What Is Market Analysis?
SWOT (strengths, weaknesses, opportunities, and threats) analysis is a framework used to evaluate a company's competitive position and to develop Strategic planning & Implementation. Market Analysis assesses internal and external factors, as well as current and future potential. A Market Analysis is designed to facilitate a realistic, fact-based, data-driven look at the strengths and weaknesses of an organization, initiatives, or within its industry.
- Market Analysis is a Strategic planning & Implementation technique that provides assessment tools.
- Identifying core strengths, weaknesses, opportunities, and threats leads to fact-based analysis, fresh perspectives, and new ideas.
- A Market Analysis pulls information from internal sources (strengths or weaknesses of the specific company) and external forces that may have uncontrollable impacts on decisions (opportunities and threats).
- Market Analysis works best when diverse groups or voices within an organization can provide realistic data points rather than prescribed messaging.
- The findings of a Market Analysis are often synthesized to support a single objective or decision that a company is facing.
Understanding Market Analysis
Market Analysis is a technique for assessing the performance, competition, risk, and potential of a business, as well as part of a business such as a product line or division, an industry, or other entity.
Using internal and external data, the technique can guide businesses toward strategies more likely to be successful, and away from those in which they have been, or are likely to be, less successful. Independent SWOT analysts, investors, or competitors can also guide them on whether a company, product line, or industry might be strong or weak and why.
Market Analysis was first used to analyze businesses. Now, it's often used by governments, nonprofits, and individuals, including investors and entrepreneurs. There is seemingly limitless applications to the Market Analysis.
Components of Market Analysis
Every Market Analysis will include the following four categories. Though the elements and discoveries within these categories will vary from company to company, a Market Analysis is not complete without each of these elements:
Strengths
Strengths describe what an organization excels at and what separates it from the competition: a strong brand, loyal customer base, a strong balance sheet, unique technology, and so on. For example, a hedge fund may have developed a proprietary trading strategy that returns market-beating results. It must then decide how to use those results to attract new investors.
Weaknesses
Weaknesses stop an organization from performing at its optimum level. They are areas where the business needs to improve to remain competitive: a weak brand, higher-than-average turnover, high levels of debt, an inadequate supply chain, or lack of capital.
Opportunities
Opportunities refer to favorable external factors that could give an organization a competitive advantage. For example, if a country cuts tariffs, a car manufacturer can export its cars into a new market, increasing sales and market share.
Threats
Threats refer to factors that have the potential to harm an organization. For example, a drought is a threat to a wheat-producing company, as it may destroy or reduce the crop yield. Other common threats include things like rising costs for materials, increasing competition, tight labor supply, and so on.