Strategic Planning in the Small Business

Unit 2 HO 2-5 (continued)

accurate surrogate indicator of relative market share. For ex­

ample, a small hardware store may know that they face com­

petition from six other stores in the basic market area.

Furthermore, they know that three of the stores command the

bulk of the business. Thus, without any specific

data, a business

may clearly understand that its market share rating is relatively

weak. Rarely will there be a total lack of available information.

Typically, objective information is complemented by sound sub.

jectivejudgments to arrive at ;.more accurate picture of relative

market share.

One

must recognize that market share is a rather limited

indicator of market performance because it addresses only past

performance and says nothing of future potential. However,

quite useful inferences may be drawn from this assessment. For

example,

if the market is competitively saturated and industry

growth prospects

are limited, the strength or weakness of the

present market share may be a key indicator of whether or not

the business will be able to withstand and survive the industry

shakeout that is likely to occur.

Knowledge of Markets

Here, one is evaluating the firm's awareness and knowledge

of

the markets it serves

or is likely to serve in the near future. At

least two areas should be considered when determining this

rating of market knowledge. First, owners must determine their

knowledge of target markets. For example, who are the firm's

customers? What is the demographic makeup of the tArget

market and how is it changing? And, perhaps most importantly,

what are the customer preferences and needs and how will

these be changing in the future?

Owners must

also evaluate the level of understanding of

their markct area. What changes

or developments are occur­

ring here that may reflect on or affect the business? For ex­

ample, is the demographic composition

of the market area

changing? Are important new competitors entering the market

area? In short,

is the owner aware of important market 'rea

changes and directions. Of course, knowledge and aware~iess

74 PartOne The Analysis Phs,

217