Market Analysis

Assessing Your Business Opportunities

William Winston, Robert E Stevens, Philip K Sherwood, John Paul Dunn

• Éditeur: Routledge
• Année: 2013
• ISBN:
  9781317765134
• Édition: 1
• Sujet: Business
• Sous-sujet: Business General

Planning is a critical process when starting a new business or introducing a new product. Market Analysis shows readers how to execute a feasibility study for more effective planning. A step-by-step approach leads the reader through the feasibility analysis process and describes what needs to be done and how to do it. Techniques and tools used in preparing a feasibility study are emphasized and can easily be applied directly from the book to real situations. Three sample feasibility studies are included to demonstrate the application of tools in manufacturing, service, and non-profit settings.Market Analysis contains all the information needed to complete a feasibility study and a complete outline of a business plan. It covers such important topics as strategic management and planning, determining market size for a product or business, analyzing costs and returns on investment for new products and services, sources of capital for new ventures, and analysis of competition. An annotated bibliography of sources of data used for feasibility studies is included for quick reference. Market Analysis is the ideal guide for all strategic planners, market analysts, and marketing researchers. Anyone considering starting a business or launching a new product will find this practical book packed with invaluable information.Translated into Chinese!

Part I
Introduction to Assessing Business Opportunities

Chapter 1
Assessing Business Opportunities—An Overview

The Importance of Opportunity Analysis

The 1980s ushered in an era of business which is perhaps one of the most challenging in history. Markets for many products have weakened, major firms face some of their most critical financial crises, international competition for major product categories is at an all-time high, financial markets are in an upheaval due to interest rate changes and uncertainty over future rates, and shifting government policies on tax decreases, increases, and deficit spending are only some of the most obvious environmental factors business managers must cope with.

While these changes have created havoc in many industries, they have also caused many managers to reevaluate the basis of success in their own industry and in business more generally. Many have realized that the key to success is planning. Not just on a short-ange basis, but on a time scale that is long run or strategic in orientation.

This book concentrates on opportunity analysis which is an intricate part of the strategic planning process. It covers not only how opportunity analysis relates to strategic planning, but also presents the techniques which can be used to carry out opportunity analysis. Thus, it is oriented toward building analytical skills for an individual manager by describing what should be done and how to do it.

Factors Influencing Feasibility Analysis

The strategic alternatives of an enterprise are influenced by a number of factors. The factors are of three types: external factors, financial considerations, and internal factors. External factors include market size, competitive technology, the economy, government, political conditions, social change, and nature.

External Considerations

Market Size. The size and makeup of markets for goods and services influence the nature of the opportunities an organization faces. The growth and longevity of markets influence not only whether opportunities will be pursued but also the level of commitment a firm will make to pursue an opportunity.

Competition. Some companies and some markets focus strategic planning around the behavior or anticipated behavior of their competitors. This is the view of some managers who emphasize that corporate strategy must revolve around the behavior of competitors.

Technology. Major technological advances tend to create opportunities for companies prepared to capitalize on them. The computer chip, electronic transistor, and synthetic fiber have all led to minor revolutions in their respective markets.

Inflation and the Economy. After several decades of stable prices, inflation became a definite factor for planners in the 1970s. The basic economic conditions of a nation will determine the range of opportunities available to organizations. Inflation, tight money, high interest rates, and cash flow problems are part of the economic circumstances that confront firms today and require appropriate strategic planning. Even the largest and most powerful corporations have not been immune to these problems. For example, General Motors has had its bond rating lowered because of changing economic and financial conditions.

Government Regulations. The role of government has increased in the regulation of economic life in all major industrial nations. Government has influence on many phases of marketing, including distribution, advertising, price policy, product design, and consumer use. Although government regulations present both restraints and opportunities, their side effects have often been higher costs. Pollution control devices, reporting requirements, tax policy (windfall tax), safety policy, and other government controls and regulations have added costs to the industry and the consumer. Evaluation of past and proposed legislation is an essential part of strategic planning for all organizations.

Political Conditions. The introduction of political risk should be an essential part of any organization’ srategic planning. The oil crisis of 1974 and general political instability have altered the state of the art of planning within many companies depending upon unstable supplies of raw materials. A part of the international business environment that is unavoidable today is the potential uncertainty of political events. The violent overthrow of the Pahlavi dynasty in Iran, the continuing conflict in Northern Ireland, some 15 to 20 wars, border clashes, and guerilla conflicts in Africa, as well as Poland, and many similar events have increased anxiety over the role of political risk in overseas investment. It is no wonder that strategic planners frequently use the word “turbulent” to describe the environment within which today’s multinational companies must operate.

Social Change. Social change presents opportunities as well as hazards to business enterprise. These influences change rather slowly over time; however, they can ultimately have severe impact on the economic viability of the company. Social change can have a radical impact on the behavior of important groups of consumers. For example, technological innovation must be assimilated by the consumer in order to become economically viable. While the technology is available for a checkless economic environment, society has been slow to embrace it. The same may be true of what is called the office of the future. MKT has done extensive research on the paperless office and while the technology is possible for this, there is great uncertainty in regard to the social acceptance of this type of office environment. Major research efforts are constantly tracking social changes and attempting to evaluate their impact on business. Since many important social changes move at a slow pace, business often fails to identify the significance of the change to their business activities until it is too late to mitigate the damage or to capitalize on the opportunity.

