How To Write A Vbi Market Study
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1 Terms f Reference fr Market Study (Tanzania Virtual Business Incubatr) 1. Prject Backgrund Describe prject bjectives. 2. Ratinale and apprach f the VBI Market Study The ratinale fr the cntracting f a VBI Market Study is primarily the need t plug the enterprise develpment strategy f the VBI int up-t-date, relevant and reliable market infrmatin that indicates which ecnmic sectrs the VBI-supprted business wmen shuld fcus n in rder t achieve market success, prfitability and sustainability. This VBI Market Study is a self-cntained assignment with a precise time-frame and expected utput, hwever t appreciate its significance - it shuld als be seen as the crucial fundatin f a lnger and brader cycle f market analysis within and beynd the VBI Prject. The Cnsultant team is thus assigned the respnsibility t prvide a clear and realistic directin t the VBI strategy f supprt t market-riented wmen entrepreneurship develpment, by means f a substantiated and cnsistent indicatin f which ecnmic sectrs and sub-sectrs will be suitable t the beneficiaries capacities, as well as displaying the marketing ptential necessary fr small firms viability. Hence the timing f this Study, t be cmpleted befre the beginning f the first VBI training cycle, scheduled t prvide key inputs fr the fine-tuning f the VBI service package, and in particular fr the rientatin, entrepreneurial chice and marketing supprt prvided t the lcal wmen entrepreneurs. Several Prject cmpnents and VBI activities will therefre tie int the market strategy utlined by the VBI Market Study: training, capacity building, business planning, prduct develpment, marketing and netwrking supprt, and ther VBI services will be geared twards supprting the lcal wmen SMEs t respnd t the existing demand r stimulating the ptential ne as recmmended by the utcmes f this Study. 3. Overall bjective f the VBI Market Study The verall bjective f the VBI Market study will be t: Investigate the SME-riented markets (primarily at natinal and reginal level), in rder t identify thse ecnmic sectrs / sub-sectrs with the highest ptential fr the type f wmen enterprises t be develped by the VBI in the Prject area, subsequently prviding specific, relevant, updated, detailed and reliable advice as t which areas f business the VBI-supprted entrepreneurs shuld select, with a special fcus n value-added activities. 4. Specific bjectives f the VBI Market Study The specific bjectives f the VBI Market study will be t: I. Map ut the current situatin in terms f available raw materials, lcal skills, prcessing and cmmunicatin infrastructure, marketing channels and apprpriate technlgies within the Prject target area II. Assess the lcal, reginal and natinal demand fr thse gds and services that culd be efficiently prduced at a micr- t small-scale f peratin by the wmen assisted by the VBI 1
2 and rganized in the frm f sle prducers r micr- t small-scale enterprises as defined by the Prject either prducing and marketing n an individual firm basis r netwrking with ther firms in particular fr jint purchasing r marketing. III. Amng the ecnmically feasible sectrs and sub-sectrs f prductin, identify thse with higher ptential and with an emphasis n value-added activities (e.g. Fd prductin, prcessing, and vending; Hrticulture; Organic farming; Handicrafts; Cttage industries, and recycling; Textiles and apparel; Services (salns, cafes, etc); Mining; Cnstructin, etc.) with a view n service/prduct and prcess innvatin and identificatin f ptential demand (especially in the crafts sectr). IV. Identify ptential marketing utlets, including relevant trade flws, prcedures and regulatins, mainly in the prject area, but als in the rest f the cuntry r fr exprt in ther African cuntries r verseas (e.g. Eurpe), if relevant t the selected lines f prductin. 5. Structure f the VBI Market Study 5.1 Phasing The VBI Market Study will be rganized in tw phases, i.e.: (1) Gegraphic phase --- the preliminary mapping f the supply side (in the VBI Prject target area) and demand side, fllwed by a review and feedback with the prject stakehlders fr the selectin f sectrs with high ptentials (see pint 5.2). (2) Sectral phase --- the in-depth analysis f the selected sectrs frm the supply and demand pint f view, and the final recmmendatins f viable market strategies fr the supprted SMEs. The current cnsultancy assignment is aimed at cvering bth Phases within the agreed cnsultancy perid. 