How big is the market…. really? One of the first steps to a market opportunity analysis in a Market Entry study is to size the market. A simple enough process, it would seem. Internet sites and syndicated reports are full of industry statistics. Government agencies collect and publish volumes of data; industry associations and trade journals are prolific purveyors of articles and monoliths teeming with industry information. How big the market is is a simple enough question but the answer is more complicated than it appears.  We’ve all heard the story of the two shoe salesmen who traveled to Botswana at the turn of the last century. One of them returned dejected and reported that there was no market opportunity because natives didn’t wear shoes. The other returned elated that 100% of the market was available for capture. How big the market is depends to a large degree on how you define it.

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One should typically look at market sizing in three different cuts of the data.

1. The first is what we term the “demand determinant market” or the market of overall demand that will dictate the size of the “addressable” target market. Within the addressable market, we then need to be realistic about where our client can realistically compete today in terms of existing capabilities and capacity. A larger portion of the market may be feasible later after making investments in capital equipment, personnel, or expertise, but for now, they are not “viable” opportunities.
2. We get to a full competitive analysis to estimate the market share that can be captured in the near term or the “winnable” market opportunity. Ultimately, all this must be in the context of the industry environment. The “addressable market” is further defined by gaining perspective on market size and potential through the eyes of customers and competitors and suppliers of adjacent product and solutions.  It is also calibrated by looking at alternative as well as substitute solutions. When this process if fully vetted, we can say we have defined the “addressable” market or the total market opportunity for our company. But we need to be realistic about which portions of the addressable market we can compete in today.
3. Finally, we must conduct an honest assessment of the competitive environments to determine what portion of the viable market we can realistically expect to capture. This is where the voice of the customer and competitive intelligence come into play.  It is ultimately about our ability to craft a compelling value proposition and deliver that value effectively and competitively. But in order to make key business investment decisions, we must first be able to estimate that success in order to be able to calculate a return on investment.

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