Market Analysis
Market Analysis is an essential first step in developing a business case for a new product concept. It is important to determine the size and growth rate of the market, and estimate the market share that the new product is likely to capture. This may include the following steps:
Market Segmentation
In order to develop a realistic forecast for a new product or service, it is beneficial to divide the market into market segments. According to Wikipeida, "a market segment is a group of people or organizations sharing one or more characteristics that cause them to have similar product and/or service needs." Markets can be segmented based on geography, demographics, industry segments, usage of technology, user preferences, etc.
Market Size - Installed base and existing market shares
Use primary or secondary research methods to accurately size each targeted market segment. Determine the existing penetration of the product/service within each market segment. This is the existing installed base. In addition, determine the composition of the installed base by vendor.
Estimated Market Growth Rates and Market Shares
Use primary or secondary research methods to estimate the growth rate of the market segments over the planning horizon. In addition, estimate the penetration of each segment by the product/service, including your company's market share, for each year of the planning horizon. This will provide the product shipments by year, which will be a key component of the business plan financial analysis.