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Marketing analysis
In step 1 you developed a value proposition based on gut feeling, previous experience and a quick scan of trends in the market. Step 2 is all about solidifying your business idea by checking your assumptions more in-depth. This means a more structured analysis of trends, competitors and your company’s strengths and weaknesses.
In this step you have to watch out for the ‘paralysis of analysis’ phenomenon caused by endless research and consultation which can discourage you or take the edge of your value proposition due to accommodating too much to outside advice. As an entrepreneur you have to find the right balance between following your gut feeling and rational analysis.
This step includes taking the following actions:
Trends in the market
List the major trends in your market related to the economic, social, political, legal and environmental spheres. This is your ‘long list’ of trends which you subsequently narrow down to the most relevant trends (approximately 3) that your company capitalizes on. Making a long list is always useful as you make sure that you aren’t overlooking certain trends which could significantly influence your value proposition, in a positive or negative way.
Identify competitors in the market
Map out direct and indirect competitors (e.g. substitutes) and examine their strengths and weaknesses. For example, list their competencies related to your value proposition, e.g.: prices, product features, marketing and distribution channels. Next, make a table where you contrast your company with those competitors, on the aforementioned dimensions. This way you get a better understanding of your company’s value proposition and can fine-tune it where necessary. A closer examination of your competitors can also result in you deciding to fold your business idea, e.g. when you find out (e.g. a search on google) that there are more capable competitors in your market than you initially thought of.
Identify potential business partners
Are you going at it alone or is there a company in your field that complements your business and which, in return, could benefit from one of your strengths? This potential partner could even be a competitor. For example, if you consider entering a foreign market your company could benefit from the competitors local network whereas the competitor might benefit from your unique expertise.
Identify opportunities in the market
In order to extract meaningful conclusions from the above analyses, a Porter five forces- and SWOT analysis are useful. With the Porter five forces analysis you can decide upon the overall attractiveness of the market by assessing and adding up different forces in the market (e.g. competitors, customer, suppliers).
Finally, an extended SWOT analysis (including a confrontation matrix) helps you to identify the most critical business issues regarding your value proposition by investigating the interplay between your internal Strengths & Weaknesses, and the external Opportunities & Threats.
For your value proposition to work out, you would expect a positive critical issue to emerge in the SWOT analysis where one of your strengths (which is a key part of your value proposition) interacts very favorable with an opportunity (trend) in the market. However, such a positive issue could be overshadowed by the identification of a critical but negative issue. For example, an undermining legal trend that you don’t have the resources for to appropriately deal with.
Go to step 3