Importance of market analysis and how it fits in the broader theme of strategic management
Substantial market analysis on both competitors and customers are the reason for the most successful products, services, and businesses that are present in the market currently. Market analysis is the first and most crucial stage in marketing plan development, which is a vital component of strategic management (Lasserre, 2017). It refers to a continuous process of comprehensive data collection to determine the extent to which a product or service will or is meeting the needs of its intended customers. Also, market analysis assists the business in getting valuable insights about the market, including a shift in the economy, ongoing market trends, competitors, customer’s tastes and preferences, as well as the demographics making it a crucial component that provides companies with all vital information that help make wise and strategic business decisions. Companies aim to satisfy a given element in the market. Thus they need to study the market to understand it, know how it changes, and various upcoming events to prepare adequately to handle them appropriately.
The definition of strategic management provides important hints regarding how market analysis is an essential component of the whole business plan. Strategic management implies the process through which a company sets objectives, analyzes its competitive environment and internal organization, and evaluates its strategies to warrant their appropriate implementation to achieve set goals (Moutinho & Vargas-Sanchez, 2018). The market, customers, competitors, to name a few, forms a considerable component of the external business environment and often influence the most significant part of the business operations. A shift in the market will inform the strategic business management to remain competent. Regardless of the experience that one might have plus the instincts that guide their thinking and planning in the market, businesses must include high-quality, extensive data, market analysis into their strategic planning, decision-making process to have the broader picture of the market, convince key stakeholders and prove their conclusions. . Don't use plagiarised sources.Get your custom essay just from $11/page
The primary objective of strategic management is to ensure that the business is operating at no risks and prepared enough to handle the risk when they occur while maximally leveraging its potentials (Rothaermel, 2016). The business environment has become so volatile to the extent that it is just predicting or forecasting within the existing business scope (though also necessary) is not enough to guarantee success or adequate risk mitigation. Therefore, businesses must exploit extensive and accurate data as well as qualitative assessments regarding the direction and the trends in their industry. This will help it identify the niche in customer satisfaction that rivals may leverage. Strategic management is more of wise decision making and planning, which is solely driven by rigorous market analysis and data, which also ensures timely adaptation. Hence, market research is significant at protecting the business in more than one way.
Business knows their possible risks through market analysis by studying the customers’ behaviors and being able to predict a shift in their traits in a few years to come (Rothaermel, 2016). Similarly, through market analysis, the business understands their competitors to remain fit and unshaken. Risks are common in the fast-paced market, thus fumbling at the wrong moment can drive to severe consequences and affect an organization’s longevity. In a fiercely competitive market, often the businesses have a thin margin of error. Therefore, over-relying on inaccurate assumptions can be lethal. The information from the market analysis is what companies use to inform their strategic management activities and decisions since it informs business and corporate strategies. Conducting market research and analyzing the obtained data are crucial at validating facts, informing decision making, and determining strategic business plans. Also, one of the aims of strategic management is to mitigate risks as much as possible. Market analysis ensures the collection of high-quality industry research, which is vital at mitigating risks by aiding in hypothesis testing, insight validation, and building a sense of confidence. Managers will create short and long term investments; however, without the recognition of the many market trends and their analysis, the success of such ventures remains a dream.
How companies use market analysis to develop their strategic plan and gain strategic advantage
Adequate market research and its analysis put a business in an excellent position to seize opportunities for its product development and gain entrance into a new market. It helps the company to remain strategic and focused, which is the role of strategic management plays (Putra et al., 2019). Once a business knows its market and industry, it can make more prudent decisions grounded in facts, and increase its market spending. At the same time, companies have ample time to re-evaluate investments that earns low revenue. Business experiences turbulence, which may change its scope or disrupt it, for instance, the current pandemic coronavirus, or it may want to expand or invest in a startup. Adequate market research provides a stronger foundation to shift business when it experiences such interruptions. Companies will want to leverage any opportunity as early as they present, and they can only ensure this by doing extensive business research and analysis.
