses will expand their sales to the point where they achieve economies of scale. Exclusive access to distribution channels and resources also give businesses the competitive edge.

Market Demand

When establishing a business in a new market, companies must perform an analysis of the demands of a particular product or service. Some products are considered essential by consumers, such as housing and transportation. Demand for these products can change as populations shift and as local incomes change.

Business Environment

Businesses must understand the environment that they operate under. Political and regulatory constraints can change the strategies that businesses must use to be competitive in an unfamiliar market. Businesses must also understand unique societal factors in a given area, such as the preferences of local ethnic cultures.

About the Author

Charles Pearson has written as a freelancer since 2009. He has a B.S. in literature from Purdue University Calumet and is currently working on his M.A. He has written the ebooks "Karate You Can Teach Your Kids," "Macadamia Growing Handout" and "The Raw Food Diet."

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