Market and product feasibility study
1. SUMMARY
Market research tries to determine the space that a good or service occupies in a specific market. By space is meant 1-the need of current and potential consumers for a product in a defined area. 2-They also identify the producing companies and the conditions in which the good is being supplied. 3-also the price formation regime and the way in which the product of the producing company reaches consumers and users.
In a feasibility study it serves as an antecedent for carrying out technical, engineering, financial and economic studies to determine the viability of a business.
The market study is made up of blocks, seeking to identify and quantify the participants and the factors that influence their behavior.
The market study seeks to prove that there is a sufficient number of consumers, companies and other entities that, under certain conditions, present a demand that justifies the investment in a program of production of a good during a certain period of time.
For practical purposes, they are structured in blocks that seek to analyze past behavior and project the future of the agents participating in it.
FIGURE 1. SKELETON OF A MARKET STUDY
2- THE PRODUCT
In this part, the specific characteristics of the good or service under analysis must be defined.
1- Main product. Data must be collected to identify the main product. Its physical, chemical or any other characteristics must be pointed out. There must be consistency with the data from the technical study. It is necessary to clarify if it is traditional export products or a new product.
2- By-products. Indicate whether by-products originate in the manufacture of the main product and how they will be used.
3- Substitute products. The existence and characteristics of similar products on the market, and that they can compete with them on the market, should be pointed out, indicating under what conditions they may or may not favor the product under study.
4- Complementary products. Indicate if the use or consumption of the product is conditioned by the availability of other goods and services. Identify these complementary products highlighting their relationships with the product, so that they can be included in the market study.
THE CONSUMER.
1. Population. Estimate the extension of the probable consumers or users, and determine the segment of the population that will acquire the product in the market.
1. Current consumers and growth rate
2. Spatial distribution of the same, by age groups, sex and others whose specifications affect the product.
2. Income. The potential purchasing power of consumers should be characterized with the following data.
1. Income level and growth rate.
2. Current income strata and changes in their distribution
3. Limiting factors of commercialization
You have to identify them and they can be
1. Alterable
2. Non-alterable
It may be a deficiency in infrastructure, market regime, idiosyncrasy of users, legal restrictions, excessive distances, etc.
2.1. PRODUCT DEMAND
Here the quantities of the good that consumers are willing to acquire and that justify the execution of production programs are determined. The real or psychological need of a consumer population must be quantified, with sufficient purchasing power available and with defined tastes to acquire a product that meets their needs. You must understand the evolution of the current demand for the good, and the analysis of certain characteristics and conditions that serve to explain its probable future behavior.
They must include:
1. Current situation of demand.
Make a quantitative estimate of the current volume of consumption of the good produced. Present them this way.
a- Basic statistical series that allow the evolution of the consumption of the product to be determined during a period sufficient to allow estimating the long-term trend.
b- Estimate of current demand
c- Spatial distribution and typology of consumers. Characterize the demand and present indications of its concentration or dispersion in the geographical space, together with the variety of consumers.
2. Indicators of demand.
Use theoretical indices and coefficients based on the previous statistical series and present them like this.
to. Annual growth rate of consumption in the period considered
b. Basic indexes of price, income, cross elasticities.
3. Future situation. To estimate it, you must project future demand for the life of the project. It should be based on known statistical data. To do this you must proceed as follows:
1. Statistically project the historical trend. In the case of individual studies, regression analysis by the least squares method is recommended.
2. Then consider the constraints of future demand, these can be.
- The increase in population, income, changes in its distribution. Changes in the general price level. Changes in consumer preference. Appearance of substitute products. Changes in economic policy. Changes in the evolution and growth of the economic system..
3. Project the adjusted demand with the previous factors, and you will obtain the future demand for the good.
3- PRODUCT OFFER
Study the quantities supplied by the producers of the good to be offered in the market. Analyze the production conditions of the most important producing companies. It will refer to the current and future situation, and must provide the bases to foresee the possibilities of the project in the existing conditions of competition.
