Market opportunity analysis is a critical exercise when companies are trying to decide whether or not to enter a new market—or exit markets they are already in. This involves studying the size of the market, the competition, and the potential for success.
In this blog post, we will discuss what tools should be included in market opportunity analysis and how to do them. We will also discuss the benefits of doing a market opportunity analysis.
There are a number of benefits to doing market opportunity analysis. Some of the most important benefits include:
When done correctly, market opportunity analysis can help companies make better decisions about whether or not to enter a new market. It can also help them understand the competition and identify potential opportunities and threats. Doing a market opportunity analysis can also help companies clarify their strengths and weaknesses and improve their decision-making process.
Doing market opportunity analysis is an essential part of doing business and can help companies achieve greater success in new markets.
Market opportunity analysis is critical whenever a company is considering entering a new market. However, even if new market entry isn't being considered, companies should continuously be monitoring and analyzing their current market for new opportunities and threats.
The Ansoff Matrix is a popular framework for market opportunity analysis. The matrix helps companies think about the different types of growth they can pursue.
There are four types of growth:
Market Penetration - This is when a company sells more of its existing products to current customers.
Product Development - This is when a company creates new products and services for its existing markets.
Diversification - This is when a company enters new markets with its existing products and services.
Concentration - This is when a company focuses on selling more of its products to a smaller number of customers.
There are a number of ways to analyze a market, but four tools consistently include in overall market opportunity analysis: market sizing, competitive analysis, SWOT analysis, and Porter's Five Forces.
Market sizing is the process of estimating the size of a total available market, or TAM. In its simplest form, the total available market is the total number of potential customers in a market multiplied by the average revenue generated by each customer. TAM includes both those who are currently buying from the competition and those who are not, and is typically broken down further into the portion of the market a company has the capability to service (SAM) and the constraints that make up a competitive advantage and target market (SOM). Learn more about the difference between TAM, SAM, and SOM and how to do TAM here.
Competitive analysis is the process of assessing the competition in a market. This includes studying the strengths and weaknesses of the competition, their go-to-market strategy, their relative size, and their market share. It also includes looking at what strategies they are using to compete and how successful they have been so far. Competitors may be strong in certain market segments but weaker in others, creating opportunities for new market entrants.
SWOT analysis is a tool used to assess a company's unique strengths, weaknesses, opportunities, and threats. This analysis can be used to assess a market as a whole or to assess a company's position in a market.
Porter's Five Forces is a framework used to assess the attractiveness of an industry. The five forces are: supplier power, buyer power, entry barriers, substitutes, and degree of rivalry. With weaker forces, an industry is more attractive to new entrants—a benefit to you as a new entrant, but a challenge if you are an incumbent.
Now that we have talked about the different types of market opportunity analysis, let's talk about how to actually do them. The process of doing market opportunity analysis is not difficult, but it does require time and effort.
The first step is to identify opportunities by gathering data about the market. This data can come from a variety of sources, including your own customer data, industry reports, government databases, trade publications, and surveys. Building a TAM model is a foundational step to understand is a market is large enough to pursue. From there, understand who the competitors are in the market, and the forces shaping it. Finally, look at your unique strengths and weaknesses to understand your ability to capture marginal revenue in a given market.
With the data gathered, the next step is to decide if the market is worth entering. This involves building a revenue forecast and operating plan to understand how the market will impact your overall business.
In this post, we have discussed the different types of market opportunity analysis and how to do them. We have also talked about the benefits of doing a market opportunity analysis.
At Scalepath, we help companies with a key component of market opportunity analysis: reliable and credible B2B TAM. We provide the data, structure, and reporting needed to make informed decisions about the size and dynamics of current and new markets.
Curious to see how it works? Explore Scalepath's B2B TAM software to learn more.
