What Is Strategic Market Analysis?
Here at PESTLE Analysis, we discuss a variety of topics related to business analysis, but we’ve never introduced you to the concept of strategic market analysis. So what is strategic market analysis, and why should you care?
Although strategic market analysis has no dictionary definition, it can be understood as any market analysis which pertains to an individual business strategy or to business strategy as a whole. The goal of strategic market analysis is to help enterprises of all sizes make educated business decisions, especially as related to strategy.
Understanding Strategic Market Analysis
As we touched on above, strategic market analysis isn’t a fully developed (or defined) concept. Instead, to understand strategic market analysis, you need to take each word at face value. That’s why we say that strategic market analysis is any market analysis which pertains to business strategy. There’s definitely some ambiguity here, which is mostly caused by the ambiguity of the word “strategy.”
For some, strategy refers to an individual plan or set of steps that an organization is executing to achieve a specific goal. For others, strategy refers to an organization’s overarching approach to business, especially as related to business development and growth. Both of these are valid definitions.
In this guide, we’ll look at strategic market analysis as it related to all the different levels of strategy. Now, let’s kick things off with the different approaches to strategic market analysis.
Approaches to Strategic Market Analysis
To find strategic market analysis tools, you can look at the wider category of market analysis tools on our website, and rule out the ones which don’t refer to business strategy. Some of the most popular tools and approaches to strategic market analysis, then, include:
SWOT Analysis
SWOT analysis is a market analysis tool that takes into account the Strengths, Weaknesses, Opportunities, and Threats facing a business. This information can be used to mold a business’s overarching strategy. However, you could also apply SWOT analysis to an individual business venture, which would help analyze the strategy for that single venture.
PEST Analysis
PEST analysis is another incredibly popular market analysis tool. This time, you look at the Political, Economic, Social, and Technological factors affecting a given market or industry. Since PEST analysis focuses on entire markets, it’s better for shaping an overall business strategy than analyzing individual decisions.
Porter’s Five Forces Analysis
Porter’s Five Forces analysis is a significantly less frequent market analysis tool, but it’s still equally valid. It accounts for five factors — the five forces:
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Supplying power
Buying power
Competition
Threat of substitution
Threat of new entry
Like SWOT analysis, Porter’s Five Forces analysis is as useful for strategic market analysis as for any other type of analysis. This is because it can be applied on the macro and micro scales, to overall business strategies and to individual business decisions.
There are plenty of other tools for strategic market analysis, and you can find many of them just by looking around our website!
Pros and Cons of Strategic Market Analysis
If used correctly, strategic market analysis can be an extremely powerful tool in the world of business. In this section, we’ll go over the pros and cons of conducting this type of analysis.
Upsides to Strategic Market Analysis
- Make more money
Ultimately, business strategy comes down to maximizing profits. Strategic market analysis can be a fantastic way for your organization to make more money, since it will help uncover otherwise-hidden business opportunities.
- Conquer competition
Strategic market analysis will help you identify your competition before it’s too late. Also, it will open your eyes to the avenues you can then use to overcome that competition — for example, untapped revenue streams.
- Avoid bad decisions
One of the most important benefits of strategic market analysis is the identification and subsequent avoidance of bad business decisions. Every idea is a good idea in principle, but when you start researching and analyzing the strategy and its relevant market, you may quickly see how the plan will fall through.
Downsides to Strategic Market Analysis
- Time taken
As with any strategic planning or market analysis, strategic market analysis takes a lot of time. This is because proper market analysis takes into account a wide variety of factors, which don’t always have data surrounding them.
- Bad results
In rare cases, strategic market analysis may lead you to making false conclusions. If this is the case, it may cause you to miss out on otherwise-profitable business ventures.
How to Conduct Strategic Market Analysis
If you’ve decided that strategic market analysis would be a good choice for your organization, you might be wondering how to get started with conducting your first market analysis. There’s no exact formula, but here’s what we’d suggest you do to get going:
- Choose the market analysis tools for you.
The first thing you can do to get started with strategic market analysis is select your tools. As we mentioned earlier, there are a whole host of market analysis tools on our website. Take a look through and choose the ones that look most applicable to your organization — but definitely start by looking at PEST, SWOT, and Porter’s Five Forces analysis to see whether they’ll give you the information you need.
- Gather data from a variety of sources.
To conduct any market analysis, you’re going to need plenty of data. We go into plenty of depth on what kind of data you’ll need in this post, but we suggest you search for market reports of your industry and see what information you can find.
- Conduct your market analysis!
With your data in hand, you can start working through the market analysis tools you’ve chosen. At the end, you’ll want to draw conclusions from each tool, and see what kind of overarching decisions you can make regarding your organization’s business strategy.
Final Thoughts
Strategic market analysis isn’t a concept that’s been extensively discussed, but it’s any market analysis relating to the overall strategy of your organization, or even the individual decisions you make within that organization. It’s got plenty of benefits, and we definitely suggest you try it out!
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