Intellectual property: intellectual property rights such as copyright, patents and trademarks can prevent others from expropriating and profiting from your ideas, inventions and brands, or causing reputational damage. Exclusive rights over intellectual property can afford clients a dominant market position.

Q. How does the company position its products? Are they sold as expensive luxury goods or cheap basic goods?

Q. Can the company cross-sell or up-sell products to its customers? Can it offer other goods/services to customers on top of the primary good/service? 

For instance, if the company is an Internet service provider, does it have other products that its existing customers will want (for instance, television packages or landline contracts)? 

Cross-sell: cross-selling products means selling related or complimentary products to existing customers. For example, suppliers of appliances/electronics might try to sell warranties to customers that have purchased an appliance/electronic device. Internet service providers may also offer mobile phone contracts as part of a bundle with their core Internet offering. And so on.

Up-sell: up-selling involves trying to persuade a customer to purchase a more expensive version of a product. For instance, a car manufacturer may try to persuade customers to purchase a car model with upgraded features, whilst an Internet service provider may try to persuade customers to purchase higher-speed Internet.

Q. Are there supply/demand forces that could affect sales of the business' products/services? 

Consider complementary and substitute goods. If the business wants to grow, should it develop new products or attempt to sell more of its current products?

Supply: the quantity of a product or service available for consumers to purchase at a specific price.

Demand: the quantity of a product or service that consumers are able and willing to purchase at a specific price.

Substitute goods: products that a consumer could purchase to satisfy the same purpose, need or want as a different product sold by another company. For instance, a train ticket may be a substitute for a plane ticket (if the route is similar) and if the price of rail travel drops, consumers may consequently decide to take a train rather than fly where possible.

Complementary goods/services: products/services that can or must be purchased alongside another products/services. For instance, petrol is a complementary product to cars. If the price of petrol dramatically increases, consumers may (in the long term) be less inclined to purchase cars.

Q. Which distribution channels are being used and what are their advantages and disadvantages? Are there other more beneficial options available? How much does each element of the value chain (e.g. raw materials, manufacturing, packaging, distribution) contribute to the overall cost of producing a product? Is there a particular element that is significantly adding to the total cost of producing the final product?

Customers

Q. Who are the company’s customers? Why do they use the company’s products/services? What are their priorities? What do they expect? Does the company understand and meet these expectations? 

If businesses produce new products, uncertainties arise as to whether there will be sufficient demand for those products to generate profit. Conducting extensive market research before fully investing in the design, production, distribution and marketing of products can mitigate this risk, enabling businesses to modify and adapt offerings to suit consumer preferences.

Q. Which distribution channels do its customers like to buy through? Do they generally want to buy the product online, in-store or through both channels? Do customers from different segments have different preferences regarding distribution channels? Are sales generally made from business to business (B2B) or from business to customer (B2C)? 

Q. To what extent are the business' customers willingness to spend, both in general and in relation to its particular products/services? How are its customers' purchasing decisions affected by changes in price (i.e. what is the price elasticity of their demand)? 

Price elasticity of demand: measures the extent to which price changes affect demand. Price-elastic products are products for which demand changes significantly in response to price changes. Examples include necessities (e.g. every-day household items) or generic items that can easily be purchased from other suppliers. Price-inelastic products are products for which demand changes less dramatically in response to price changes. Examples include luxury goods such as designer items, which are less easily substituted by other products.

Q. How can customers be segmented? How big are the customer segments? 

Companies should know the size of their customer-base, which segments generate the most revenue/profit, which segments are growing/diminishing in size and what it is that customers within these segments care about/are looking for. Segmenting customers can help companies to ensure that their products are effectively targeted to the consumers that are most likely to purchase them. 

Q. Does the age, gender, location, marital status, occupation (etc.) of a customer affect their purchasing choices and/or the price they are willing to pay? 

If customers of a certain age/occupation will be unable to afford the products on offer, then companies should ensure their products, branding, marketing and distribution are tailored towards/targeted at the groups most likely to make purchases (or prices should be adjusted to encourage other groups to make purchases). 

Q. How big is the company’s market share? Is its market share growing? Is the market saturated/becoming saturated? Is the industry as a whole growing/becoming more profitable?

Q. What is the company’s customer concentration? Does the company have a small number of large customers (in which case it may have little supplier power, as it is reliant on retaining its existing customers, thus leaving little scope to negotiate)? Does it have a large number of customers that all contribute to the firm’s revenues (in which case buyer power may be lower, giving the company more freedom to adjust prices)?

Buyer power: strong buyer power means the buyers in a particular market have strong bargaining power. This is usually as a result of either (1) there being a surplus of suppliers offering similar (or identical) products to buyers and/or (2) a buyer being so large that suppliers are dependent on its business to the extent that those suppliers have to meet that buyer’s terms of purchase. Where strong buyer power exists, suppliers (in order to compete effectively) will have to offer buyers more favourable terms, enabling buyers to command, for instance, cheaper prices, greater quality, a higher level of service etc.

