Market analysis involves employment of different tactics by a firm to determine the strengths and weakness of a business through identification of available opportunities. When these opportunities are identified and capitalized, they assist a business to minimize the level of threats either internal or external. Therefore market analysis aims at assessing the attractiveness offered by market structures and the available opportunities to the business eliminating all the possible threats through concentration on strengths and avoidance of the weaknesses. Market analysis may take several approaches and dimensions to be effective and efficient. They include the study of market profitability, consideration of the key success factors driving market forces, the market growth rate, current and future market size, cost structures prevailing in an industry and the distribution channels available to the firm (Andrew 2009).
However it’s important to consider that these considerations do change from time to time and their dynamism need to be considered and addressed to keep with the trend to achieve the objective of market analysis and improve the profitability of the business as the ultimate goal. Therefore the market analysis tool available and will be discussed in this paper are the SWOT analysis, and Porter’s Five Forces Model analysis. All these analysis do greatly contribute to the market strategy formation of a business to cope with inherent challenges in a competitive market structure (Thompson & Strickland 2001).
This is a Strength, Weakness, Opportunities and Threats (SWOT) analysis involving the examination and evaluation of a company. It considers the internal and external factors of a company or a firm besides its positive and negative factors that are fundamental to the operations and running of a business. The internal evaluation involves examination of firm’s capabilities with careful and close analysis of all the available strengths and weakness. External factors on the other hand involve the examination of surrounding environment with careful intentions to identify the possible opportunities available and the threats facing the business. This analysis is paramount in guiding management decisions on the effective and efficient methods to employ, strategies to adapt, how to treat customers, best distributive channels to pursue and the improvement of business profitability through growth in output and production levels (Marketing Teacher 2009).
The analysis also assists the employees and other business stakeholders to familiarize themselves with the dynamics and operations of company and its surroundings. SWOT analysis is categorized into two broad categories; the internal and external characteristics of a business. The internal factors are represented by the Strengths and Weaknesses of a company that influences the viability operations of a business while external aspect are demonstrated by Opportunities and the Threats affecting the performance of the company’s operations. This analysis forms a fundamental aspect since the company’s strategy is determined by the outcomes of both internal and external factors reactions to the business activities and operations. For instance, Dell Company utilized the SWOT analysis to measure its market operations and come up with a strategy that will continue improving its market position in the industry (Hill, Jones, Galvin & Haidar 2007).
Their strengths included the advantage of been the largest company in the PC making industry with the largest profit margin in the last two decades. The company also exercises direct contact with their customers without involvement of bureaucratic and red tape procedures in their distribution networks. The Dell Company has implemented customer and market oriented strategies like the Customer Relationship Management (CRM) through improved information technology to expand its market base through capturing data of their customers. Dell also uses saving cost measures in its assembly procedures while making prompt deliveries to their customers’ destinations through courier services to improve and enhance chain of command in their supply chain system. To incorporate customer’s views in the running of the business, they highly encourage customer complements and queries which are promptly attended to through their customer care services that are located India (Marketing Teacher 2009).
Dell have a huge product range that it manufacturers composing of numerous components to satisfy their plethora countries and their customers. However it had some challenges and internal weaknesses when it experienced product recall due to mechanical and technical problem in manufacture. Dell utilizes the opportunities to reduce costs, large client’s base and its ability to offer the demand gap in the market. However it has experienced threats of new entrants in the market which has increased the competition in the PC industry. This has greatly reduced its profitability and market coverage due to stiff competition from other players and firms in the PC industry (Marketing Teacher 2009).
Porter’s Five Forces Model
This is a framework that can also be used to measure the market sustainability of a company in the market orientation where competition is stiff. The concepts of development and industrial organization economics are utilized to develop the appropriate model and market strategy to improve on company’s performance. This model is used to measure and determine the market attractiveness and the competitive forces within the industry. The market competitiveness and attractiveness represents those that increases and reduces profitability of company in the industry. The unattractiveness of an industry represents the one that the profitability of not only the firm but also the industry starts to decline. This unattractiveness forces the market to approach a pure competition situation (Porter 1980).
This model represents three of the five forces that deal with competition from external sources. The forces in this model are referred to as micro environment to distinguish it from macro environment. The forces are closely related with the ability of a firm to serve and satisfy all their customers’ needs in time to increase profitability. These forces require reassessment of the company’s operations in the market place and utilize the industry’s available information for improvement of profitability from proper response of the customers. These forces includes three which forms horizontal competition which composes of threat of new entrants, threat of substitute products, and threat of established rivals. The other two forces represent the vertical competition representing the bargaining power of suppliers and that of consumers. Dell in this regard has experienced a better part of the bargain by facing stiff competition from the new and upcoming PC manufactures in the technology industry (Porter 1980).
Their supplier procedures have also been challenged by well organized supply and distribution channels that have been adopted by other firms in the industry. The existing PC manufactures in the industry have been stable in business environment which have offered Dell a hard and challenging task to overcome. The customers have also given the company a challenge by their preferences and tastes of the products and services they desire to be supplied in the market. This has not only forced dell to conduct market research and product appraisals, but also involve all the stakeholders in strategy formulation to suit all the interests of interested parties. Lastly, the suppliers have been a challenge to Dell, due to lack of large scale suppliers in the market; dell had to deal with supply and distribution challenges which greatly reduced its profitability and market coverage (Johnson, Scholes & Whittington 2005).
However, the use of SWOT analysis is better than the Porter’s Five Forces Analysis which is more detailed and gives the company a more elaborate opportunity to access the market strength both internal and external. By use of SWOT analysis, the company is able to position itself in terms of product and service provisions properly more than Porter’s models can do. The SWOT analysis also assists a company to improve and maintain its competitive position in the market more than what Porter can provide. SWOT also gives an opportunity for company to receive customer feedback and incorporate it its strategy more than Porter’s model. Lastly SWOT provides a better opportunity for a firm to formulate a winning market strategy more than any other analysis.