3 Keys to Strategic Market Assessment
You have a wealth of data available to you, and you’ve been tasked to produce strategies and action points to expand your business. You need to sift through the noise and interpret the right data that links directly to your company’s growth. Easy, right?
In the global marketplace, opportunity abounds for companies that can prioritise growth strategy and execute it effectively. For any category or segment, some countries offer an opportunity for a limited number of high unit-price players and others for large volumes at cut-rate prices. Some markets are well-established and concentrated; others offer eye-catching growth rates but from a small base.
#1. Analyse Global Markets
Current-year market size and forecast growth, both in absolute terms and in compound annual percentages, are key indicators of market attractiveness and should be a primary input for growth strategy. Stay focused on the most valuable market size growth metrics:
Absolute Growth vs. Compound Annual Growth
Compound Annual Growth Rates (CAGR %) give users a quick feel for how each category has performed over time. This indicator smooths out anomalies and provides a healthy measure of a category’s trajectory. When comparing slow-moving behemoths with rapidly rising small markets, one should look beyond CAGR and consider absolute value (or volume) growth. This measure will more clearly articulate the size of the opportunity for your business.
Related Category Performance vs. Rest of Market
Another means of viewing future market potential, especially when looking at less-developed markets, is to understand the performance of other categories sharing demand drivers or similar lifecycles to your product or service. For example, if assessing the breakfast bar category, it may be insightful to gauge the performance of neighbouring, complementary and/or competing categories such as cereals, snack
bars, energy bars, drinking yoghurt, confectionery and coffee.
Staying with our breakfast bar example, it may be valuable to look at other convenience food or drink items consumed on-the-go, the share of households in urban areas or women in the workforce indicators that may point to wholesale changes in the way consumers eat breakfast.
#2. Landscape Analysis
Competitive vs. Consumer vs. Distribution
In the global marketplace, opportunity abounds for companies that can prioritise growth strategy and execute it effectively. For any category or segment, some countries offer the opportunity for a limited number of high unit-price players and others for large volumes at cut-rate prices. Some markets are well-established and concentrated; others offer eye-catching growth rates but from a small base.
Now that you’ve narrowed down the most attractive opportunities in terms of market growth, understanding how fragmented or consolidated it is in terms of the current players will help guide the best market entry strategy. Looking at company/brand shares is another opportunity to insert your specific business knowledge and prioritise to your unique situation and goals. Factor into the analysis the precise positioning of your company and its competitive advantages or vulnerabilities. For example, if you know you have a difficult time competing against a given brand on price or product selection, that brand’s presence in a market should weigh in stronger as a competitive threat. If there is a local player that aligns well with your business, the best way forward may be a joint venture or acquisition.
Growth or decline prospects for your key consumer target groups are, of course, another major determinant of the future scale of the demand you wish to tap. Establish the most relevant data set possible around age groups, gender, income, spending patterns, household types, and sizes, urban vs. rural locations, etc. Factoring this data into your analysis will ensure that countries with the most favourable long-term demographics and relevant spending propensity will rise to the top.
A key component to any market review is an understanding of distribution channels and the relative importance of the key routes by which the product or service reaches its customer—the degree of development of modern vs. traditional grocery stores, for example, or the inroads made so far by online sales or the scale of specialist vs. generalist distributors of the product.
Here is another opportunity to apply your business acumen and include the most influential and relevant channels. Street kiosks, for example, can be an overlooked channel in the developing world, but one that can stand in the way of development of some categories, such as packaged food and frozen ready meals. If consumers can buy food from street stalls quickly, easily and often inexpensively, it may be difficult to enter with a packaged food product in that market. Understanding and quantifying these local nuances is crucial to properly gauge market attractiveness.
#3. Bringing it All Together with Macroeconomics
Sometimes, there are markets that appear attractive on the surface: high growth rates, lack of competitors or strong socio-demographics. But lurking beneath those positive market indicators are some core risks that should also be captured and accounted for. Metrics on ease of doing business, the degree of Foreign Direct Investment, net capital stock and other macroeconomic indicators can begin to shed light on the challenges that await a new market entrant. In addition to encouraging indicators of predicted growth and penetrable competitive landscape, you want a sufficiently viable
Executing these three keys of strategic market assessment will help you examine opportunities, challenges, and threats to help you tailor your market entry strategies accordingly.
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