5.2 Mid-study review At the end f the Phase 1 f the Market Study (see pint 5.1. abve), the Cnsultant will be available fr a cnsultative review f the preliminary results the prject s partners. The review meeting will be cmpsed by a structured presentatin by the Cnsultant including findings, available ptins and interim recmmendatins, fllwed by a discussin with the review panel aimed at agreeing the specific directin f Phase 2 and if relevant the revisin f the TR accrdingly. 6. Activities and Wrk-plan The daily activities f the Market Study will be specified in and rganised by a detailed Wrk-plan spelling ut the tasks f the cnsultant, the timeframe and resurce allcatin fr each activity, as well as the supprt required frm the clients r ther actrs (if relevant). The said Wrk-plan will initially be agreed by the Cnsultant with the facilitatin f TGT and its partners and the WB in a dedicated meeting, in rder t allw the crdinatin f the clients cllabratin with the Cnsultant during the Market Study. A cpy f the finalised Wrk-plan shuld be submitted t the cntracting agency TGT upn signature f the Cntract, and attached t these Terms f Reference in Appendix II. 2
3 Any substantial change t the Wrk-plan shuld be cmmunicated t the clients in writing (e.g. by ) r, if nt at all pssible, at least verbally (e.g. ver the phne). This will allw fr the crrect degree f mnitring f the Market Study prgress by the cntracting agency. 7. Methdlgy and Cntent The Market Study shuld utilise an articulated and cherent methdlgy which will allw fr very practical references t the abve mentined ecnmic sub-sectrs, and which will shw a deep understanding f the Tanzanian markets and a suitable knwledge f the prductin and trading ptential in the target area. Details f the general criteria and apprach f market research, in particular fr small businesses, are included in the Methdlgical Nte attached t these TR in Appendix I. The market study will avail itself f bth secndary and primary surces, thrugh desk research and field surveys as applicable, and will prvide the client rganizatin with detailed, updated, relevant and reliable quantitative data and qualitative infrmatin. This means that the Cnsultant will be respnsible fr gathering either by himself r with the supprt f prperly trained and briefed enumeratrs reliable and cmparable quantitative data, and will nt nly rely n qualitative r anecdtal infrmatin. The Study will include a systematic cst-analysis and the identificatin f the MES (Minimum Efficient Scale) fr thse industries that might be cnsidered as high-ptential ecnmic sub-sectrs by the market study. Estimating the MES fr a certain type f business allws t verify that the business will be able t be cmpetitive n the market even if it cannt reach enrmus ecnmies f scale (e.g. even if it is an SME, as lng as it can prduce at the MES pint f that specific industry 1 ). The Market Study shuld als clearly indicate the type f market cmpetitin characterizing the ecnmic sectrs accessible by the VBI-supprted entrepreneurs. Fr instance, certain agricultural markets are typically dminated by perfect cmpetitin where firms r farmers cmpete primarily by price and have t take the price set by the verall market demand and supply; primary prductin then nly makes sense fr thse large prducers wh can explit cnsiderable ecnmies f scale and cmpete by means f the lwest price. On the ther hand, crafts prductin is nrmally distributed thrugh imperfectly cmpetitive markets where cmpetitin is by innvatin, quality and diversificatin, and the small - r even micr - scale f peratin is nt a handicap (because there are n big ecnmies f scale t be explited, i.e. the MES is relatively small in that industry, see pint made abve in this sectin): in this type f markets the individual firm has mre chances f setting the price, and precisely the ne that will capture a gd share f the market while still allwing fr an ample prfit margin. It is anticipated that the VBI entrepreneurs might be mre suited t prduce fr and distribute int imperfectly cmpetitive markets, given their small scale f peratin and their reliance n individual skills and diversificatin. The Study shuld clearly indicate which sectrs f prductin are mre likely t have a gd marketing ptential fr the VBI-supprted entrepreneurs, and shuld express the rder f pririty by prviding a ranking f sectrs and sub-sectrs that will cnstitute an effective pinter fr the strategies f the wmen enterprises and f the VBI services supprting them. Fr each f the recmmended business areas, the crrespnding market segment shuld be indicated and described, as well as the suitable marketing strategy and distributin channels specified. Within the preferred sectrs and sub-sectrs, detailed, realistic and cntext-specific suggestins shuld be made as fr the services, prducts and prduct lines which are mre suited t the VBI 1 Examples f this situatin culd be the she-making and tailring industries, where the MES pint ften cincides at the medium scale f peratin, which explains the dminance f relatively numerus and medium t small firms in thse industries. 3
