Market Potential Analysis

Topics: Household income in the United States, Economics, Income distribution Pages: 27 (4851 words) Published: July 21, 2014
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MARKET POTENTIAL ANALYSIS:

A METHODOLOGY FOR ESTIMATING THE MARKET POTENTIAL
FOR COMPUTERS AND OTHER INFORMATION TECHNOLOGIES

Kenneth L. Kraemer and Jason Dedrick
Center for Research on Information Technology and Organizations University of California, Irvine
Irvine, CA 92697

May 1998
Working Paper: #ITR-149

This research was supported by grants from the U.S. National Science Foundation and IBM Global Services.

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ABSTRACT

This paper describes a methodology for estimating the market potential for computers and other information technologies. Market potential analysis is not market forecasting, although forecasting when the potential of a market might be realized can be part of the analysis. At base, market potential analysis sizes markets based upon a sequential and increasingly refined process from global or regional to national markets and business, consumer and other segments within national markets.

Market potential analysis is a strategic tool to identify market opportunities and invest resources where they will have the greatest return in the long run. Market potential analysis can help to target markets with high growth potential in the future. Market potential analysis enables companies to: •

Categorize countries as lead markets, break-out markets or emerging markets.



Quantify market potential for a given product by country, region or globally, now and in the future.



Identify growth drivers and barriers in those markets.



Understand how to exploit growth markets by tailoring marketing, product development and production strategies to meet customer demands and overcome market barriers.

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MARKET POTENTIAL ANALYSIS

INTRODUCTION
India is reported to have a growing middle class of 200 million people, while China’s middle class is estimated to be as high as 300 million people. Faced with anemic economic growth in much of the industrial world, many companies are looking to the so-called big emerging markets (BEMs) as new growth markets for their products and services. Everyone from the U.S. Commerce Department to individual market analysts touts the huge market potential in BEMs. Yet at the same time, we see a sudden 70% increase in PC sales in Japan in one year (1995) and wonder if there isn't considerable untapped potential in the industrialized countries. Still, what happened to the economic boom that was supposed to be set off by the creation of a single European market? Clearly, the available concepts and methods for estimating market potential are limited.

This paper develops and systematizes new concepts and methods of market potential analysis. It is intended for executives and strategists concerned with developing approaches to expanding existing markets, entering new markets, or creating new markets on a global, regional and/or country basis. Defining Market Potential Analysis

Market potential analysis is a strategic tool to identify market opportunities and invest resources where they will have the greatest return in the long run. Market potential analysis is not used for short-term forecasting, but can help to target markets with high growth potential in the future. Market potential analysis enables companies to:

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Categorize countries as lead markets, break-out markets or

emerging markets.


Quantify market potential for a given product by country, region or

globally, now and in the future.



Identify growth drivers and barriers in those markets.



Understand how to exploit growth markets by tailoring marketing, product

development and production strategies to meet customer demands and overcome market barriers.

MARKET POTENTIAL INFLUENCERS
Many forces influence market potential, but there are two broad sets of factors that are key: demand drivers and inhibitors (Figure 1). Figure 1. Demand drivers for IT

Demand Drivers
Size and Wealth

Utility of product

Demand Inhibitors

Market potential...
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