Market analysis – definition and example
Market analysis is research on any market which aims to anticipate or predict the direction of prices or growth. A market analysis of a stock, bond, or commodity market tries to forecast which way prices will go.
Most analyses focus on what is to come, i.e., they are forward-looking. However, some try to understand or explain why something has happened, i.e., they examine the history.
People carrying out market analyses use technical data about the movement of, for example, the stock market or commodity prices.
Sometimes market analysis requires studying fundamental data such as supply and demand or corporate earnings prospects.
Collins dictionary has this definition for the term in a stock market context:
“The act or process of examining in detail the performance of the stock market with a view to suggesting future trends.”
Collins dictionary also says that ‘market analysis’ is one of the 30,000 terms people use most commonly. From 1924 to 1975, the number of times people used it was fairly constant. However, usage has increased significantly since 1975.
Market analysis – the marketplace
Often, market analysis involves studying and defining a company’s market and trying to determine its direction.
The study may also look at how a company can exploit that market to gain a greater share.
We can use this type of analysis to analyze our current market or to look at new ones.
No matter the size or age of a business, market analyses help identify the attractiveness of markets. They also help business people detect risks that may exist or possibly will exist in the future.
Typically, the first thing to do in market analysis is identify your markets. Most businesses are in more than one market. For example, a small restaurant, apart from being in the restaurant market, may also be in the delivery, events, and bar markets.
What is a market?
A market is a place where businesses and people gather to purchase and sell goods and services. It may be a physical place, such as a store, flea market, or farmers market.
However, a market may also be an abstract term that refers to all the possible buyers. For example “The private vehicle market grew by 2% last year.”
SWOT analysis and market analysis
Through this type of analysis, a company can identify its SWOT.
SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. Its strengths and weaknesses are a company’s internal factors while its opportunities and threats are its external factors.
We can control internal factors but not external ones.
A SWOT analysis can help a company define an adequate business strategy.
Video – What is a Market Analysis?