4 entrepreneurs prductin capacity and mre likely t encunter market success lcally, natinally r abrad. In this regard, the Study shuld recmmend PD&D interventins and marketing appraches accrdingly. Ptential Fair Trade channels shuld als be explred as preferential links t ptential Eurpean r ther verseas exprt markets. Issues f legislatin, regulatin, standards, licencing and trade prcedures cnnected with the recmmended sectrs f prductin r services shuld be lked int by the Cnsultant and the main findings included in the analysis. One example is the feasibility and valrisatin f lcal traditinal agriculture and fd prcessing thrugh the marketing f rganic prducts. 8. Reprting The final utput f the cnsultancy will be a cmprehensive Reprt n the VBI Market Study prduced in English. Quantitative data cllected during the Study, and their analysis, shuld be included in the bdy f the Reprt r in Annex. Als Qualitative data, such as interview infrmatin and anecdtal evidence, shuld als be annexed in r quted by the Reprt as relevant. Any bibligraphical r ther surce f secndary infrmatin shuld be quted in detail in a List f References at the back f the Reprt. The Reprt shuld include in its structure a brief and clear Executive Summary in its pening sectins, and a chapter f Final Cnclusins and specific Recmmendatins fr actin in its final sectin. The Reprt shuld systematically mentin and prvide details f the institutins, rganisatins and peple wh have been the surces fr gathering data r qualitative infrmatin, r the key infrmants fr drawing cnclusins and frmulating recmmendatins. 4
5 APPENDIX I. Methdlgical nte A. General backgrund n Market Analysis Market analysis cntributes t all the steps in a business frm the initial determinatin f custmer needs t final delivery f a prduct r service. It can be divided int the fllwing general functins: market research, marketing strategy develpment, identificatin f specific markets t serve (including market niches), use f market analysis in decisin making (e.g. pricing and prmtin). Therefre, it is wrth nticing that market research (thrugh infrmal day-t-day investigatins r thrugh a frmalised market study) is but the first step f a lnger cycle defined as market analysis, which needs t accmpany the whle business cycle fr the enterprise t increase its chances f success. In the specific case f the present cnsultancy assignment, the Market Study reprt (cnsultancy utput) will be prduced keeping in mind its very functin: a tl t prvide precise and reliable pinters t the VBI Prject as fr thse SME sectrs that display gd marketing ptential and high cmpatibility with the target area characteristics and human resurces. The Market Study shuld thus be carried ut and prduced as a dcument that cntributes relevant and effective infrmatin and guidance fr the VBI as a service centre and the Prject beneficiaries as existing business wmen. i. Market research Market research entails identifying ptential custmers and their needs. It strives t develp a thrugh understanding f the industries in which the ptential custmers perate, the regulatry envirnment, and cmpeting prducts and services. Market research invlves systematic gathering, recrding, and analysis f data relating t the marketing f gds and services. It emplys a variety f different types f activities, such as analysis f industry data, demgraphic data, cmpetitr activities, and custmer surveys. Market research is an rganized way f finding bjective answers t questins every business-persn must answer t succeed, such as: Wh are my custmers and ptential custmers? Where are they lcated? Can and will they buy? Am I ffering the kinds, quantities and quality f gds r services they want? Are my prices cnsistent with buyers' perceptins f the prduct's value? Are my prmtinal prgrams wrking? What d custmers think f my technlgy and business? Wh are my cmpetitrs? 5
