Market Analysis


Market Analysis Services

Market analysis definition – what is market analysis?

A market analysis is both a quantitative and qualitative assessment and is essential knowledge for a company to achieve a better market performance;
– better positioning
– to be distinctive
– be competitive
– and to serve customers better
– and better serve customers.

A market analysis is a study with conclusions of the market’s dynamics (volume and values). It is a thorough assessment of the attractiveness of a particular market (or segment) within a specific sector.

Without in-depth insights into (existing) customers and the market potential, it is virtually impossible to arrive at an effective marketing strategy. Market analysis provides direction for success and returns and is the basis for sharpening policy in a targeted manner and reducing business risks.

Therefore, a market analysis is also the input for planning and allocating priorities and resources about business activities such as budgets, investments, production numbers and schedules, the required personnel and facilities, etc.

It seems a complicated and time-consuming process, but it is, in fact, an extensive market analysis of the internal strengths and weaknesses concerning opportunities and threats driven by the external environment (SWOT analyzes).

But note: market analyses must be based on well-defined market segmentation.
Differentiation and the market knowledge to classify market structure and market processes are prerequisites for collecting those specific data that should lead to the distinctive added value. After all, today’s strategic policy is not more of the same.

The difference and similarities between market research and market analysis?

Companies use market data to use the information obtained for future decisions. In general, getting such data is a tedious and lengthy process, sometimes confusing even the most experienced and skilled market professional. It is even more unclear, as there are several terms and ways of obtaining data that are often used interchangeably. This is also the case with market analysis and market research. The distinction between the cited methods we have briefly outlined below.

The market analysis examines a specific market (sector, industry, or niche). As a result, current and historical facts are used to predict possible outcomes. Market analysis should deliver companies raw data highlighting the size and potential of a specific market (including figures of competition, trends, sales channels, prices, etc.) to strategically plan for the future. Companies use market analysis to understand product/market combinations better, studying products in a particular environment and other market variables. Market analysis determines the coherence between supply and demand.

Market research has a different focus and is more of a specialized process to research a particular market in cooperation with customers and other stakeholders by asking one or more questions and categorizing the answers received. Market analysis may also form part of the market research. Companies use market research to serve existing customers better and/or acquire potential new customers.

Therefore, market analysis is general and collects large amounts of hard facts and figures using various impersonal and preferably automated data retrieval techniques.

On the other hand, market research is precise, limited by time, participants, emotions and opinions, and is based on human interaction and interpretation.

While market analysis places many data points in a large storage frame, market research collects only the data necessary to answer research questions.

Concerning the data and outcomes, market analysis just provides long-term information. In contrast, market research results are only relevant for a short period of a maximum of a few years.

While market analysis provides quantitative rather than qualitative data, market research can provide quantitative and qualitative data.

The seven dimensions of market analysis

For performing a market analysis, Professor Emeritus David A. Aaker has indicated the following 7 elements structure;

1. Market size

This dimension defines the size and potential of the markets under consideration. The market size is calculated based on the current market turnover. Another important consideration when measuring the market size is future growth potential. Therefore, appropriate assumptions about market growth rates need to be made.

2. Market trends

Trends show the general growth or decline of a market, the activities of competitors, and customer behaviour over time. Current market trends can also help predict future market trends.

3. Market growth rate

Market growth rate predictions use past data and future trend indicators to predict the future growth of the markets. Product diffusion curves are used to predict turning points in growth forecasts.

4. Market profitability

Companies are for-profit companies. If the market segment has a good profitability, the needed investments (in time and capital) will  be weighed according company’s guidelines and other opportunities. To calculate a market’s profitability, the following data must be obtained: purchasing power, supplier power, barriers to entry, etc. Market profitability is often assessed by using Porter’s Five Forces model.

5. Sector cost structure

The value chain analysis can be used in addition to the industry cost structure to identify value-added activities and reduce costs by eliminating activities that do not add value. By focusing on activities that are critical to your business, you can gain a competitive advantage and avoid wasting resources. Porter’s Value Chain model can be used for determining sector or industry cost structure.

6. Sales channels

By analyzing the effectiveness of existing sales channels and identifying new ones, a company understands its ability to reach customers and identify new opportunities for competitive advantage. Companies with existing sales channels may find it easier to market similar products in equal market segments.

7. Key success factors

Identifying critical success factors helps a company focus on existing strengths that have contributed to the success and seize opportunities that can give it a competitive advantage. These factors could include access to essential resources, distribution channels, patents, operational efficiency, technological superiority, and so on.