Market Research
Once you've pinpointed an area or industry you're interested in, you can proceed to do market research into the area. Some important areas to look into are:
The basic research will give you an idea of how large the market will be and how many competitors are active in the industry. To make sense of it all, you will need to look at how big the market is, comparing that against the number of active players. For example, there might be a market worth $500 million and there might be 1 million competitors. Although the market is very large (half a billion dollars), but because there are so many competitors, each company might expect a market share averaging $500. On the other hand, if there was a $50 million market and there are 1,000 competitors, it could be a much more lucrative market. Each company might expect an average of $50,000 in sales. While this may not seem overly impressive, bear in mind that it is about 100 times larger than the previous example. Likewise in smaller markets with a fewer players, a $2 million industry with 3 competitors would see each company averaging out about $670,000 in sales. Definitely a lucrative proposal. The 3 Largest Competitors In every industry, the two largest competitors tend to dominate the market. For example Coca-Cola and Pepsi-Cola dominate the soft drinks market, Chervron and Shell might dominate the automative fuels market and Boeing and Airbus dominate the passenger jet market. It is not uncommon to see the first, second and sometimes third largest companies by market share account for 50% or more of any one given market. Therefore, their profile and 'corporate personality' can give you some idea of their market behavior. With this data in hand, you can make a measured judgement whether to proceed with your plan. If you do decide, you can formulate a plan of action.
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