1. Present situation. Present and analyze sufficient statistical data to characterize the evolution of the offer. To do this, follow the following scheme:
a- Statistical series of production and import.
b- Quantify the volume of the product currently offered in the market.
c- Make a critical inventory of the main suppliers, indicating the conditions in which the main companies in the sector carry out production. You should point out the following aspects.
- Produced volume Market participation Installed and used capacity Technical and administrative capacity Location with respect to the consumption area Prices, cost structure Product quality and presentation Marketing systems, credit, distribution network Advertising customer assistance. Special protection regimes.
2. Analysis of the market regime. Present enough information to know if the structure of the product market is in perfect competition, imperfect and its various nuances.
3. Future situation, the foreseeable evolution of the offer, formulating hypotheses about the factors that will influence the participation of the product in the future offer. The following should be highlighted:
a- The possibilities of increasing the degree of utilization of the idle capacity of current producers.
b- Existence of plans and projects to expand installed capacity by current producers.
- Analyze the influencing factors in the foreseeable evolution of the offer. Examine the data on the foreseeable evolution of. Evolution of the economic system. Changes in the provider market. Economic policy measures. Price regime, exchange market. Random and natural factors.
c- Project the adjusted supply with the above factors, and you will obtain the future supply of the good.
4- THE PRICES OF THE PRODUCT
Here we analyze the price formation mechanisms in the product market.
1. Training mechanism: there are different possibilities for setting prices in a market, it should be pointed out the one that corresponds to the characteristics of the product and the type of market. Among the modalities are:
- Price given by the domestic market Price given by similar imports Price set by the government Estimated price based on the cost of production Estimated price based on the demand (through elasticity coefficients) International market prices for export products.
2. Fixing the price, it is necessary to indicate probable maximum and minimum values between which the unit sale price of the product will oscillate, and its repercussions on the demand for the good. Once a price has been chosen, it is the one that should be used for the financial estimates of the project.
5- POTENTIAL MARKET
The objective of the market study is to project the quantities of the product that the population will be able to consume at the different levels of expected prices. In this sense, it is necessary to calculate the unmet demand. To determine it, proceed in this way.
1. Cross the projected demand data with the projected supply.
2. If the demand is greater than the projected supply it means that there will be unmet demand.
3. Compare it with the offer of the product that the project will cover, and quantify it.
4. In the absence of such differences, the factors that may allow capturing an already covered market, or incorporation into possible future expansions, should be mentioned.
5. Remember that this potential demand will be used for financial estimates.
6- MARKETING
They are the activities related to the transfer of the product from the producing company to the final consumer and that can generate costs for the project.
1. It is necessary to detail the marketing chain from the time the product leaves the factory until it reaches the user. There are many modalities, you must indicate if the products manufactured by the company are going to be sold
- At the factory door.Wholesaler level.Retail level.Consumer level.
2. Determine if you are going to use advertising, to promote the product, packaging, customer service, transportation and others, and the costs they cause to the product.
CONCLUSIONS
1. A market study enables the characteristics of the product or service to be placed on the market to be clearly identified
2. The study makes it possible to analyze past behavior and project future demand for a good, analyzing factors of various kinds that influence its consumers.
3. It also studies the behavior and conditions in which the companies that produce the product act in the market, and projects that behavior in the future, to determine under certain hypotheses, what their future evolution will be.
4. Once the evolution and projections of the supply and potential demand are known, estimate the unsatisfied demand existing in the market for the good and calculate the part of that demand that will cover the project's product.
5. Finally, this study allows us to estimate the expected unmet demand for a product, and whether consumers, given their income level and prices, will be able to purchase it.
BIBLIOGRAPHY
- WHITE Adolfo. Formulation and Evaluation of Projects, Ediciones Torán, 4th edition. ILPES. Guidelines for submitting projects. XXI century Editors. 10 edition MARIOTTI John. Marketing. Mac Graw HillPAIVA Antonio. Class Guides.
