Market Analysis

West Visayas State UniversityMPG 508: Program and Project Development and Project Management

Reported by: Christine Liz Jimenea

Market analysis is the first stage in the preliminary screening of the project’s viability.

• It provides us with an initial reckoning on whether to proceed or not?• Unless there are there buyers for the product,there is no reason why we have to proceed withTheir production.• Rule of thumb: Is there a demand for the product in the market?

INDUSTRY ANALYSIS

MARKET STUDY

MARKET PLAN

I. INDUSTRY ANALYSISMajor Steps:1. Determine the industrial classification of

the enterprise2. Identify what are your industry’s domina

nt economic characteristics or features3. Identify the competitive forces that are

at work in the industry and determine how strong they are

4. Identify the driver of change in the industry and analyze what impact they will have on your proposed enterprise; and

5. Identify the key factors that will determine your enterprise’s competitive success or failure

Common Economic Features or Characteristics Include:

a. Market size and growth rateb. Geographic scopec. Number and sizes of buyers and sellersd. Pace of technological change and innovation

Porter’s model is a powerful tool to diagnose the chief competitive pressures in the market..

a. Rivalry among the competing forces in the market

b. Market attempts of companies in other industries to win customers

c. The potential entry of new competitorsd. The bargaining power and leverage supplier of

inputs can exercisee. The bargaining power and leverage

exercisable by buyers of the product

The Drivers of Change… Product Innovation Technological Change Increasing globalization in the industry Changing societal norms, attitudes and

lifestyle

KSF ( Key Success Factors) Marketing Related KSFseg. Courteous customer service; attractive packaging; breadth of product line/ selection

Product Related KSFsEg. Superior workforce; Design expertise; ability to develop innovative products; access to adequate raw materials; high labor productivity

II. MARKET STUDY Determines whether there is a need for the product that will be

produced by the enterprise.

2 aspects:

1. To evaluate whether there is a demand for the product in the market. Demand > Supply= “Market!”

2. Once demand for the product is established, appropriate marketing strategies will be designed to ensure that the product will reach its target market.

Note: The project is still feasible from a marketing point of view if the product possesses a comparative advantage despite having an adequate supply in the market.

The Preparation of a Market Study Involves the ff. Steps:1. Description of a product ( p65)2. General market description ( p65)3. Demand estimation and analysis a. Without the project b. With the project4. Supply estimation and analysis a. Without the project b. With the project5. Supply –demand Consolidation

The market for our product is too broad. Not all households or establishment will buy our product.

First, we need to identify our potential consumers and examine their buying behavior or “ market segmentation” ( large identifiable group with similar wants, purchasing power, geographic location)

Potential market- a set of consumers who possess a sufficient level of interest in a market offer eg. Capiz= 50,000 hh

Target market- part of the potential market who is willing to buy our product

Second, we need to select one or more of these market segmentsas your target market .

eg. Middle and upper middle class =40% of 50,000 hh

Third, choose the particular geographic location where the consumers are generally concentrated . eg. Roxas City

Per household consumption= Total volume of production less wastage

_____________________________ Total number of households

Total number of households X percentage of the target market

To identify our potential customers:

To identify our target market: (Number of middle and upper income households )

DEMAND…Some things that we need to know first before we proceed…

Determinants of Demand:

1. Price of the product or service2. Money income3. Prices of related products or services4. Taste or preference for certain products or services

There are 2 Types of demand for a product:

5. Real demand- the ideal per capita consumption of the productby the potential market and the target market. Derivedfrom studies conducted by research.

2. Effective demand- the actual per capita consumption of theproduct by the potential market and the target market.Divide the total volume of product actually sold in themarket with potential market or target market.

Know the formula first:

r = average annual growth rate

Pn = population in the nth year

Po = population in the first year

t = time interval between Pn and Po

P n = Po ( 1 + r ) t

Activity 1: Know the Annual Growth Rate (page 70)

1. Problem: solve for the growth rate 2. Given:

Year 1995 : population is 12,000…. PoYear 2000 : population is 15,000….Pn( Time interval : 5 years…. t)

3. Required: find the value of r4. Solution: Pn = Po ( 1 + r )

5

(15,000) = 12,000 ( 1+ r ) 5

5. Answer: 4.56 %

1. Estimate the population and household growth rates of your target market using two intercensal periods

Activity 2: Make a Forecast of the Population (page 71)

Using the Annual Growth Rate: 4.56%

POPULATION HOUSEHOLD2000 – 15,000 2,5422001-- 15,684 2,6582002- ________ ____________2003- ________ ____________2004- ________ ____________2005- ________ ____________

Demand Forecast Without the Project: estimation of the current consumption per capita and per household.

Demand Forecast With the Project: assumptions as to the level and growth of per capita and per household consumption

I. Demand Forecast Without the Project2. Estimate the current consumption per capita and per householdAssuming that based on the data gathered, consumption of theproduct in 2000 was 1,200 kg.

