ASIO (20)

One of the initial pieces of information needed by the entrepreneur is the market potential for the product or service. To ascertain the size of the market, it is first necessary for the entrepreneur to define the market. For example, is the product most likely to be purchased by men or women? People of high income or low income? Rural or urban dwellers? Highly educated or less educated people? A well-defined target market will make it easier to project market size and subsequent market goals for the new venture. For example, let’s assume that an entrepreneur in the Boston area notes the success of businesses such as Au Bon Pain and Panera Bread Company and thus is considering launching a food business that offers the convenience of “fast food” but with the taste of a sit-down restaurant. With a huge

tourism trade the entrepreneur decides on a mobile (food cart) crepe business that will in-clude a number of carts situated in high-traffic areas.

To build a strong marketing plan with reasonable and measurable market goals and ob-jectives the entrepreneur will need to gather information on the industry and market. Most entrepreneurs have difficulty with this stage and do not often know where to begin. The best way to start is to first visualize this process as an inverted pyramid (see Figure 7.1).

This means that we start with very broad-based data and information and work down until we can develop a positioning strategy and quantifiable goals and objectives. All this infor-mation can then be used in the industry analysis and marketing planning sections of the business plan that are discussed later in this chapter. (Also see Chapter 8.)

As noted in Figure 7.1, we begin the process by evaluating general environmental trends. This would include household income trends, population shifts, food consumption habits and trends, travel, and employment trends. This information can be found in sources such as the U.S. Census Bureau, Bureau of Labor Statistics, Forrester, Reuter Business Insights, and Statistical Abstracts, to name a few. These sources are available in the local college or university library. Some sources such as the U.S. Census Bureau can be found online or in the local community library. Table 7.2 provides a partial list of sources that

FIGURE 7.1 An Upside-Down Pyramid Approach to Gathering Market Information

Market objectives Market positioning

General environmental and demographic trends

National food industry trends

Local environmental and demographic trends

Local food industry trends

Local competition strengths and

weaknesses

can be considered for typical census-related data. Forrester and Business Insights are pri-vate services and can be obtained from libraries or by purchasing specific reports on your industry or market. For international markets, population, economic, and demographic in-formation can be accessed at such Web sites as www.euromonitor.com, www.census.gov/

international, www.internetworldstats.com, and www.imf.org (the international monetary fund). Most of this international data is organized by country and by continent.

Source Description 1. U.S. Census (www.census.gov)

A. U.S. Population Statistics for 2010 Data includes population by area.

B. Service Annual Survey Includes dollar volume of receipts in selected service industries. Also includes year-to-year ratios.

C. County Business Patterns, Economic data of small areas by industry for Metro Business Patterns, and analyzing market potential, budgeting, and Zip Code Business Patterns forecasting.

D. Statistical Abstracts Statistics on social and economic variables at national, state, and metropolitan levels.

E. Annual Survey of Manufacturers Statistics such as industry outputs, inputs, and operating data on manufacturing activity, by industry groups.

F. Current Industrial Reports Regular reports measuring production and shipments of wide range of products.

2. Industry and Market Data

A. Encyclopedia of American Industries Industry trends and market data compiled on all SIC-coded firms.

B. Standard & Poor’s (NetAdvantage Wide array of industry and market survey array of products and services.

E. RDS TableBase Provides market share, rankings, industry/

product forecasts.

F. Other sources on industry or market These reports may be purchased or accessed trends are MarketLine, Forrester, through a university library.

Investext, Dun & Bradstreet, and financial ratios on 5,500 lines of business covering a wide range of industries. Most cost less than $100.

TABLE 7.2 Sources of Data on Environmental Trends, Industry Trends, Financial Ratios, and Other Benchmarks

The next step is the assessment of trends in the national food service industry. We would look for data on total food sales and commercial restaurant sales by type of restaurant. This information can be found in such sources as Dun and Bradstreet’s AllBusiness, Encyclopedia of American Industries, the www.usa.gov Web site, and S&P’s NetAdvantage . Standard and Poor’s also provides very specific data on the food industry such as in its Industry Surveys:

Restaurants and the National Restaurant Association. Also see Table 7.2 for more in-depth information on some of the important sources of information that can be used in this analysis.

Notice that the first two stages in Figure 7.1 focus on the national market, and the next two stages consider trends in the local market where the business will be located. This con-sists of general local economic trends and an assessment of the local food service industry.

The sources may include the same ones mentioned above except data related only to the local market would be considered. In addition, the state of Massachusetts publishes data on tourism (the Massachusetts Travel Industry Report ) and economic trends (U.S. Census Bureau). Also implicit in this local food service industry analysis is the regulatory environ-ment. Each state has distinct regulations regarding alcohol and food delivery license requirements. If an international location was being considered the entrepreneur would follow the same procedure by searching for local data. This may be more difficult to obtain in another country. If not available, then it would be necessary for the entrepreneur to spend time in this market and speak to local businesses, channel members, and consumers.

These data can also be found online or in your local library.

The final step is an analysis of the local competitive environment. In this example the entrepreneur would need to identify any restaurants, food stands, or push-cart food services that could be competitors. This list can be found in the yellow pages, local town hall (food license bureau), or through observation. Each local competitor’s strengths and weaknesses should be assessed. This can be judged by using marketing research (discussed in Chap-ter 8); evaluating the competitors’ Web sites, advertising, menus, and locations; and review-ing any published articles that have appeared in the local media. A spreadsheet can then be prepared with the list of competitors in the first column, followed by columns devoted to their strengths and weaknesses.

Once all this analysis has been completed, the entrepreneur is ready to clarify the prod-uct or service offering, actual market positioning in the competitive environment, and mar-ket objectives. These are part of the marmar-keting plan and are discussed in more detail in Chapter 8. These data, in addition to contributing to the preparation of the marketing plan, lay the groundwork for the financial projections and forecasts discussed in Chapter 10.