Explain the nature of competition in this market. This topic is still in the general area of describing the industry, or type of business. Explain the general nature of competition in this business, and how the customers seem to choose one provider over another.

What are the keys to success? What buying factors make the most difference? Price? Product features? Service? Support? Training? Software? Delivery dates? Are brand names important?

In the computer business, for example, competition might depend on reputation and trends in one part of the market, and on channels of distribution and advertising in another. In many business-to-business industries, the nature of competition depends on direct selling, because channels are impractical. Price is vital in products competing with each other on retail shelves, but delivery and reliability might be more important for materials used by manufacturers in volume, where a shortage can affect an entire production line.

In the restaurant business, competition might depend on reputation and trends in one part of the market, and on location and parking in another.

In many professional service practices, the nature of competition depends on word of mouth, because advertising is not completely accepted. Is there price competition between accountants, doctors, and lawyers? How do people choose travel agencies or florists for weddings? Why does someone hire one landscape architect over another? Why choose Starbucks, a national brand, over the local coffee house? All of this is the nature of competition.

List the main competitors. What are the strengths and weaknesses of each? Consider their products, pricing, reputation, management, financial position, channels of distribution, brand awareness, business development, technology, or other factors that you feel are important. In what segments of the market do they operate? What seems to be their strategy? How much do they impact your products, and what threats and opportunities do they represent?

To prove a market, you build a forecast on credible numbers. Nobody expects you to be correct or right about the future, but you do have to be reasonable, logical, and credible. You should cite sources, such as the U.S. census or trade group statistics, or published articles, or known experts, as much as you can.

While it’s not strictly necessary, a market forecast is generally a good addition. That means numbers, like shown here, estimating potential market at present and market growth over five years. This illustrates your segmentation as well, and works as support for your segmentation strategy and choice of targets. You can see how segments are handled in this sample.

In the illustration you can see how the spreadsheet works. It is pointing to cell H5, and the formula in the edit bar is the formula in that cell. It identifies the last year in row-column notation as G5, and the first year as C5. The growth rate calculation produces the number showing in H5, 2%.

As you can probably guess, the formulas in the rest of this row take the growth rate assumption in column B and apply it to the other cells, after the initial value in column C. You add 1 to the growth rate and multiply it by the previous year to get the next year’s calculated amount.

You can create a simple market analysis by estimating the number of potential customers for each segment and the growth rate, as shown in this example. Once you have those numbers, it should be a simple step to develop a corresponding chart, such as the classic market pie chart on the previous page, or a bar chart showing growth by segment.