Market conditions: market analysis, methods and essence of analysis

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:39

Wishing to improve its position within the market, the manufacturer must know what factors are most conducive to the promotion of goods. This is where market analysis comes in. The market situation is not just the ratio of supply and demand, as many people think. This is a fairly complex mechanism, subject to constant fluctuations that displace both old and new players. We will tell you how to conduct an analysis vital for any enterprise.

What is market analysis?

Market conditions are the situation established in the market at a certain point in time under the influence of the main economic forces: supply and demand. Depending on supply and demand, there is a movement of goods, a market price for products is set, manufacturers appear or disappear, the company's capitalization grows or decreases, and in general, market fluctuations occur.

Market analysis is an analysis that is designed to assess the situation in the market for goods or services in order to establish a strategybusinesses.

Why is it needed?

By analyzing the current market situation, the company is able to:

reveal your position in the industry;
identify competitors and choose a method to deal with them;
learn consumer preferences and satisfy demand for a torus or service;
simulate product perspective;
identify areas of action and translate them into a strategic plan.

Market analysis should be performed not only when the company already has its own niche, but also when a new player only wants to get it. In this case, the analysis of the market situation allows you to determine the size of the barriers to entry into the industry, the degree of market congestion, the prospects for this industry, etc.

Target

The purpose of this analysis is to establish the current behavior of supply and demand and the degree of influence of economic objects on the behavior of the market, in order to make the right management decisions that contribute to obtaining more profit at lower production costs. All of this is the essence of market analysis.

Tasks

Just like any other study, this type of analysis involves setting certain tasks. In this case, the tasks are:

Choose the most complete and up-to-date information about competitors: identify the level of demand for a competitive product, draw parallels between the pricing of your own company and that of a competitor, studysuppliers and their prices for raw materials and materials, determine the threat of substitutes, etc.
All indicators need to be systematized.
Reveal all the factors that have an impact on the behavior of the market, establish their strength, relationship and direction of their action.
Set the degree of activity of all factors and their interaction to compile the forecast production of the company.

Factors affecting market conditions

Market conditions, market analysis can be influenced by those factors that, to one degree or another, affect the change in the scale of production, price setting, the issuance of securities, etc.

These include:

degree of market balance (demand=supply, in perfect proportion);
degree of deviation of the main characteristics of the market;
current, probable or warping prospects that are taking shape in the market;
movement of finished products and goods;
probability of capital loss under current conditions;
number of intra-industry competitors;
development of an alternative commodity item.

Research methods

For a full-scale analysis of market conditions, statistics come to the rescue. Statistical methods can be divided into 6 main groups. Therefore, market analysis methods include:

Statistical observation - real-time tracking of market activity to collect data, the volume of whichwould allow a full analysis.
Selection and grouping of received information.
Descriptive analysis that includes compiling a frequency table, calculating characteristics, or graphical presentation of information.
Reducing the results to a single conclusion.
Analysis of links - used to determine the degree of relationship between the objects of statistical research (the volume of products supplied to the market and its quality).
Forecasting market behavior. It gives an idea of how supply and demand for a particular product or industry as a whole will behave.

Additional methods

If the target consumer of the manufactured product is the population, then resort to additional methods of market analysis. The market situation in this case becomes more global, and additional mechanisms are used for its assessment methods, including:

game theory;
building models that can mimic the market;
analysis of factors with indirect impact, etc.

An indicative analysis of the market situation can be carried out by anyone. However, to build an accurate forecast, it is necessary to involve specialists who are fluent in all methods of market research.

Investments

Analysis of the investment market situation is determined by the constant volatility of supply and demand. The cyclicity and volatility of the investment market actualizes constant monitoringmarket conditions: the main trends and forecast of demand for securities. Any investor must have a complete set of information about the current situation on the market, be able to correctly adapt to the current state of affairs, give a correct forecast of market behavior in order to skillfully exist in the field of a market economy. Without the ability to determine the degree of development and an active investment market, it is impossible to make correct and competent decisions that will have a clear economic justification. Only such knowledge lays the foundation for a successful investment strategy.

Investor's shortcomings in assessing the investment market conditions can lead to negative consequences, such as a decrease in income, loss of equity and invested capital.

Investment market analysis involves the use of methods such as real-time market tracking, data analysis, and demand/supply forecasting.

Tracking the situation on the market in real time involves monitoring changes in the system of indicators that characterize supply and demand, current prices and the degree of competitive relationships. Particular attention is paid to those areas of the market where it is planned to build investment activities, or where it is already actively operating. The results of the study are displayed graphically or provided in any other form that can provide market agents with predictive data on the behavior of the securities market.

Analysis of the current situation on the securities market suggestsdetermination of trends in its change, based on the data that were obtained as a result of the study of previous periods. Analysis of the situation, first of all, begins with the calculation of complex indicators that characterize market behavior, obtained as a result of monitoring. Then the prerequisites for the deformation of the current cycle of the market conjuncture are revealed.

Analysis of the current situation at the time of the study and its subsequent forecasting is an important element in choosing the most important areas of the investment business strategy and forming an investment portfolio. The main goal pursued by the forecast is to determine the patterns of development of factors that in the future form the market situation. The forecast is made on the basis of a time period, based on certain methods and calculations.

Services

Analysis of the conjuncture of the services market is carried out according to the same principle as in the case of the investment market. Any entrepreneur, depending on the results of the study, must make a forecast, according to which he will build his pricing policy.

Forecast can be made for long-term, medium- and short-term periods. Long-term forecasting is associated with the development of a strategic plan for the distribution of its services in the market, which involves global capital investments for the implementation of large projects. A distinctive feature of long-term forecasting is that it is developed for a periodfrom three years.

Medium-term forecast is made to correct the main activity of the enterprise. The service provider company determines which services will be subject to strong market fluctuations and which will remain unchanged for the next two to three years.

Short-term forecasting of the service market conjuncture involves the introduction of short-term financial instruments that will help the company to occupy or at least not lose its niche in the coming year. Such forecasting is the most accurate, flexible, and on its basis the enterprise is able to calmly maneuver in short-term planning.

Parts

Analysis of the auto parts market is similar to the previous ones. In general, regardless of the industry, the analysis of market sectors is carried out by the same methods. The only distinguishing feature is the scale of the study (legal entities, general population). An analysis of the market situation of an enterprise that is engaged in the production and sale of auto parts involves the following steps:

monitoring the current situation in the automotive market of the country and the world;
collecting the necessary data array, which is the basis for further statistical research;
analyze based on previous years and draw parallels with the current situation;
grouping the results;
forecasting.