Market Analysis for a Startup

My thoughts on how to do the in-depth market analysis before taking the plunge

It is very important to understand the market that you are going to be in before you decide to build the product. There are many factors, internal or external which could impact your business in any market.

Factors to be considered for market analysis:

• Demographic Factors: like location, age, gender, income, spending habits etc. This will help you in determining the TAM for your product
• Technological Factors: understanding of what all technologies are available which you can use to build your product
• Sociocultural Factors: understanding of trends, behaviours and attitude related to the culture of the market like paying in cash is one of the factors in India
• Economic Factors: like GDP, interest rates, inflation, market size, the growth rate will help you decide the size of the opportunity
• Political and Legal Factors: like tax policies, trade agreements, labour laws, political stability will help you prepare in advance for those changes

Once you have understood the market factors, it’s important to understand the business environment in the market. Porter’s five forces is a widely used methodology to understand the business environment:

• Threat of new entry: The extent of the ease with which new players can enter the market
• Buyer Power: The amount of power held by the customers in the industry. This primarily depends on the number of choices available to the customers
• Supplier Power: The amount of power held by the suppliers to control the prices or supply. This basically depends upon the number of suppliers available for a particular product. More suppliers mean less supplier power
• Threat of substitutes: How easily can other products replace yours
• Competitive Rivalry: Its the measure of current competitive players in the industry and their capabilities

Porter’s Five Forces Model

Now that we have understood the market factors and business environment, it's important to list down all the competitors to prepare a competitive landscape for your product or business

• Identify the competitors — A detailed list of all the direct and indirect competitors
• Analyse the background of these competitors — It’s important how these companies were started and how they have progressed
• Understand their business model — Operating and Revenue model of all the competitors need to be understood
• List down their strengths and weaknesses — Competitors strong and pain points could be judged based on the customer feedback
• Analyse the performance of all your competitor products — A detailed analysis of the website, mobile apps or other technology which they are using
• Predict their future initiatives — Knowledge of competitors future product features could help in keeping you ahead of the curve

Summary:

Understanding the market factors, business environment and competitive landscape are critical factors to do a market analysis for all kind of businesses. Doing this in detail will enable any entrepreneur with the right knowledge to make the call whether or not the sector is a good pick to do a business. If yes, then how to remain ahead of your competitors.