To get the per capita consumption:

1,200 / 15,000 ( population in 2000 )= .08 kg or 80 grams

To get the per hh consumption:

1,200 / 2,542 ( number of hh in 2000 )= 0.472 kg or 472 grams

Assuming that this consumption pattern remains unchangedFor 5 yrs…

Activity 3: Estimate the Demand Per Capita and Per HHgiven: Per capita= 0.08 grams given: Per Household= 0.472 grams

YEAR Projected Population

Projected Demand per Population

Projected Household

Projected Demand per HH

2001 15,684 1,254.72 2,658 1,254.5762002 16,399 1,311.92 2,7792003 17,147 1,371.76 2,9062004 17,929 1,434.32 3,0392005 18,746 1,499.72 3,178Eg. 15,684 x 0.08= 1,254.72 Eg. 2,658 x 0.472= 1, 254.576

3. Estimate the amount of money each population or individual spends for the product in a yearBased on the industry, we know that revenues derived by the producers in this product is php 600,000 for the target market.

TOTAL SALES TOTAL POPULATON PER CAPITA EXPENDITUREphp 600,000 15,000 php 40/person

TOTAL SALES TOTAL HOUSEHOLDS PER HH EXPENDITUREphp 600, 000 2,542 php 236/ hh

Each individual spends php 40 and each hh spends php 236. This is Based from the year 2000 data.

II. Demand Forecast with the Project4. Make assumptions as to the level and growth of per capita and per household consumption5. Let us take the first assumptionActivity 4: Assuming that per capita consumption will grow by 5%

1. Problem: Solve for the per capita consumption with 5% increase2. Given: Year 2000 per capita consumption is 80 grams

3. Required: Year 2001 consumption in grams4. Solution: 80 x .05 = 4 grams, 80 + 4= 84 grams5. Answer: 84 grams consumption by year 2001

( Pls look at page 76 )

1. Estimate the demand for the product in the potential market.a. Know the total production minus wastageb. Know the consumption per householdc. Know the consumption per individual

2. Determine the number of households in the target market3. Make a ten year forecast of your households in the target market4. Project the total volume of the product consumption without the

project for 10 yrs5. Project the total volume of consumption with 5% increase for ten yrs6. Consolidate the projected demand with the project and

without the project

SUPPLY…After we have determined the demand for our product, the next step Is to determine how much we should produce

Production of goods is generally influenced by:

Price- higher prices make it profitable for firms to produce more outputPrice of inputs- If prices for inputs go up, volume of production that

producers can profitably supply at any given price goes downConditions of production- the introduction of new and modern

technologies increases supply

Supply answers the question:

1. How much of the product is being produced in the market?By estimating the past and present volume of production.Primary data-conduct a survey or Secondary- industrystudies or government agencies

2. Where are the sources of the product?Generally, products are produced near the target market or just outside the market

3. Who are the leading producers of the product?From the number of firms producing similar product, identify2 or 3 leading producers

4. How much of the target market can be satisfied by the existing producers? eg. If supply grew by an average of x, we can expect the same growth rate of x (during the next 10 yrs)

5. Can we still enter the target market? Eg. If the forecasted supply canonly fill 27 % then more than 70% have unmet needs.

6. How much can we produce? It will depend on the Rated capacity- maximum volume of production if machines and

equipment are utilized to their maximum capacity

Operating capacity-Volume of production given the current usage ofmachine and equipment

7. Demand and Supply Consolidation p83

III. Marketing Plan The Marketing plan outlines the steps on

how to sell the product to its intended customers

It discusses the ff:1. Delivery channels2. Distribution strategies3. Promotions strategies4. Organization and management

1. Delivery ChannelsHOW materials are transported from the source to the processing facility and how the finished product is transported from the processing facility to the distribution channels

The marketing plan only focuses on the second aspect, transport of The finished product from the processing facility to the distribution channels.

Must Consider: Distance of the processing facility from the target market, modes of transportation available, necessity of purchasing a vehicle and what type

Raw materials enterprise market

2. Distribution Strategies HOW best to distribute the product so it can reach its

intended consumers either: Directly or indirectly…

3. Promotion Strategies HOW to promote the product?

Using the “marketing mix concept”- controllable variables that can influence the behavior of targeted consumers

4 P’s: Price, Place, Product and Promotion

1. Price: there are 3 approaches to determine the price of our product…

i. Cost-based pricingii. Demand based pricingiii. Competition-based pricing

2. Place : eg. Retail outlet for buyers (retailers and wholesalers)

3. Promotion: communicating or broadcasting the producteg. Agricultural products- fiestas, convention,bagsakan. To differentiate our product, we need to label it. This encourages customer loyalty. Choosingthe right color and texture makes it more attractive.

4. Product

4. Marketing organization and management Discusses who will be responsible for

selling the product. eg. Sales supervisor, Laborers, Driver

The enterprise should minimize the number of personnel involved in marketing

We will, because we can!

- Angelia OngMiss Earth 2015