Market Analysis: Commercial Viability Assessment

• Market/Commercial Analysis is a detailed evaluation of market conditions, trends, competitive landscape, and commercial viability for a proposed business or project.
• It assesses potential success, risks, and opportunities in the target market.
• Project analysis initiates with an estimate of the potential market size for a proposed product or service to gauge the likely market share.
• Market and demand analysis aims to determine the aggregate demand for the product/service and the market share that the proposed project will capture.

Objectives of Market Analysis

• Market and demand analysis is a key activity for determining the scope of an investment.
• It determines the possible production program, technology required, and choice of location.
• Demand and marketing analysis aims to determine the effective demand for a proposed project.
• Demand and marketing analysis seeks to determine market characteristics in terms of unsatisfied demand, competition, imports, exports, etc.

Market Research

• Market research is integral to the feasibility study.
• Market research generally ranks top among the core chapters of a feasibility study

Market Analysis: Importance

• Engineers, financial analysts, and economists calculate the socio-economic costs and benefits of a project
• Market analysis is more ambitious and riskier compared to other parts of a feasibility study because it deals with the future.
• Market research relies on the quality of the market analysis
• The projections of future demand and expected sales are critical.
• Market research requires imagination, creativity, and feeling.
• Marketing demand and sales forecasts are subjective at the final stage.
• Market research cannot provide definite certainty, especially when considering a project's lifespan of 10-15 years.
• Project analysis starts by assessing the potential market size for the product or service being offered.
• It also seeks to get an idea of the expected market share

Marketing Elements

• Marketing involves individuals and groups obtaining their needs and wants through creating, offering, and exchanging products of value.
• Marketing puts the problems, needs, and desires of existing or potential consumer groups at the center.
• Market orientation of project preparation considers both demand and supply markets.
• Marketing research provides information to develop marketing strategies.
• Successful marketing strategies are shaped in a planned manner, using the necessary combinations of marketing instruments.
• Findings from market research guides determining means and preparing action plans to achieve marketing objectives.

Situational Analysis and Objectives

• Project analysts should establish the relationship between a product and its market.
• Speaking informally with customers may help with determining the relationships.
• Speaking informally with competitors may help with determining the relationships.
• Speaking informally with middlemen (wholesalers and retailers) may help with determining the relationships.

Collection of Information

• Secondary information is gathered in another context and is already available.
• The Central Statistical Authority (CSA) gathers and publishes census data.
• Census data includes population, demographics, household size, and composition.

Market Survey

• A market survey can be a census or a sample survey.
• A census survey covers the entire population.
• Population refers to all units under consideration in a study.
• Examples of populations include all higher private educational institutions and textile-producing firms.
• Census surveys can be costly and impractical.
• Sample surveys are more useful when a census survey is impractical.

Information Gathering

• Total demand and its growth rate should be gathered through market surveys.
• Motives for buying should be gathered through market surveys.
• Demand in different market segments should be gathered through market surveys.
• Income and price elasticity of demand should be gathered through market surveys.
• Purchasing plans and intentions should be gathered through market surveys.
• Satisfaction with existing products should be gathered through market surveys.
• Unsatisfied needs should be gathered through market surveys.
• Attitudes towards various products should be gathered through market surveys.
• Distribution and price practices and preferences should be gathered through market surveys.
• Socio-economic characteristics of buyers should be gathered through market surveys.

Sample Market Survey Steps

• Defining the target population
• Selecting the sampling method and sample size
• Developing the questionnaire
• Recruiting and training field investigators
• Obtaining information via the questionnaire from the sample of respondents
• Summarizing the information gathered
• Analyzing and interpreting the information

Key Components of Market/Commercial Analysis

• Size is an estimate of the current size of the market.
• Trends involve the identification of key market trends, including emerging technologies.
• Target Market involves defining the specific market segment that the project will serve.
• Current Competitors means identifying existing competitors.
• Competitive Advantage means assessing potential unique selling propositions (USP).
• Barriers to Entry means analyzing obstacles that could hinder new competitors from entering the market
• Customer analysis means understanding the needs and desires of the target customer segment.
• Customer analysis means identifying customers purchasing behaviors and buying decisions
• Pricing strategy means creating a breakdown of pricing models based on market demand, competitor pricing, and perceived value.
• Pricing strategy means identifying a profitable pricing strategy such as premium or value-based pricing.
• Distribution and Sales Channels means analyzing potential channels to reach customers, such as online, retail, wholesalers, and direct sales.
• Evaluating the effectiveness of channels in cost, reach, and customer convenience.
• Legal consideration includes relevant regulations or legal factors that could impede the project.
• Ensuring compliance with necessary rules.
• Financial projections includes estimating the revenue potential costs, and profitability of the project.
• Financial forecasts determine commercial feasibility.
• Risk assessment identifies potential market risks.
• Mitigation strategies manage potential market risks.

