Businesses rarely have the ability to influence buyer demographics, so shifts in aggregate customer needs must be monitored to adapt appropriately. Target markets should be monitored through market research to identify shifts in customer preferences.
External factors that could influence the likelihood of specific demographics being interested in the offerings of a business should be carefully considered. Businesses that monitor changes in buyer demographics can make more accurate long-term projections and seize opportunities before their competitors.
1. New Market Entrants
Entrepreneurial firms that enter the market can shift traditional paradigms and force existing businesses to alter their focus to stay competitive. Failure to adapt to the impact of new market entrants could result in challenges to the future sustainability of an established business.
The introduction of many new firms could also gradually eat away at the market share of established businesses. Effective businesses must monitor the competitive landscape for new market entrants and consider ways to adapt to their impact on the external environment.
The success of many products was driven by a technological innovation that overcame traditional problems presented by established products. New technologies can be an existential threat to established businesses, so it is important to watch for new technological developments to adapt rapidly to these changes.
It may be necessary to form partnerships with innovative firms to retain market dominance. New technologies can also form the basis of future growth through a strategy that accounts for the new technological realities of the marketplace.
3. Legal Environment
Businesses generally have limited influence over new legislation or industry regulations. However, the legal environment can impose significant constraints on an organization’s international network, marketing strategy, and ability to utilize proprietary technology.
Most legislation takes years to become law, and legal challenges in the courts can make legislation unenforceable. The likely outcome of new legislation can almost always be projected many years before it becomes law. Businesses in heavily regulated industries should monitor the outlook of the legal environment carefully to adapt to regulatory changes before they become enforceable.
4. Availability of Capital
The general market drives the availability of capital, which can often be forecasted by monitoring financial trends. Competitors that are highly leveraged could face challenges when interest rates rise due to scarcity of capital. Businesses can also employ their knowledge of market trends to reduce costs by planning capital purchases in advance.
For example, a business might consider locking in a fixed rate loan if market research projects lower interest rates in the next couple of years. The influence of capital availability on business performance can be significant for both new and established firms.
5. Market Supply Capability
The supply capabilities of the marketplace are in constant flux, so businesses that gather timely intelligence regarding supply fluctuations can have a significant advantage in their industry. Businesses that have preliminary intelligence about an upcoming supply shortage can buy up available resources before their competitors. Purchases can also be delayed if an upcoming supply surplus is expected.
Businesses that scan the market on a regular basis can even utilize the intelligence that they gather for a stronger negotiating position with their suppliers. Therefore, projecting supply capabilities can offer businesses significant advantages in the marketplace.
Competitors can steal valuable customers from businesses that do not monitor the competitive environment on a regular basis. A competitor with a new offering could present the customers of another business with a proposal that entices them consider switching.
Businesses that monitor the competitive environment can prepare their customers for new offerings by preliminarily informing them about their offering’s advantages.
The monitoring of competitive activities can also give businesses the opportunity to take advantage of competitor mistakes. Businesses that watch their competitors carefully can seize opportunities in the competitive environment when they arise.
7. Buyer Demographics
Shifts in aggregate customer needs must be monitored carefully because businesses rarely have the ability to influence buyer demographics. Demographic changes at the national level should be considered to project the consequential impact on the target market.
A sample of existing customers should be monitored over time to find shifts in customer preferences. Factors that could influence the likelihood of specific demographics being interested in the offerings of a business should also be considered. Businesses that monitor changes in buyer demographics can make more accurate financial projections and modify their target market appropriately.
8. Human Factors
Individuals who command a significant proportion of industry resources can shift markets and create opportunities for businesses that watch for these changes. An organization or leader could face a scandal that could turn loyal customers away for reasons that are not economically significant. Businesses that foresee the impact of the scandal could capture new customers and increase their market share.
A change in a competitor’s leadership structure could lead to a new market focus that could require competing business to adapt accordingly. Businesses that are adaptive to human factors can perform more effectively in real market conditions.
Obtaining Competitive Advantage
Businesses that monitor developments in the external business environment are more prepared for changes in future market conditions. Adapting to market conditions before competitors can help businesses increase their market share and nurture a loyal customer base. However, failing to adapt to market changes can threaten the longevity of an enterprise. Market research is essential for businesses that want to retain their market dominance or capitalize on opportunities that could emerge in the future. Businesses that gather sufficient intelligence to adapt their strategies to market changes can enjoy continued growth in the years ahead.