6 Hw des my technlgy and business cmpare with alternative technlgies and cmpetitrs? Market research deals with peple and their cnstantly changing preferences and actins, which can be affected by numerus influences. Because many f these influences cannt be quantified, market research is nt an exact science. Marketing research des, hwever, seek t gather facts and pinins in an rderly, bjective way; t find ut hw things are, regardless f any precnceived ntins; and t find ut what peple want t buy, nt just what the business might wish t sell them. ii. Marketing strategy develpment A marketing strategy includes the identificatin f custmer grups which the business can serve better than its cmpetitrs and a plan fr tailring its prduct fferings, prices, distributin, prmtinal effrts and services twards that particular market segment. Ideally, the strategy shuld try t address custmer needs which are nt being met in the market place and which have the ptential fr enugh business t justify develpment csts. A gd strategy will recgnize the resurce limitatins f a particular small business r business unit within a large cmpany. Thus, a business must use the market infrmatin and its wn capabilities t fcus n the market segments it can serve best. iii. Selectin f specific markets t serve Given the limitatins f a technlgy and a business, marketing effrts usually need t cncentrate n specific market segments. Fr example, the fllwing are sme ways t segment a market: Gegraphical segmentatin. Specializing in serving the needs f custmers in a particular gegraphical area (e.g., a city, state, r regin). Custmer segmentatin. Identifying existing custmers and prmting the prducts/services with thse grups f peple mst likely t buy the prduct. In ther wrds, selling t the heavy users befre trying t develp new users. Prduct r service. Linking marketing effrts t related existing prducts and services. iv. Integratin f market decisins The effrts in market research, strategy develpment and segmentatin all are cmbined t aid in develping appraches t the fllwing fur key decisin areas in a marketing prgram: Prducts and Services. Based n the abve cnsideratins, describe the specific prducts and services and intended custmers. Prmtin. Specify the type f advertising, sales, and ther prmtinal activities. Pricing. Determine price levels and pricing plicies (including credit plicy). Cnsider the effect f discunting plicies, vlume discunts, special strategies fr gvernment cntracts r sub-cntracts frm larger cmpanies, ttal cst t the custmer, and the cst f cmpeting and cmplimentary prducts. Distributin (Place). Decide whether t distribute prducts r services thrugh sub-cntractrs, prime cntractrs, r yur wn persnnel. B. Market research fr small business 6
7 Definitin: Market research is the cllectin and analysis f infrmatin abut cnsumers, cmpetitrs and the effectiveness f marketing strategies. Small business wners use market research t determine the feasibility f a new business, test interest in new prducts r services, imprve aspects f their business, such as custmer service r distributin channels, and develp cmpetitive strategies. In ther wrds, market research allws businesses t make decisins that make them mre respnsive t custmers' needs and increase prfits. While market research is crucial fr business start-ups, it is als essential fr established businesses. It is accurate infrmatin abut custmers and cmpetitrs that allws the develpment f a successful marketing plan. But market research is nt just a cmpnent f the business plan t be shelved and frgtten. It needs t be an integral, nging part f a business' develpment. It is crucial t analyze a market and target the right clientele befre wasting resurces n advertising r n develping a new prduct r service. Cnducting market research essentially means gathering the infrmatin an entrepreneur needs t make decisins abut his/her business. Market research is the systematic gathering, recrding, and analyzing f data relevant t selling the gds and/r services prduced. Markets shuld be researched cntinually and infrmally (e.g. cnversatins with clients r traders) but mre frmal market research is als necessary t keep the business vital and grwing. The Market Research Grid (see diagram belw) shws the tw types f data surces and the three areas f research that are imprtant t any business. The entrepreneur needs t gather infrmatin frm and abut his/her custmers t fcus any marketing effrt, maintain and imprve custmer service, and t guide the effrts in develping new prducts and/r services. The