Business operates within a specific context that affects its growth potential. This section describes the market a company will enter and the industry in which it will compete. The description of a company’s operating environment may cover new products and developments in the industry, trends and outlook for the industry, and overall economic trends.
- Market size and growth – A market consists of a group of customers who are willing to buy products or services to satisfy a need. This segment of a business plan should define the market in which a company is competing. The size of the market can be determined in numbers of customers, units sold (or transactions) and money value of purchases.
- Trends – Entrepreneurs should determine the trends that are driving the market. They should think about how the market is changing, and consider economic, socio-cultural, political, global, environmental, demographic and technological changes. Positive and negative developments should be described. Even negative trends can represent opportunities.
- Target market – This section is devoted to the analysis of the specific market segment that represents the best point of entry for a business. The focus here is on the consumer of the particular product/service. The consumer is often different from the entity that buys the product (pays the money). You could also identify a niche that exists which you could exploit.
- Industry structure – This section describes how the industry as a whole is organised, where and how the goods/services are produced and delivered to customers. It should include information about the level of integration, and how the distributors, dealers, and systems integrators fit in. You should analyse the supply chain from beginning to end.
- Competitive environment – This section should describe the competitive environment in the industry. Talk about the elements the companies in the marketplace compete on (quality, price, new product/service introductions, customer support, etc.), and about the degree of rivalry among competitors. A highly competitive industry means price competition. Most new firms cannot compete on price. You should find out the average size of the competitors, and if the market is dominated by any big players.
- Competition – Each competitor should get their own paragraph. It should provide a short description of what the company does, its position in the industry, and its strengths and weaknesses. It is very helpful to prepare a competition matrix analysis that compares a venture with its major competitors.
- Opportunity – In this section you should succinctly describe what the opportunity is and why it is attractive. Conclusions need to be based on research, interviews and particularly the customer surveys. This is a key section of the plan; you must make the case that there is attractive opportunity for your venture.