Market study has been discussed in Step 1 and in Annex 3. In a nutshell, market research is often recommended as the first step in a feasibility study. One must not think of market research as highly sophisticated, expensive, and complicated. It can be very much a "do-it yourself" thing.
Market analysis results in information about the market potential, which provides the basis for accurate sales forecasts and your marketing strategy. Its basic components include the following:
(i) an estimate of the size of the market for the product/service,
(ii) projected market share,
(iii) information about your target market, and
(iv) analysis of the competition.
Market research involves activities designed to obtain data about the market, and falls into two main categories: Primary research, which involves collecting new data through market surveys and other field research (specific studies that are conducted on behalf of a company), and secondary research, which includes gathering pre-existing information from published sources.
In addition to conducting research, it is valid to rely somewhat on an organization's own opinions and observations, especially if it is involved in its local community. No one knows a community like the people who have spent their lives there. However, it is important to back up the organization's opinions with data and research. Gut feelings are not enough to take to the bank. Resist the temptation to look only for data that confirm your opinions.
All this information goes into estimating the sales that will be achieved during the first few years of operation. The rest of the feasibility study and business plan is built upon these estimates. Because it is one of the principal tools for determining whether the business will work, an investment in market research is worthwhile. The quality of information in the market analysis depends on the amount of energy that went into obtaining it.
An organization needs to be as specific as possible about the dimensions (size, trends) of the opportunity that the enterprise faces. Since a new business does not have a track record, the research must be thorough to enable the organization to make realis-tic sales estimates.
In the market analysis section of the feasibility study, an organization must determine whether adequate demand exists for its proposed products or services.