Market Analysis: Types, How and When to Do

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No company is created and operated in a vacuum. Managing a business is a mix of science and art, especially to achieve balance the elements that you have control with those who are outside their power of influence.

In other words, this is the effort to be able to adjust the internal characteristics of the business to get the best out of the external environment, the market. This fit is important and it is these external changes that explain the bankruptcy of big business and the emergence of new empires! That's why market analysis methods are so popular.

Main Advantages of Doing the Market Analysis

a) To take advantage of opportunities of external movements
b) Repositioning your business before it is too late
c) Mitigate the inherent risks of your business
d) Prioritize activities that will generate more return
e) Maintain the competitiveness of the business over time

ATTENTION: THERE IS NO RIGHT AND WRONG IN THE ANALYSIS OF YOUR MARKET, THE IMPORTANT IS THE SELF-KNOWLEDGE.

Precisely for this reason, every strategy-defining process, from the most rudimentary to the most elaborate, exercises and receives input from market analyzes of different types and styles.

Thus, market analyzes are typically interested in the relationship between what we have internally in our business with what exists of market forces.

Normally Analyzed Internal Factors:

a) Product portfolio
b) Business Units
c) Forces
d) Weaknesses

External Factors Usually Analyzed:

a) Competitors
b) Growth of a given market
c) Market share
d) Political, economic and social situation

The number of items to be evaluated tend to vary and will depend a lot on the complexity of your business and the maturity level of your strategy design and development process.

Over the years, several management and strategy gurus have come up with a number of methods that help structure market analysis and enable anyone to take advantage of its benefits. Below, I'll make a menu that you can use to choose which type of analysis makes the most sense for your business!

  1. Porter Forces
  2. SWOT Analysis
  3. PEST
  4. BCG
  5. ANSOFF
  6. Benchmarking

1. The 5 Porter Competitive Forces

Market Analysis: Types, How and When to Do 1

This is probably the most famous and used method of market analysis. The idea proposed by Porter is that there are 5 great forces acting in any given market:

a) Suppliers' bargain: understand how much the suppliers will put pressure on your business. Usually, the less suppliers and more specialized they are, the less attractive that market is, because you will be in their hands.

b) Clients' Bargaining: as well as suppliers, the more pulverized the customers of a certain market, the more attractive it gets because you will not depend on a few customers.

c) Competitors: is the competitiveness of that market, the more competitors already established, the less attractive a market is.

d) New Entrants: is the ease of new companies entering that market and becoming new competitors. Typically, you want to be in the market with huge ticket barriers to avoid surprises.

(e) Substitutes: similar to competitors, you should be aware of substitutes, as they can also transform the market into a more competitive and less attractive environment.

When to do this analysis?

Although this is a universally applied analysis, it is most recommended for when evaluating entry into a new market, since it was originally proposed for the evaluation of industries as a whole and not of individual firms.

How to do this analysis?

There are several theoretical books explaining the method, but few practical tools to help you with a structured step-by-step. Therefore, we have created a analysis of 5 forces of Porter that can be known in this link.

2. SWOT Analysis
spreadsheet-ready-analysis-swot templates

Together with Porter's forces, SWOT analysis / matrix is ​​the most widespread and universal method when it comes to market analysis or strategic planning. THE SWOT is special, since it precisely proposes to make the connection between the factors under our control (internal) and the (external) market factors.

If you still do not know, SWOT stands for Strenghts, Weaknesses, Opportunities and Threats. Let's take a quick look at each of the items below:

a) Forces: are those internal factors that generate benefits for the business. Typically this involves a good team, customer portfolio, location, etc.

b) Weaknesses: are the internal factors that create risks for the business. Some examples are low margin, outdated technology, membership turnover, etc.

c) Opportunities: are the external factors that are favorable to the business. They may be new laws, tax cuts, growth of some market, etc.

d) Threats: are the external factors that can be detrimental to the business. New international competitors, fall in the economy, increase of some type of cost, etc.

When to do this analysis?

Because of its more strategic character, it is interesting that the SWOT analysis is done regularly by businesses in a minimum interval of 1 year. Typically it is done as a step in a larger strategic planning process.

How to do this analysis?

SWOT analysis can be done in several ways. In group or individually. In person or at a distance. On a blackboard or excel sheet. There is no right answer, you need to see the momentum that your business fits the best. The important thing is to create an open environment of exchanges and perceptions, while noting down all the inputs and creating plans on top of them. Regardless of how you make yours, we have a SWOT analysis worksheet which can help you structure the process.

3. PEST or PESTAL analysis
Pest or Pestal Analysis

This is a type of market analysis that we see being little used formally by companies, although it is impossible to avoid it, but much debated and researched in the best management colleges.