One excellent quality in business management is vigilance. Most successful companies understand that identifying and analyzing market trends is one crucial thing they need to do to be relevant in the industry (Rothaermel, 2016). Also, they are aware that trends change, particularly in a certain demanding industry, and change the whole industry; thus, they must keep up with them, which is not only an involving task but also a compulsory one. When market trends change, it is the customers’ needs, preferences that change. Many things are attributed to such changes; however, the business must strive to understand why such changes occurred. After understanding why they do happen, they will develop strategic plans that will meet the new customers’ tastes, preferences, and wants to stay relevant to their customers, catch emerging trends, leverage and maximize return on them.
Customers are the drivers of business success; thus, market analysis enables companies to know the shift in their traits, generate strategic plans that will ensure the products and services are in line with the demands (Vishnevskiy, Karasev & Meissner, 2016). Very few customers will leave such a company for another. Businesses that are quick to understand their customers will quickly tailor their products to satisfy their wants before their competitors; thus will gain a competitive advantage in the market while enjoying a more significant market share. Since most companies understand the significance of trend watching, they will allocate the appropriate budget and resource for trend-watching. This enables such companies to get every advantage when they finally want to further their business goals.
Also, market analysis ensures that businesses know how customers spend and keep them updated with the development trends in customer spending (Putra et al., 2019). With this in mind, the companies will develop a strategic plan that devotes some of its efforts to take advantage of these relevant trends. Companies also exploit market analysis to know how things are growing in the industry. They will then go a long way to create successful enterprises that is modern with a synonymous name with the products that the business offers.
Market analysis helps businesses understand that there market trends that they cannot change, such as demographic trends, and empowers companies to tailor their strategic plans to anticipate such trends to its advantage. Market analysis helps businesses to keep a tab on their rivals. Many companies use market research and analysis as an excellent evaluation tool for conducting comparative studies. Marketing research enables the company to trace its progress in the industry and the growth of its competitors by continuously eying on them. The company will then design its business strategies and strategic plan that will keep its ahead of many firms in the industry.
How to consult with a struggling business to develop a strategic plan
The best method to exploit when consulting with a struggling business is an eight-step consultation process. This process aims to gather adequate information that will inform or provide insights into the development of the company’s strategic plan. It will begin by initial introduction and collection of data followed by expectation setting and management. Step three is the identification of business problems while step involves the identification of business needs. Fifthly, business paraphrasing will follow to create smart goals. The sixth step is to research the client’s daily operations and decision-making, and the seventh step is the definition of solutions that improved decision making and fulfilled goals. The last step will be compiling the detailed information and analyzing it to get some insights that will fuel strategic plan development.
The main goal is to find out how the struggling company works, what it does, its products and services, and how they are offered into the market (Rothaermel, 2016). Besides, it is essential to know the struggling company’s target customer and their characteristics, the extent of competition in its market, and how rivals in the industry organize their operations. This information is enough to let the business have a picture of what the struggling business is facing and take lessons to guide its development of strategic plans. It helps know where the company went wrong or was unsatisfactory, along with other business problems and needs, which may be attributed to their struggling status.
References
Lasserre, P. (2017). Global strategic management. Macmillan International Higher Education.
Moutinho, L., & Vargas-Sanchez, A. (Eds.). (2018). Strategic Management in Tourism, CABI Tourism Texts. Cabi.
Putra, D. I. P., Syah, T. Y. R., Indradewa, R., & Pusaka, S. (2019). Duck Nugget Frozen Food Market Analysis and Marketing Strategy as a Startup Business Plan in Indonesia. Journal of Multidisciplinary Academic, 3(4), 65-70.
Rothaermel, F. T. (2016). Strategic management: concepts (Vol. 2). McGraw-Hill Education.
Vishnevskiy, K., Karasev, O., & Meissner, D. (2016). Integrated roadmaps for strategic management and planning. Technological Forecasting and Social Change, 110, 153-166.