Marek Rutkowski

Market analysis - step by step

Reliable market analysis is often the foundation of shrewd managerial decisions. It offers a long list of benefits - it helps to define directions for development, select, strategies, and plan better, and it helps improve the efficiency of current operations. The ability to conduct market analysis is also useful when working on the sales front line. So how do you conduct professional market analysis?

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Market analysis ¹ is most often reduced to specific activities aimed at better understanding mechanisms, behaviors, and market processes. It is a key element of market research, in addition to market forecasting. In learning about market phenomena and processes, you can use secondary information that has already been collected, processed, and developed in a form allowing it to be used by, for example, various administrative units, institutes, scientific and research facilities, publishing houses, mass media and other organizations, as well as internal information available to various organizational units of the company you represent.

Why is it worth analysing the market?

The purpose of the market analysis is to support the decision-making processes in the company. Conclusions drawn from market analysis can help you to significantly improve your sales results. A reliable market diagnosis will help you determine the target group of potential buyers, organize your sales network, attract new customers, and more effectively negotiate the terms of transactions. In addition, it will enable you to professionally monitor the market in terms of supply, demand, and the effectiveness of activities conducted. Analysis of market phenomena can help you learn about random events that affect the state of the market where you operate. In turn, diagnosing market processes promotes understanding of cause and effect relationships.

What issues should market analysis cover?

Professional market analysis focuses on two basic areas: analysis of an enterprise’s macro-environment and its micro-environment. As part of macro-environmental analysis, we analyse economic, demographic, political, legal, social, technological, and natural conditions. Depending on needs, the studied phenomena may be diagnosed in various subject-object, spatial, and temporal terms. Table 1 presents examples of typical factors considered in macro-environmental analysis.

Table 1. Sample scope of a company’s macro-environmental analysis
Macro-environment segments	Examples of macro-environmental factors analysed
economic	business cycles, the level and rate of economic development, having a direct impact on the size and scope of opportunities for and threats to the enterprise assessment of the economic environment, including: inflation, unemployment and exchange rates, debt levels, fuel and energy prices, expenditure on science, culture, education, health care the purchasing power of potential customers (including the income levels of various social groups, and price, savings, and loan availability data) the level and structure of household expenditures the profitability of enterprises, investments implemented
technological	technological level, expenditures on research and development modern technology adoption rates access to new technologies level of transport development level of fragmentation of production processes, and the deindustrialisation of some industries
socio-cultural	level of scientific, cultural, and artistic development lifestyle, social mobility ecological awareness and sensitivity, awareness of civil rights the structure and degree of diversity of the individuals and groups making up society level of consumer ethnocentrism (preferring to purchase products of native origin) levels of heterogenization (satisfying more and more diverse needs) and homogenization of consumption (similar consumption behavior) level of service consumption (the share of expenditure on services in the structure of household expenses) virtualization of consumption (satisfying specific needs via electronic means)
demographic	education level and structure population and its dynamics, age structure, density and regionalisation of population the number, size, and structure of households, the stage of the household’s life cycle population increase, fertility and mortality rates, number of marriages occupational structure of the population, employment rate of women number, size, and structure of enterprises (organization), place and scope of activity
administrative, political, and legal	legal norms and administrative provisions in force which affect the company’s business (e.g. concessions, permits) legal regulations regarding employment, legal forms of activity, regulations regarding environmental protection rules on taxes and duties international legal and political conditions political stability of the country
natural	climate and weather phenomena (including global warming) availability of natural resources (including mineral and agricultural raw materials, renewable energy sources) topography of the area - surface contours, bodies of water, access to the sea, specific natural conditions

Source: Author’s own work

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Data publikacji w serwisie: 15.01.2020

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Market analysis - step by step

Why is it worth analysing the market?

What issues should market analysis cover?

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