Supplier Power: strong supplier power means the suppliers in a particular market have greater freedom to set prices and dictate the terms of sale. This is usually as a result of either (1) there being a surplus of buyers in comparison to the number of suppliers/available products or (2) a supplier being so large or offering such a unique product/service that buyers have few (or no) alternative purchasing options and are therefore dependent on that supplier’s business. Where strong supplier power exists, suppliers may be able to command a price premium (i.e. a higher price) for their products/services in the knowledge that their customers will not simply be able to switch to an alternate supplier and secure the desired product/service at a cheaper price. 

Competitors/Market

Q. Who are the business' competitors and what are their respective market shares? Are its competitors doing something better/more effective? What does the business do better than its competitors? 

If there are existing competitors in the market that are more established, it might be difficult to compete. Established businesses may benefit from having recognisable brands and trusted relationships with consumers, and the resulting customer loyalty may prevent customers from switching to a product/service offered by a new market entrant.

Q. How does the business' cost structure compare with its competitors' cost structures? Does it have higher fixed/variable costs? If so, why? Will this impact upon its ability to compete on price and thus attract customers if it enters/remains in that market? 

Established businesses are more likely to receive preferential rates from supply chain participants such as suppliers, reducing costs to a level that new businesses would struggle to match (having had little or no opportunity to earn good will or trust). In addition, an established business may benefit from economies of scale, enabling superior cost control and wider profit margins than that which a new entrant may be able to attain. Consequently, established firms may be able to undercut prices charged by new entrants.

Q. How do competitors behave? Do companies in the market collaborate? Do they engage in price wars? Do they use advertising to diminish the reputation of their competitors? 

Price war: a "price war" involves two or more companies repeatedly undercutting each other’s prices in order to persuade customers to purchase their products over competitors’. Price wars can therefore be beneficial for consumers (provided the drop in price does not correlate with a drop in quality). Price wars may however lead to smaller businesses (which typically have less control over costs) making losses or being unable to compete.

Q. If the company plans to enter a new market, does it face any barriers to entry that could reduce its chances of successfully entering that market? 

To compete in saturated markets (i.e. markets with many competitors), the company will likely need a unique selling point. To that end, consider whether it offers a product or service with unique attributes that differentiates that product/service from those offered by competitors. For example, can the company find a way to significantly undercut competitors' prices (as Ryanair did in the airline industry)? This could provide it with a competitive advantage that boosts its chances of success.

Barriers to entry: barriers to entry may reduce the chances of a business successfully starting up or entering a new market. Such barriers include: financial barriers; complicated or restrictive regulation (for instance certain jurisdictions may not allow foreign businesses to enter particular local markets); an inability to compete against established competitors; various risks and uncertainties; and a lack of resources.

Q. Is the market heavily regulated? If so, how does the legal environment affect companies’ ability to trade, market their products and expand? Note that certain industries are regulated more than others (e.g. Tobacco, Alcohol, Arms etc.).

Q. How is the market structured? Is it fragmented? How many firms are competing to sell to the same customers? Does one supplier have a monopoly, do a few suppliers have an oligopoly, or are there many suppliers that compete on price? This information is relevant as the ratio of suppliers to customers can affect buyer and supplier power, which can help to determine whether new entrants are likely to struggle to compete. 

Fragmented Market: a fragmented market is a market in which many firms operate and most (or all) of these firms each have a relatively small market share.

Monopoly / oligopoly: where a business (or a small group of businesses in the case of an oligopoly) owns such a large share of its market that it has total (or substantial) control over trade within that market. This market dominance can make it difficult for competitors to emerge, which can enable monopoly holders/oligopoly members to charge inflated prices and leverage their power against suppliers and other stakeholders. 

Q. What are the key market segments within the market as a whole and how have these grown/retracted over time? Has the company focused its business on the segments that are growing? Are its market segments likely to remain profitable in the future? Which segments does its competitors focus on? If the company is looking to grow, should it try to sell more to its existing market segments or shift its focus?

For instance, if you are a mobile phone manufacturer producing cheap and simple handsets, are the major competitors in your market also producing cheap handsets (i.e. focusing on the same market segment as you) or do they focus on a different segment (i.e. high end technologically advanced mobile phone handsets)? 

Market Segment: markets can typically be subdivided into segments (i.e. different sections) based on different factors, for instance the age, gender or income of consumers. For instance, within the mobile phone handset market, there are high-end, expensive handset models (e.g. the iPhone) and cheaper, basic handset models, and these are targeted to different customer groups depending on their income/purchasing patterns.

Q. What are the key problems and challenges relating to a particular market segment (e.g. luxury goods or basic goods)/the industry as a whole? Is the industry as a whole stable? Have industry revenues remained consistent across the year? Have there recently been any significant changes in supply/demand? How is the industry evolving/changing? Is the company well positioned to deal with these problems? Are competitors better placed to deal with them? 

For instance, if there is a recession and you sell higher-end goods, you may see a decrease in sales as consumers will generally be less willing to purchase expensive goods. However, if you also offer cheaper product ranges, or have a high enough profit margin that you are able to reduce the prices of those goods, you may be well positioned to deal with this issue.