Market attractiveness is a term that is used in describing possibilities of interesting profit that can be obtained by investing in a market or industry that is readily available. A market that is more attractive presents a chance or potential for earning greater profits by investing in it.
However, before investing in a market or industry companies often engage in different forms of analysis that enable them to determine whether a move to invest in the industry or market would really be beneficial.
For instance, before investing or venturing in an industry or market, a company analyzes the attractiveness of the market or industry to determine what the potential profits are. Market attractiveness can be influenced by various factors. Size of a market is one of the factors that can influence its attractiveness. Size of a market can influence customers’ availability as well as competition from other companies.
For example, a shoes market is usually large and it easily accommodates rival companies. On the other hand, specialized equipment for industries can have a smaller market. Such a market provides fewer opportunities and it has limited customers as well. Thus, such a market may not be attractive to most investors.
Another factor that determines market attractiveness is the prevailing climate in the market. Entering a market that has heavy regulation can be difficult. Product interest can be high which provides a larger base for customers or even low which presents a challenge for new companies that are entering the market. Other market climate factors that may affect its attractiveness include economic turmoil and inflation. For instance, introducing an expensive, new product where the market of a country has runaway inflation can generate high profits.
Scope of a market is also an important factor that is considered when analyzing its attractiveness. A broader market for instance has high chances of providing a room for different companies to operate which can increase profits potentials. In a small or regional market, chances are that there is no room for expansion. Other factors that can affect market attractiveness include the production cost and raw materials that are available. Such factors limit the production capacity or price of the products.
All this information is brought together when analyzing market attractiveness to come up with a report that shows the opportunities that are available in a new market. The information is used in determining whether it is advisable to enter into a market and developing a business plan.
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