Marketing and Entrepreneurship: Research Ideas and Opportunities

By Gerald E. Hills | Go to book overview

9
Analyzing Market Opportunities for New Ventures

Ernest R. Cadotte and Robert B. Woodruff

Each new business venture faces an environment that is partly friendly and partly hostile, partly known and partly unknown. Although a great idea, adequate financing, and sound management are obviously important in beginning a new venture, the external environment will also be a crucial factor in the success or failure of the undertaking. The implication is clear: new-venture decisions should be based on a careful analysis of this external environment, and this can be accomplished by conducting a market opportunity analysis (MOA).

The major elements of a market opportunity analysis are shown in Figure 9.1. With an analysis of the relevant macroenvironment, major forces (economic, social, technological, legal, and natural) are uncovered that might affect market opportunity. Second, major markets in which the product might compete are identified and segmented. Next, a wealth of information is gathered to learn about specific customers in markets, the competition, and appropriate channels of distribution. This information, in turn, both provides important guides for developing a strategy to take advantage of market opportunity and lays the foundation for forecasts of the new venture's sales. The final step in the process is an evaluation of the attractiveness of the entire market opportunity in terms of financial return, consistency with organizational objectives, and other criteria.


MACROENVIRONMENT

Every new venture seeks market opportunity in the context of a larger macroenvironment. Forces arising from this part of the external environment may affect the venture's organizational capabilities, customers, competitors, and channels of distribution. For instance, government spending priorities regarding the proposed space plane could greatly affect American Matrix Corporation's

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