industry and market analysis unit 2. researching the industry examine industry trends,...
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Industry Forces that Affect Your Business 1.Barriers to Entry 2.Threats from Substitute Products 3.Sources of Supply 4.Buyer’s Ability to Bargain 5.TechnologyTRANSCRIPT
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Industry and Market Analysis
Unit 2
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Researching the Industry
Examine industry trends, demographics, and competition Trends and Patterns of Change
Is it becoming more difficult for new companies to enter? Has the rate of sales growth slowed? How quickly do things change in the industry?
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Industry Forces that Affect Your Business
1. Barriers to Entry2. Threats from Substitute Products3. Sources of Supply4. Buyer’s Ability to Bargain5. Technology
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1. Barriers to Entry
Barriers to Entry - are conditions or circumstances that make it difficult or costly for outside firms to enter a market to compete with established firms
Economies of Scale – are situations where the cost of producing one unit of a good or service decreases as the volume of production increases
Brand Loyalty – loyalty to or the tendency to buy a particular brand of a product
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2. Threats from Substitute Products
If the industry is very competitive you will be competing with those companies that produce products similar to yours
Your business will also be competing with companies that produce substitute products
Most products have substitutes
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3. Sources of Supply
Suppliers have an impact on sales You must have access to affordable sources of
Inventory Raw materials Goods
You should also consider Location of suppliers Trade discounts they offer Availability of alternative sources
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4. Buyer’s Ability to Bargain
Industries where buyers have bargaining power may make it difficult for new entries
Large discount buyers have enormous bargaining power which allows them to purchase their inventories at deep discounts Wal-Mart Costco Home Depot
Small businesses struggle to compete
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5. Technology
Enables companies to improve their business processes Companies that use technology operate effectively and
efficiently Is costly to the business Trade offs can be well worth it
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Industry Demographics
Basic characteristics include Number of companies Annual revenues Average size of the companies by number of employees
These facts reveal whether the industry is growing, shrinking, or remaining stable
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The Competition
Market share is a portion of the total sales generated by all competing companies in a given market
Niche is a small, specialized segment of the market based on customer needs
Market positioning is the act of identifying a specific market niche for a product or service
Competitive Advantage is a feature that makes a product more desirable than its competitor’s products
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Researching the Target Customer
Creating a customer profile – is a complete picture of a business’s prospective customers
When creating a customer profile, ask these questions Who are my customers? What do they generally buy, and how do they hear about
the products and services they buy? How often do they buy? How can my products or services meet their needs, or what
value can I provide?
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Evaluating Customers’ Needs
Customer Needs Analysis pinpoints the features and benefits of your goods and services that customers value
You must provide the features and benefits that your target customers want
It creates a better chance that they will choose your product or service over the competitiors