Nature. Droughts, floods, blizzards, lack of snow, and lack of rain can all have important impact on business. In many cases, the capricious acts of nature are unpredictable and they represent environmental factors which require proper planning.

Financial Considerations

Financial considerations reflect the financial impact of alternatives in terms of revenues, costs, and return on investment. They must reflect both the size of the investment needed to effectively compete in a market and the potential returns associated with that investment.

Revenue Estimates. Revenue estimates provide the essential data needed to assess the impact of market entry by a new competitor. If a firm is considering entering an existing market they must assess their chances of attaining a given market share and thus a specific stream of revenues. The estimate of sales revenues along with cost estimates provide the essential data for pro forma analysis of an opportunity.

Cost Estimates. Cost estimates reflect the level of costs which will be associated with the revenues generated by a proposed venture. It is extremely important that all costs be estimated to accurately reflect the income or cash flows which will be produced by an opportunity.

Return on Investment. Given the estimates of future revenues and costs, the next step in financial analysis is the analysis of return on investment. Two concerns are present here: (1) the level of investment needed to compete effectively and (2) the profitability potentials available given the investment level. In other words, “How much money will it take to pursue an alternative?” and “What type of earning can be produced?”

Internal Considerations

The internal factors include: (1) organizational purpose, (2) corporate objectives, and (3) resources.

Purpose. A statement of purpose or mission is management’s expression of the nature of the organization. It is an answer to the questions: “What kind of organization are we?” and “What kind of organization do we want to be?” The definition of purpose or mission becomes the guiding force in strategic decisions because what we do should be a function of what we are.

Corporate Objectives. While a mission statement proposes to answer the question of what we are, corporate objectives answer the question: “What do we want to accomplish?” Objectives become the specific ways in which a firm accomplishes its organizational mission. These objectives also become the standard by which organizational effectiveness is judged. Effectiveness is measured by the firm’s success in accomplishing its stated objectives.

Resources. The resources of an organization are the enabling factors which allow a firm to accomplish objectives. Resources are composed of the people, money, machinery, facilities, etc., a company either possesses or has the ability to acquire. Its people base and material asset base represent an organization’s capabilities for pursuing opportunities.

Thus external factors define the nature of the opportunity, the financial considerations tell us the financial impact of the opportunity, and the internal factors determine whether a firm should pursue an opportunity (mission and objectives) and whether it is capable (resources) of pursuing an opportunity.

What is Opportunity Analysis?

Opportunity analysis is the process of defining the exact nature of the opportunities available in an organization’s operating environment in terms of external, financial, and internal considerations. Exhibit 1-1 presents an overview of this process in terms of the steps involved in the analysis.

As Exhibit 1-1 depicts, opportunity analysis is a comprehensive analysis of all aspects of an alternative before decisions are made to pursue that alternative. The results of such an analysis put the decision maker in a position of having a strong data base from which to choose among the various alternatives present in the environment in line with financial and internal considerations that are specified by management.

EXHIBIT 1-1. The opportunity assessment process.

The analysis begins with a detailed study of the environment in which the proposed business would operate. This includes not only the legal, political, economic, social, cultural, and technological environment, but also market size, growth trends, and consumers’ attitudes and behavior. It also involves a study of current and potential competitors who may be going after the same customers you propose to attract. These factors are external to the organization or person contemplating the new venture and therefore a great deal of diligence is required for a thorough analysis of these factors. This usually involves a substantial commitment of time and money to collect the information used in the analysis.

If this analysis indicates that these factors are favorable to the potential business, then an analysis of the financial implications of the opportunity should be undertaken. The financial analysis is the key to determining the potential profitability of the business and the expected return on investment. The results of this analysis provide the information which can be used to attract investors and/or lenders who may be approached to obtain capital for the venture.

The final area of analysis involves a study of internal factors which affect the decision to pursue a given opportunity. The organization or individual’s purpose, objectives, and resources must be analyzed in relation to the proposed opportunity. An opportunity, even a potentially profitable one, may not “fit” with the purpose, the objectives, or the resources of the organization. Such opportunities are foregone for others that do “fit.”

As the diagram emphasizes, a thorough study of the opportunity is completed before a decision is made to pursue it. Rushing into a decision without the type of analysis described in this book increases the chances of failure. While failures cannot be completely eliminated because of unforeseen circumstances, the chance of success can be greatly enhanced by thoroughly assessing the opportunities before commitments are made. An article in Changing Times dealing with factors that lead to failure listed “guessing instead of digging” as the number one way to scuttle a new business.¹

Plan of the Book

Chapter 2 presents the foundation for opportunity analysis which is strategic planning. This chapter provides the framework from which opportunity analysis can be viewed as an integral part of the strategic management process.

Part II of the book contains two chapters which deal with external analysis. Environmental factors, market size, and growth and competitive analysis are gi...

Table des matières

• Cover Page
• Half Title Page
• Title Page
• Copyright Page
• Contents
• About the Authors
• Foreword
• Acknowledgements
• Part I Introduction to Assessing Business Opportunities
• Part II External Analysis
• Part III Financial Analysis
• Part IV Internal Analysis
• Appendix
• Index