How to identify and evaluate new market opportunities
In corporate development and when branching into new business areas, it is crucial to recognize and utilize the driving forces in the market. Accurate market analyses form the basis for an in-depth evaluation of market opportunities.
Market analyses help you to classify market opportunities and risks
Technological advancement, digitalization and automation, global networking, economic and cultural change: many companies today operate in very dynamic markets that require innovative solutions so they can continue to exist successfully in the future. Although many new trends offer a far greater amount of attractive market opportunities than before, the environment and competition have also become noticeably more complex and fast-moving.
It is therefore extremely important to know the individual characteristics and potential of the markets in question so you can make the best possible decisions for your own business development. In view of the increasingly rapid change, an in-depth market analysis plays an essential role. The objectives: To identify suitable market opportunities, make meaningful forecasts and successfully implement investment plans, business plans or marketing strategies.
Market observation and market analysis: Focus on structured research and evaluation
In preparation for a strategic market analysis, you should first of all formulate which questions and objectives need to be answered/pursued. What specific information you need and what the ideal next steps are depend on these. The objectives can be, for example, “identifying market opportunities, risks and potential” or “calculating the expected sales for a new business model”. The specific questions are derived from these. The following are possible questions in a market analysis:
- How great is the market potential for a certain product or service in a target group?
- In which direction will the market develop? What are the defining trends for the coming years?
- What potential does the market offer for new products or services that did not exist before?
- Which competitors with similar solutions exist in the market? What are their strengths and weaknesses from a customer perspective?
- What demands does the target group make on the product or service?
- How much would consumers or users pay for a new product or service?
- What basic conditions (e.g. technical or legal) have to be met for a market launch?
Based on the questions relevant to you, you develop a precise plan of tasks for the market analysis. Accurate data collection and a structured evaluation are important for the next steps. These enable meaningful forecasts of market opportunities, sales potential or necessary improvements to products or services.
A comprehensive approach to the market analysis is necessary
Regardless of the methods and tools chosen, market analyses are often structured similarly. But depending on the question and context, the focus on individual components can vary. As a rule, a strategic market analysis comprises five content-related dimensions that ensure comprehensive coverage of your chosen area:
- Description of the target market and segmentation by target groups
- Analysis of market size and forecast of market development
- Competitive analysis
- Identification of relevant customer segments
- Trend analysis on future developments and potential in the target market
Choosing the right market analysis methods
Choosing the right market analysis methods is crucial for identifying and evaluating market opportunities. Primary research, where you collect and evaluate data independently, offers up-to-date results, as well as the major advantage that you can tailor the planned measures precisely to the underlying question and the knowledge you hope to gain. Various market analysis methods can be used in primary data collection, including:
- Surveys and interviews
- Case studies and questionnaires
- Tests or experiments
- Observations and on-site analyses
- Evaluation of internal or external raw data
However, primary data collection is often more time-consuming, costly and organizationally complex. In certain situations it may therefore be worthwhile entrusting a specialist service provider with the collection and evaluation of the data.
In secondary research, on the other hand, data that already exist and are accessible are incorporated into the market analysis. Here, it is important to check the extent to which the available data sets fit the question and can provide meaningful answers. In addition to the company’s own sources, there are generally a multitude of publicly available studies, statistics and reports that can be used for secondary data collection. Further information on the market can be provided by, for example:
- Business reports and balance sheets of competitors
- Information files
- Sector directories
- Trade journals
Appropriate tools for a meaningful market analysis
To ensure that market opportunities and market potential are successfully identified in the analysis, several tools have proven effective in exploring the various aspects of the market. These include:
- SWOT analysis: In a SWOT analysis, you draw up a specific strength-weakness profile of your company in relation to the question. The analysis reveals the strengths and weaknesses compared to competitors and determines the competitive opportunities and threats in the market.
- PEST analysis: This tool is a general environmental analysis. In the PEST analysis, political, economic, sociological and technological factors are examined. The aim is to enable an evaluation of trends and forecasts of the expected market development.
- The PESTEL analysis expands the PEST analysis by the environmental and legal aspects that can influence the development of the market in question and the associated market opportunities.
- General environmental analyses are often combined with specific competitive analyses. The industry structure analysis according to Michael E. Porter, for example, uses five concise competitive forces to examine the structure and change in markets. The five forces are: Industry rivalry, threat of new entrants, bargaining power of suppliers, bargaining power of buyers, threat of substitutes.
- The CAGE Distance Framework can be used to identify cultural, administrative, geographic and economic differences between target and home markets. It is therefore especially useful when searching for worthwhile target markets and assesses their accessibility.
The bottom line: Identifying realistic market opportunities with market analyses
In-depth market analyses reveal market opportunities and market potential, and highlight possible risks and threats from competitors. Knowledge of the individual features and key developments in a market helps when developing new ideas and designing specific business models. In an increasingly complex interplay between various driving forces, comprehensive market analyses create a meaningful basis for important strategic decisions.