envirnment sectin f the Market Research Grid refers t thse ecnmic, scial, and plitical frces that shape business. Gathering infrmatin abut the envirnment allws entrepreneurs t stay abreast f and respnd t particular trends r events that impact n a small business. Whether it is a predicted drp in interest rates, r the clsure f a lcal mill, ne needs t be aware f it and judge the ripple effect n the business, fr gd r ill. Secndary data surces are market research data that have already been cllected by smene else. Telephne bks, gvernment publicatins, and surces such as natinal statistics, trade jurnals, and surveys cnducted by ther rganisatins are all examples f infrmatin that has already been gathered and can be used t get a first glimpse f what custmers want, what the cmpetitin has dne, and what the envirnment is like. Primary surces, n the ther hand, prvide first-hand infrmatin. When an entrepreneur surveys his/her custmers r questins the cmpetitin, s/he is gathering infrmatin directly frm the surce. While this kind f market research data can be the mst cstly and time-cnsuming t surce, it can als be the mst valuable, because it is the mst current and the mst specific. Market Research Grid Secndary data Custmers Cmpetitin Envirnment Primary data The first step in market research is t frame the questins ne wants answered. The first area t research is the cmpetitin and the mnitring business trends. Hwever, the bulk f the market research will be cnsumer-based. The apprach has t be systematic, cnsistent and prgressive. Fr example, it can start with a market research survey f current custmers, fcused n whether r nt they wuld be interested in a specific service r prduct. This culd be as simple as asking everyne wh came int a stre, r as frmal as a questinnaire. If the respnse is psitive accrding t the 7
8 criteria set, ne culd mve n t telephne r face-t-face interviews with randmly selected members f a targeted ppulatin. If the feedback were psitive, ne culd prceed t mre in-depth market research survey interviews with selected respndents. Especially fr small businesses, it is imprtant that research tries t identify ptential r existing niche markets. A niche market is a fcused, targetable prtin f a market. By definitin, then, a business that fcuses n a niche market is addressing a need fr a prduct r service that is nt being addressed by mainstream prviders. One can think f a niche market as a narrwly defined grup f ptential custmers. What is the advantage f establishing a niche market? It is the great advantage f being alne there: ther small businesses may nt be aware f a particular niche market, and large businesses will nt want t deal with it because the scale is fr them inefficient. The trick t capitalizing n a niche market is t find r develp custmers wh are accessible, whse number is grwing fast enugh, and that are nt lcked int the netwrk f ne r mre established vendrs already. Basic principles t keep in mind when designing and carrying ut market research are the fllwing: i. The infrmatin will nly be as gd as the market research sample. T get useful market research data, the sample grup needs t be relevant t and representative f the target ppulatin. It als needs t be addressed frmally and bjectively at sme pint, because infrmal market research is always tainted t a degree by the relatinships f the peple invlved. ii. The survey r market research questinnaire shuld be designed carefully. They shuld be fcused specifically n the infrmatin needed, well structured and lgical. Questins shuld be culturally and scially sensitive. iii. The survey r market research questinnaire shuld be kept fairly shrt. If pssible, a market research survey r questinnaire shuld all fit n ne page. Sme peple are intimidated by lng frms; thers see multiple page frms as just t much f an impsitin n their time. iv. Opprtunity fr detailed answers shuld always be prvided. Nt everyne will take advantage f it, but sme will, and smetimes these written-in cmments are the mst valuable f all. v. Market research recrding techniques shuld be selected and rganised first. A system f recrding the data and qualitative infrmatin shuld be wrked ut in advance. vi. Evaluatin criteria shuld be set befrehand. In rder t ensure an bjective evaluatin f the research utcmes, benchmarks fr what is cnsidered a gd market fr a certain prduct/service shuld be established befre data cllectin in rder nt t bias data analysis and cnclusins. 8
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