There are thousands of tips on how to carry out market analysis correctly, but my goal is to share with you the 10 most valuable tools that you can access totally free of charge.
If you take a top-down approach to market analysis, you start with an overview of the global and national economies, political environment and social factors.
Then, you will narrow the market analysis to an industry. Broad market factors and external forces acting on the market are best analysed with a PEST framework that includes Political, Economic, Social and Technological factors.
If you have a team of analysts and you like to collaborate on PEST analysis, you can do so for free using a Realtime Board that allows you to design your PEST framework in minutes at no cost.
Your business has its own unique strengths and weaknesses – these are internal factors. There are also external factors like opportunities and threats. SWOT analysis will allow you to assess internal and external factors that will affect your business.
One of the ways to do this is to use free online templates such as Xtensio. As with PEST analysis, you will be able to collaborate with your team and share market analysis.
#3 Porter’s Five Forces
If you have not decided what industry or market sector to enter with your business, it’s time to evaluate and compare competition using Porter’s Five Forces.
This tool will allow you to assess the degree of rivalry, barriers to entry, power of buyers and suppliers, and availability of product substitutes.
Many businesses fail because they enter the wrong industry. So, before you start writing a business plan, it’s a good idea to examine and compare Five Forces of competition using free online tools such as Porter’s Five Forces Analysis Generator.
#4 Ansoff Matrix
There are broadly speaking only four ways in which your business can grow. You can achieve growth through new Market Development with your existing products, further Market Penetration in your current environment taking out rivals in price wars, exploring both the new market and new products through Diversification strategy and creating new products in your existing market through Product Development.
All these four strategies are combined in an Ansoff Matrix. The good news is that there are free online resources that will help you choose your optimal strategy.
#5 Generic Strategies
Have you ever wondered why some automobile manufacturers struggle and are on the verge of bankruptcy whereas others such as Toyota and Ferrari are doing well?
They all work in the same industry but they use different generic strategies, so if you want your business to prosper then make sure you are aware of these generic strategies to distinguish yourself from similar businesses.
Going back to the case of Toyota and Ferrari, these companies are both successful but they used completely different generic strategies. Toyota pursued Cost Leadership strategy using its lean technologies and no-waste approach.
As a result, the company can enjoy higher profit margins than competitors because it works more efficiently.
By contrast, Ferrari preferred the Differentiation strategy to achieve success. Instead of reducing costs, they focused on making unique premium cars.
As a result, the company also enjoys high profit margins but not because of low costs but because of premium pricing. There are free online tools that can help you decide what generic strategy is right for your business and for your specific market.
#6 4Ps (Marketing Mix)
Market analysis is not limited to the choice of strategies. There are also tools that can help you make better tactical decisions if you run a business. To win in the market, you need to be aware of the 4Ps of marketing: Product, Price, Place and Promotion.
You must know what your potential customers want, at what price they are ready to buy it, what distribution channels you can use to deliver the product most efficiently and how to promote your brand to build recognition. You can improve these four areas of your business by using free online tools such as Marketing Mix.
#7 Value Chain Analysis
The ultimate goal of any for-profit business is to increase its value. When you undertake a market analysis, you need to be aware of the key drivers of your business value and to consider the Primary and Support activities.
Primary activities include Inbound Logistics – how cheaply you get the supplies, Operations – how efficiently you produce the product, Outbound Logistics – how efficiently you deliver the product to the customer, Marketing & Sales – how aggressive and effective your marketing is, and Service – how well you serve the client after they have purchased the product.
Also, don’t forget about Support Activities such as infrastructure, technology, human resources, and procurement. You can master each of these steps using free online tools.
#8 Ratio Analysis
Once you’ve chosen your strategy, marketing mix and explored your value chain, you need to have a tool for assessing your performance against competition and the best way to do this is to use financial ratios.
The most common ones are Profitability ratios, Liquidity ratios, Investment ratios, Efficiency ratios and Solvency ratios. One of the best free online tools to estimate financial ratios in the market is the 15Writers’ Online Calculator.
If you’ve expanded your business and are ready to acquire your competitors or purchase ownership in other companies, then you will need valuation tools.
These tools will help you estimate the risk of a business and its future cash flows and intrinsic value. Valuation tools will also help you construct an efficient portfolio of your assets. Damodaran provides one of the most extensive market analysis tools that can be used totally free of charge to value any business.
Lastly, when you study the market, you will want to eventually assess unique information from your current or potential customers and this can be accomplished through online surveys as this will give you information that no other tool can give.
One of the most popular survey tools that can be used in the market analysis is Survey Monkey. You will be able to spread your questionnaire to customers efficiently and track the progress of the survey online.
As you can see, there are numerous resources available online to those looking to start a business. Hopefully, this list of free online tools for market analysis has helped you. Do let us know which ones you think are the most useful?