Market capacity in business planning
Market capacity is one of the key characteristics of any market, and without deep and detailed information about this “enter it” indicator, pursuing bold and ambitious plans, it would be wrong.
I noticed an interesting pattern … Sometimes very important issues, in particular the “market capacity”, when developing business plans for investment projects (section “Marketing Plan”) do not pay enough attention. At first glance, this seems absurd, and, nevertheless, it is. Is this done intentionally? This is a question for conspiracy therapists. Yes, and in the classic book on marketing F. Kotler “Practical Marketing”, as I recall, even the term is not used …
But F. Kotler is a theory. Practice also does not lag behind, really … in a slightly different perspective. For example, the phrase that I heard from the mouth of one head of a large food enterprise (invited to lead in Rostov-on-Don from Moscow) struck me with its “non-standard”. He literally said the following: “The rubber market – how much we produce, and sell so much!”. However … it was not possible to sell as much as they had produced, and he was sent back to Moscow, as he did not meet the expectations of the business owners.
What is market capacity
And really, how can you say that the market is “rubber”? Any sane person understands that in “a certain territory” you cannot sell more than you buy there. It is this sales volume that is the capacity of the market. If we turn to business terminology, then in the marketing sense – market capacity (market capacity) – the total effective demand of buyers for a particular product at the current price level. However, there are other definitions that are similar in nature.
Market capacity is the volume of those goods or services that are offered and purchased within the market (market segment). Market capacity – the volume of transactions for the sale of goods or services made in a particular territory (territorial market) or in a separate industry (industry market).
Market capacity is characterized by the size of the population’s demand, equal to the value of the product offer. At any given time, the market capacity has a quantitative certainty, i.e. the volume of supply and demand is expressed in the value and physical indicators of the sold and, therefore, purchased goods or services.
However, a mistake has already crept in here … Why only “… with the demand of the population”? What about enterprises and organizations? Does the state buy anything?
Why do you need to know what the market capacity is for a particular product / service or group of goods, and what share does the enterprise occupy in the market (as a rule, the market capacity and / or the organization’s position in this market is calculated)? First of all, in order to properly assess their ability to work in this market, and, accordingly, make the only and correct management decision! A decision that further affects the viability of this enterprise or the product it produces (sells). Of course, this does not always work, but nonetheless … it’s necessary to try.
In other words, market capacity is one of the key characteristics of any market, and without deep and detailed information about this “enter it” indicator, pursuing bold and ambitious plans, it would not be entirely correct. The market, of course, is not a “river that cannot be entered twice”, no, you can enter! Only with significant costs for the organization.
The main indicators that give an idea of the market capacity:
What is the market capacity measured by?
How to determine (calculate) the capacity of the market?
How does market capacity change over time?
How to position the company to the market?
The influence of third-party factors on the dynamics of the market.
How is market capacity measured?
As a rule, market capacity is measured in physical and / or monetary terms. At the same time, it is necessary to “outline” the territory (not to be confused with the word “devil”), in which the capacity will be calculated. As a rule, it is a city, district or region, i.e. geographically defined territory. And so on the rise: the federal district, the country, the world …
As a time parameter is usually chosen year. Why exactly year? Because many goods and services have a seasonal factor. For example, ice cream and mineral water in the summer just swept away from the shelves, but in the winter it is bought somehow not very. But cigarettes … in winter they smoke worse than in summer, the decline in interest is 20-25%. It would seem, why? And it turns out that in the summer:
Longer light day.
Thirst – beer – cigarette.
Harvesting in the countryside (extended working day).
This is for you hihans / hahanks, and for producers – these are millions of sales and profits, of course!
How to determine (calculate) the capacity of the market
As a rule, analytical figures cite certain figures regarding the capacity of the market, but they are not justified. Most eminent Russian and foreign authors and marketers in their monographs quite cleverly walk away from concrete examples and calculations.