chapter1 2/17/2004 13:3:18 Page 1 1 Definition and Strategy Imagine trying to run a profitable business without reliable mar- ket research. It would be like trying to drive a car blindfolded. You sit in the driver’s seat with your hands on the wheel, but you can’t see the potholes, the curves, or any part of the road ahead. You can’t see what kind of traffic is coming toward you, and you can’t tell what the other drivers are doing. To arrive safely at your destination would require either incredible luck or nothing short of a miracle. Market research offers business managers a picture of the environment in which they operate. It is the eyes and ears, the map and the traffic report of the entrepreneur. Market research gives decision makers an awareness of the road and the traffic; it tells them what cross streets to anticipate, which turn to take at the intersection, whether the traffic copter is circling overhead and what to do about it, and what kind of weather to expect for the journey. Good market research can thus facilitate informed deci- sion making. What does market research cover? Broadly speaking, it covers the market and the industry. Markets are “all people who have a specific, unsatisfied need or want and are willing and able to purchase a product or service to satisfy that need.”1 An industry includes those organizations striving to meet the needs of a mar- ket. In his 1980 classic book called Competitive Strategy: Techniques for Analyzing Industries and Competitors, Michael Porter defines an industry as “the group of firms producing products that are close substitutes for each other.”2 Within an industry, importers, suppli- ers, manufacturers, and distributors (all of which generally mani- fest themselves as companies) come together to bring goods and services to the target market or target customer. To understand a 1. Nitin Nohria, The Portable MBA Desk Reference, 2nd ed. (New York: John Wiley & Sons, 1998), 245. 2. Michael Porter, Competitive Strategy: Techniques for Analyzing Industries and Competitors (New York: Free Press, 1980), 5. 1 chapter1 2/27/2004 15:59:39 Page 2 Introduction to Online Market & Industry Research target market, the researcher must understand the industry within which it fits. Conversely, to understand an industry, the researcher must comprehend the markets that the industry serves. Figure 1-1 illustrates how the pieces of the industry/market puzzle come together in one particular case. Product managers, sales representatives, market researchers, competitive-intelligence professionals, business development spe- cialists, and technical writers, as well as presidents, chief executive officers, chief financial officers, and investor relations personnel all need market and industry research. Who gathers this market and industry information depends on the situation; librarians, market research personnel, and competitive-intelligence profes- sionals within companies all conduct market and industry research. At one time or another, however, most business profes- sionals do their own market or industry research. This book pro- vides workable search strategies and valuable source information that can facilitate research in just about any industry, whether you are a novice or a seasoned researcher. You can use the techniques outlined here to guide any market search, and ideally, they will lead you to the most useful and cost-effective sources. Market and industry research is used within companies and enterprises to enlighten tactical decision making and to develop longer-range strategic marketing plans, which in turn guides prod- uct development, business development, product positioning, product price, technology, distribution, and promotion. This vol- ume will help you conduct effective market and industry research to facilitate informed decision making in your organization. Chapter One offers an overview of the issues surrounding good market and industry research, and puts the research process into a larger context by explaining the types of sources available and how information is gathered and distributed. In this introductory chap- ter you will discover how to define the research problem and identify the questions that require answers. You will learn search strategies based upon the type of information you need and where that information might be found. You will learn about major information suppliers and gain insights into how to choose between them, as well as how to create an effective search state- ment for each of the online environments you search. The chapter concludes with guidance on how to assemble the search results and illustrates what a final report might look like. 2 chapter1 2/24/2004 16:28:13 Page 3 Figure 1-1. Market Segmentation: American Airlines— Admiral’s Club Companies Market Serving the Target Industries Sectors Segments Market Products Customers Positioning Construction Shipping Vacation American AAdvantage Business Value/price travel Program travelers Transportation Automobile United Luxury Commuter Affinity Wealthy Manufacturing Air Northwest Credit Card families Membership Regional discounts Finance, Train Delta First Class International Insurance International travelers Quiet Bus Southwest Admiral’s Information Domestic Club First Class Free Chapter 1 Ships travelers beverages Public Administration Phone etc. Computer Definition and Strategy access 3 chapter1 2/27/2004 15:59:43 Page 4 Introduction to Online Market & Industry Research Chapter Two offers a detailed case study. In this chapter, the researcher recounts an actual research project from the initial request through the final report. In an interesting narrative the researcher describes the initial request, the project definition process, and the step-by-step research process. The information was used to guide a country club board of directors (the client) on how to better serve their members (the customers), how to attract new members, and how to best manage the club’s physical plant. The board of directors and president wanted to understand the industry and the marketplace as they set policy and developed plans for their organization. The case study illustrates the pro- cesses described in Chapter One. To illustrate practical solutions to real-life research problems, Chapter Three presents a series of detailed problems, each with a proposed solution. These problems come from the experience of professional business researchers, and they reflect the choices and strategies made to keep the project on time and within budget. The problems and solutions included in Chapter Three illustrate how to research many of the topics outlined in Helen Burwell’s industry study template (described in Chapter One). Seasoned researchers know that there are hundreds of online sources that can help answer market and industry research ques- tions. Chapter Four contains valuable descriptions and assess- ments of the most frequently used sources. This final chapter serves as a reference that may prove useful as you select the best sources for specific types of information in your future research. Together, these chapters provide a wide range of tools for market and industry researchers, from general principles to spe- cific examples and tips. Now, let’s turn to an outline of the research process. THE RESEARCH CYCLE In Online Competitive Intelligence, Helen Burwell offers an excellent Industry Study Template that can serve as a checklist for an indus- try study or overview. Burwell’s template3 is reproduced here to illustrate the types of information needed to develop an under- standing of a market and the industry within which that market operates. 3. Helen P. Burwell, Online Competitive Intelligence (Tempe, Ariz.: Facts on Demand, 1999), 228–229. Reprinted with the permission of Facts on Demand. 4 chapter1 2/17/2004 13:3:19 Page 5 Chapter 1 Definition and Strategy ● Status of the Industry ● Relative size and scope of the industry—growing, stable, or declining? ● History of industry ● Trends in industry ● Forecasts regarding size of the industry ● SIC or NAICS codes ● Customers for Products or Services ● Customers ● Size of market ● Potential new buyers ● Directions in the market ● Import penetration ● Forecasts for market ● Distribution methods ● Market/Marketing Issues ● Scope of products ● Brand loyalty ● Product leader description ● Product differentiation ● Alternate products/services ● Complementary products ● Quality continuum ● Marketing media used ● Price structure ● Price margins ● Manufactured Goods Issues ● Technology in use ● Technological trends ● Industry innovations ● Emerging technologies ● Service Business Issues ● Scope of services ● Level of services ● Fiscal Matters ● Changes that may affect supplier prices ● Legislation/regulations ● Availability of raw materials ● Other sales by major product type 5 chapter1 2/27/2004 15:59:46 Page 6 Introduction to Online Market & Industry Research ● Productivity-Related Matters ● Manufacturing Rates ● Efficiency levels ● Product innovation This is a lot of information! How does the market researcher get a handle on it all, much less find it, assess it, organize it, and present it? The Research Cycle, shown in Figure 1-2, illustrates the market research process. Generally, the first thing to happen is that someone in the company (the client) identifies an information need. Through the steps that follow (either formally or infor- mally), the research question must be clearly understood by the researcher. A search strategy is created and implemented, and the results