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C. The Market Analysis
This section should present sufficient information about the relevant
market for your company's product (or service), as well as establish
that the market is large enough to accommodate the company's sales
goals.
Answer the following questions:
1. How big is the Market?
Describe the potential market in terms of the following:
• Size (units or dollars)
• Historical and projected growth rate (%)
• What are the major factors driving the growth of the Market?
Note: the source of information should be revealed. Attach appendices
if any.
Example: Bread market
- American consumer eats an average equivalent of 2 slices of
bread daily. The estimated bread market size is 500million slices
daily (assuming 250million U.S. population). With an estimated
price of $0.25 per piece, the bread market is about $12.5 million
daily.
- Bread is sold through many retail outlets including supermarkets,
bakeries, cafes, restaurants, fast-food chains and specialty bread
and pasta shops.
- The overall bread market has shown little growth in the past.
However, the demand for European-style gourmet bread such as croissants
has grown exponentially.
- The introduction of European-style bread products seems to
be the primary factor driving the growth of the market.
2. Who are your competitors?
Describe the currently existing as well as potential direct competitors
in terms of the following:
• Sales level, market share and profitability
• Strengths and weaknesses of their products or services
Example: Bread and pasta shop competition
- The bread and pasta industry is local competition only because
proximity and convenient access to the store is a major influencing
factor in purchase decision. Buyers are only willing to travel
a finite distance from their residence or office to make such
purchases. Therefore, another bread and pasta shop situated 15
miles from our store would not considered as a direct competitor.
- We do not consider bakeries, cafes and supermarket-type products
as direct competition because we believe that our store concept
appeals to a niche market segment that are less price sensitive.
Our potential customers are willing to pay higher prices for fresh
and gourmet bread and pasta products in great varieties.
- There are about 15 bread and pasta shops currently existing
in the city. Most of these shops offer high quality bread and
pasta products in great varieties. The success of the few existing
bread and pasta shops is the strongest indicator of our store's
potential.
- Competitors' sales and profit
- Est. no of customers per day per store: 400
- Est. average purchase per customer: $5
- Est. sales per day per store: $2,000
- Est. annual store sales: $720,000
- Est. net profit per store: $108,000
3. What are the strategic goals of your company?
How do you plan to differentiate your business from competition?
In other words, what is your positioning strategy?
What percentage of the market will your company penetrate?
Example: Bread and pasta shop
- The goal is to become the dominant bread and pasta shop in
XX area.
- Our store plans to offer products that are made fresh daily
in wide varieties at comparable prices to competition.
- The strategic implication of local market is to secure the
best location in a given community of target market. We will situate
our store at location with high volumes of foot traffic in affluent,
cosmopolitan communities with high population density.
- We highly emphasize on service and aim to build a sense of
community. We believe our high quality products, combined with
hospitable service, will generate high volume of repeat businesses.
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