Project Components

• The fluctuating costs of raw materials could increase production costs
• A company might aim for a 10% profit margin to comply with regulations.
• Social media is a viable marketing channel
• Startups could aim for a price point of around $30,000 to attract buyers looking for low costs
• Customers are seeking environmentally-friendly and sustainable alternatives
• Strong brand loyalty is critical for established companies to maintain cost margins
• The global market is expected to grow rapidly

Product Description

• The product description consists of the explanation of the product or service being offered.
• Includes key features, functions, benefits, and overall value proposition for the target market.
• A good product description helps investors, partners, and customers understand unique selling points.
• A good product description helps understand how the product addresses needs.
• Product description includes: 1- Overview: A brief introduction and main purpose of the product. 2- Features: Attributes of the product such as such size, design, materials, capabilities 3- Benefits: Explains how the product improves experience, solves problems, or value. 4- Target market: Intended users or customers. 5- Differentiation: How the product stands out from competitors.
• Product descriptions are key to understanding the competitive landscape and marketing

Potential Customers

• Characterization helps understanding the market landscape, planning future sales, and ensuring success.
• Characterization involves identifying key attributes and demographics of the target audience for the product or service.
• Demographics: Age, gender, income level, education, occupation, and family structure.
• Geographics: The location of the target customers
• Psychographics: values, lifestyle, interests, opinions, attitudes, and behaviors that influence their purchasing decisions.
• Behavioral traits: How customers make purchasing decisions, frequency of purchase, brand loyalty, and the type of purchase behavior (impulse or planned).
• Needs and pain points: Problems or needs a product addresses for potential customers.
• Understanding factors enables businesses to tailor marketing messages, design products that meet specific needs, and create a user experience with the target audience.

Demand Forecasting

• Demand forecasting involves predicting the future demand for a product or service based on historical data, market trends, and analysis of customer behaviors.
• Historical sales data analysis: Examines past sales trends and customer preferences to predict future demand.
• Market trends and conditions: Considers broader economic factors, industry developments, and competitor activities that might influence demand.
• Methods to gather insights include surveys, focus groups, and other methods to gather insights.
• Statistical methods: Applying quantitative models such as time series analysis, regression analysis, or machine learning to predict demand more accurately.
• Market size and growth projections: Gauges future demand.
• Demand forecasting ensures that businesses can avoid over and underproduction, manage inventory, optimize resource allocation, and align production schedules.

Competitor analysis

• Characterization involves identifying and analyzing business strengths, weaknesses, strategies, and overall positioning of businesses that offer competing products or services in the market.
• Aspects determining who the direct and indirect competitors are.
• Aspects estimating each competitor's market share.
• Aspects comparing product features, quality, pricing, and advantages to competitors.
• Aspects Analyzing marketing and sales strategies, and distribution channels.
• Aspects Investigating how customers perceive competitors' brands and products.
• Characterizing competitors lets you identify market opportunities, differentiate products, and position offerings to compete effectively.

Supply Forecasting

• Aspects predict future supply requirements of a product or service.
• Aspects focuses on ensuring that business meet customer demand.
• Key elements include:
• Current Supply Chain Capacity.
• Supplier Reliability.
• Materials and Components.
• Logistics and Distribution.
• Potential Supply Chain Risks

Marketing Strategy

• The marketing strategy outlines how a business plans to promote and sell its product to its target audience
• Items defining a marketing strategy:
• Target Market
• Value Proposition
• Positioning
• Marketing Objectives
• Marketing Channels and Tactics
• Pricing Strategy
• Promotions and Advertising
• Sales Strategy
• Budgeting and Resource Allocation

Revenue Forecasting Components

• Estimating the future income that the business expects to generate from the sale of its products or services over a specific period.
• Revenue forecasting key components are:
• Sales Volume Projections.
• Pricing Strategy.
• Market Demand and Trends.
• Customer Acquisition Rate.
• Sales Channels.
• Market Share and Competitor Influence.
• Short-term forecast is usually a few months to a year.
• Long-term forecasts extend over several years.

Marketing Cost Forecasting

• Aspects include the process of estimating the expenses that will be required to execute the marketing strategy and achieve the projected revenue.
• Advertising and Promotion Costs.
• Content Creation and Production.
• Sales and Marketing Personnel.
• Market Research and Analysis.
• Technology and Tools.
• Public Relations (PR) and Events.
• Discounts and Offers.

Forecast components

• Enables accurate projects for future cash flow, budget allocation, and resource planning.
• Enables financial models, securing funding, and evaluating profitability.
• Enables identifying potential financial risks by showing revenue over costs.
• Forecasts help businesses make informed decisions and maximize profitability.

Defining Demand/Market Segmentations

• Market segmentation divides target markets into subgroups with identifiable characteristics,
• It helps in:
• efficient marketing resources
• better understanding of customer needs
• better understanding of the competitive situation
• accurate measurement of goals/performance
• enables forming marketing programs and strategies
• enables design of the marketing mix
• Pay proper attention to particular areas

Forecasting Methods

• Qualitative Methods:
• Jury Method: combines opinions from experts for the likely sales
• Delphi Method: iterative, involves expert opinion from the experts
• Time Series Projection Methods:
• Trend projection Method: based on assumptions of variables continuing
• Exponential Smoothing Method: in this method the forecasts are modified in the light of observed errors.
• Moving averages Method: forecasts equate period over sales
• Casual Methods:
• Chain ratio Method: estimates aggregate demand
• Econometric Method: a building of a mathematical relationship