When evaluating how attractive a segment of a market might be before entering, one of the categories of factors to assess is the market factors.
Size
It seems obvious but the size of the segment is important if the aim is to enter the market and increase operations to a larger scale to increase profits.
Growth Rate
Markets that are experiencing growth are far more attractive than potentially entering a declining market that has continually reduced room for success.
Stage of Industry Evolution
Mature markets may see more immediate profit but the reduced future potential must be evaluated. Early stages of evolution, however, commonly have reduced competition and far more future potential for future success.
Predictability
A volatile market with no predictability is a strong deterrent when it’s existence isn’t guaranteed for long enough to see a return on investment. A stable market that can be measured and have predicted value is far more appealing.
Price Elasticity and Sensitivity
In a price sensitive market where you don’t contain the efficiency superiority, there is a greater risk to attempt entry. Attractive markets have low price sensitivity with a low price elasticity of demand.
Bargaining Power of Customers
The more power a buyer has in price negotiation leads to a less attractive option than if the supplier were to have more of an impact.
Demand Cycles
Seasonal demand cycles might deter an organisation from entering a new segment with the same cycle. It can, however, have the opposite effect and become very attractive for a business who wishes to enter a market that has a counter-seasonal demand to their current market.
References:
Hooley, G, Piercy, N, Nicoulaud, B & Rudd, J 2017, Marketing Strategy & Competitive Positioning, 6th Ed., Pearson, Harlow, UK.
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