A acronym PEST or PESTAL comes from the following terms that it aims to analyze:

a) Political: Are there changes in the government that favor a certain position that favors or does not favor your business?

b) Economic: what economic moves are taking place and how do they affect you?

c) Social: Are there major changes in human behavior that can create opportunities or threats to the business?

d) Technological: what technologies are dying and what are being born and how do we relate to them?

e) Environmental: what changes in the environment can affect our value chain?

f) Legislative: are there laws that have been proposed or can be proposed to help or hinder us?

When to do this analysis?

The PEST analysis is more like Porter because it is usually done before the business enters a particular market. However, for already operating companies, it should also be redone regularly, though not as much as SWOT, since its items do not have as much volatility.

How to do this analysis?

Because they are macro data, typically the PEST market analysis is based on surveys and secondary sources such as major business sites, government communication channels and independent surveys. In any case, in order to aggregate and organize this information, we PEST analysis worksheet which can be of great value.

4. Matrix BCG

Market Analysis: Types, How and When to Do 2

Carry out a market analysis through a BCG matrix, as well as SWOT, helps you connect some whole factors in your business, in this case your products / services, with external factors, in this case your market share and the growth of these markets themselves.

A BCG matrix was created by the Boston Consulting Group, from which it inherited its name in acronym format. It aims to generate a classification of its products / services in 4 quadrants:

a) Stars: are those products in which you have great market share and with good growth expectations. You need them to survive and you must invest much of your attention and resources in maintaining them.

b) Questioning: products with low market share, but in high growth markets. Usually, they are new products and fruit of innovation, you should be aware of how much to invest or give them.

c) Dairy Cow: are products that you have high participation, but in stagnant markets. They make up your revenue well, but they will not guarantee your future.

d) Pineapples: products with low participation and stagnant markets. The goal with these products is to think of the best possible strategy to get rid of them without impacting your overall supply.

When to do this analysis?

The BCG matrix analysis will certainly vary in company size and also feature the products / services offered. However, it is important to do this periodically to avoid portfolio mismatch as soon as possible.

How to do this analysis?

Despite being a market analysis, the BCG matrix depends on both internal and external data. Therefore, it must be made considering the product's share of the company's revenue, with business data and also comparing whenever possible with secondary data. Like the other analyzes, we have a BCG matrix worksheet which can help you compile this data and study faster.

5. ANSOFF Matrix

matrix-ansoff-automatica

A matrix ANSOFF is a market analysis very similar to BCG, as it also aims to evaluate the business portfolio according to 4 quadrants. Being that the evaluation is done according to the time of the market and the products if they are already existent or are new.

It was created by Igor Ansoff, and unlike BCG, it does not classify the portfolio of products / services, but rather defines a general market strategy for each of them:

a) Penetration: this is the strategy for products already existing in markets already known. In it, your goal is to follow that line to get more and more marketshare.

b) Product Development: this occurs when you launch a new product in a known market. The strategy in this quadrant is to be able to adjust the product so that it actually has acceptance.

c) Market Development: unlike the previous one, in that case you are wanting to take an existing product to a new market. The concern here is to understand these new customers to gain marketshare.

d) Diversification: this is the most aggressive strategy of all, where you are trying to get into a new product in a new market. Usually these types of products are found in very innovative companies or new businesses.

When to do this analysis?

The ANSOFF matrix is ​​exactly the same as BCG when it comes to the time to perform it. In fact, it is always interesting to do both matrices when analyzing your portfolio to get another vision.

How to do this analysis?

This analysis, like the SWOT, is a highly qualitative analysis that depends on the evaluation of the managers. Although it can be supported by market research, most decisions come from the interpretation of the team that is developing it. In this case, it is even more worksheet that we have developed to guide you.

6. Benchmarking (Competition Analysis)

competitive analysis report

This is the market analysis model most certainly used in practice by companies. "Keeping an eye on competition" is an important tactical activity that generates changes in the company's short-term tactics.

Although it is usually focused on pricing, the benchmarking can also be applied more deeply in the analysis of the supply gave full value and the quality of service of competitors.

Accompanying the movements of the competition can be a result of learning and also of inspiration, so it must be done constantly even if it is simply listening as your clients report other experiences of consumption.

When to do this analysis?

This is a routine and tactical analysis that should be done every day, whether by listening to the customer, reading news about the market or actually making a customer obscure with competitors.

How to do this analysis?

There is no single method for competitive analysis. Sometimes it is to go ahead of the business, sometimes it is to make a call, automatically search the internet, etc. etc. What matters is knowing what you are trying to understand. In other words, what makes your customer choose you or your competitor? What is he looking for? To help you organize this data, we also have a competitive analysis worksheet!

I hope this post has helped you choose the best methods to do the market analysis of your business! A new year is coming and it is a good time to start the planning cycle. If you would like to see more tools on the topic, see here all our strategy sheets!

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