Describing your market
Unless you are developing a completely new, never-before-seen industry, you will find that your business slots into a pre-existing industry. Each industry is made up of the group of firms that supplies a market or markets. Each market is slightly different and companies in the same industry could still be serving completely different market segments. Understanding your specific industry and market segment can help you develop the most effective strategy for success. Once you understand where the competition, risks and opportunities are you will be better prepared to enter your chosen market.
To help you, here are several ways that markets/industries can be described.
Industry/market life-cycle stages:
Completely new (market paradigm shift) – a completely new market based on radical innovation. It is a high-risk market as its longevity has not been proven but can bring high rewards with a lack of competitors and first mover advantage allowing the possibility of market dominance. Marketing costs can be high to attract customers to a market that they have never needed before and processes and procedures are yet to be developed.
Emerging – a market where demand is proven but size is still uncertain and processes and procedures are still developing. Competition in an emerging market can be fierce as dominant brands emerge with aggressive marketing strategies and competitive pricing. There are opportunities for development and innovation to begin leading the market.
Mature – a large market with established demand and processes but where growth may be slow or non-existent. Competitors will be well established and it can be difficult to break into, however, the limited innovation means that there are significant innovation opportunities.
Declining – a market that has well established processes and buying patterns but is steadily losing both customers and competitors and so has a limited life expectancy. As competitors drop out, innovation and product range declines which can present opportunities if demand is still high enough. Buying out competitors could allow a business to consolidate the market. There could also be opportunities to cut production costs to reflect reducing demand.
Fragmented – a market with a large number of similarly sized, established competitors, usually leading to competitive pricing and limited profitability. There could be the opportunity to buy out competitors to create a market that is…
Consolidated – a market in which a few, large competitors dominate causing high barriers to entry including the ability to price defensively. Radical innovation would be needed to successfully break into a consolidated market.
Local, regional, or national – are markets, often new and emerging that trades solely in one geographic region though they may become international in time. Smaller geographic markets make market dominance easier and careful expansion.
Global – a market that is international from the start (increasingly common through the Internet). Going global immediately can give a first-mover advantage, or allow a niche market to thrive, however, it can also be expensive to establish.