The Language of Small Business Texts and Vocabulary Training (for students of Economics) Part 1. Учебное пособие

Who will buy

Market size

The first step is knowing the market size. This could be either its monetary value or the number of units sold in the market. Beyond this you need an estimate of the market potential, which is unlikely to be the same figure as market size, because it is unlikely that everyone on the market will buy your, or an equivalent, product. Obviously, if you have the figure for the overall market, but have decided to concentrate your business resources on a particular market segment, your next step is to assess the size of the particular segment you are interested in. Even then, this may not give you your estimated market potential (the amount of sales you stand some chance of being able to make over a period of years).

Market Structure

This is the process by which the final product is sold to the end-consumer. In very simple markets, there will be only the business producing the goods and the final consumers buying directly from the manufacturer. But many markets are much more complex and there are several links in the selling chain before the final consumer is reached. As well as businesses selling direct, there could be a network of distributors, and yet another layer of agents or dealers before reaching the retail outlets and the consumers.

You need to know how your particular market works to be able to estimate the value of sales. If you choose the direct route for sales (that is, you are selling to your end-users), once you have fixed the selling price and estimated the number of units you can sell, you know the value of the sales. Your forecast profit will depend obviously on the costs of the direct selling as well as all the other costs and overheads. Because direct selling can be an expensive burden, especially for a small business, many try to sell through other businesses. Or this may be the way that the market is already organized. In this case, your selling price to the distributor or network has to be low enough to allow the distributor to earn the required income and still sell to the consumer at the right price.

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Any study of market structure can only apply at the time the study is made, because distribution networks are constantly evolving. The research should help you formulate your own sales plan. If there are many end-users with a ready-established distribution network, you may decide to sell via the distributors or agents and encourage sales to end-users by PR and advertising. However, if you are aiming at a few, large consumers, direct selling may be the answer.

Market Share

Unless you are supplying a completely new product or service, you are going to share the market with other businesses. To be in a dominant position (that is, the supplier of 25 per cent or more of the market) would be very rare for a small business.

To be able to forecast your sales you are going to need some idea of what share of the market your competitors have. You also need information about your competitors' business and products to enable you to position and price your own offering. Knowing the market shares gives you a measure of how successful the other businesses have been.

Monopolies are unusual, but there may be a duopoly (two businesses supplying 25 per cent or more of the market each) or an oligopoly (three, four or five businesses dominating it). However, many small businesses are likely to face a fragmented supply position, where there are lots of suppliers and one business is unlikely to achieve more than 5 per cent of the market. This is particularly true if it is a new industry or market.

Measuring market share is one thing, achieving it another. But there are some ways of influencing the share you can seize. On the whole, it is helpful to build a reputation for good, consistent quality. For this to be translated into market share, a second influence is maintaining a reasonable level of marketing activity: PR, advertising and sales activity. A third influence is if your product is recognized as being ahead of the competition in performance, design or whatever.

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Who will buy

Look at your competitors in a detailed fashion. Some of the data it would be helpful to have includes:

•what are the competitive products and how much of each do they sell?

•how well have they done in the last few yeas?

•how is the company organized?

•how is their selling carried out?

•if they produce goods, how is it done and what are the facilities?

•who are the main customers?

•what is the pricing policy and what sort of delivery is offered?

Market size, market structure and market shares do not remain the same.

What happens today may be totally irrelevant to what is happening in one, two or three years time. The usual method of deciding what is going to happen in the future is to look at what has happened in the past and project it forwards. This approach is fraught with dangers. At the very least, you need to adjust the figures for changes which may occur or are forecast to occur.

On a general level, anticipated changes in the economy can affect the buying patterns of individual markets. There may be changes forecast in tax or other laws which will influence purchasing decisions. New information or research may emerge on the effect of certain items (for example, health hazards).

On a more specific level, in your particular target market there may be new products or better products emerging. There may be specific changes caused by government or local authority policy. And so on. You need to look closely at your market to guess what changes will occur which might affect the market trends. In any conversations with people already operating in the market, remember to ask what likely changes they think are on the cards. You may be better able to take advantage of them as a new entrant with no constraints from existing products, methods of operating or overheads.

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The Language of Small Business

Investment needed in Sales

This is really nothing more than your need to make realistic forecasts of how much you will sell, when you will be able to do it and what you need to spend on selling and promotion to achieve it. Inevitably, if you are starting your own business, you are optimistic, but do not let optimism blind you to the uncertainty of making sales.

If you are in any doubt, a rule of thumb might be to double the length of time you expect it will take you to achieve a certain level of sales. In this way, you will organize sufficient funds to keep the business going until you reach break-even. Of course, the danger of this rule of thumb is that your business may not seem sufficiently attractive to lenders and investors. Keep a balance.

It might be possible to obtain a more reliable estimate of sales by carrying out test trials on a limited basis, although this is difficult for a small business to do.

How to do the Research

There are a number of techniques for researching a market. The ways open to a small business are likely to be fewer than to a larger organization, simply because of money. In most cases, it will be you, the owner, who does the research.

The basic research methods for small businesses include:

•Desk research, studying directories and other literature;

•Interviews with customers, suppliers, competitors, distributors, ex-employees of competitors;

•Test trials.

Desk Research

The main sources of information are:

•directories;

•government information;

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Who will buy

•information from within your own business, if already up and running;

•trade associations;

•the trade press and special features in the quality papers;

•competitors' literature;

•published statistics and reports;

•former colleagues.

As well as these published sources of information, you should not neglect the information you have within the business if you are already established. Keep good sales records and encourage your employees to be on the look-out for market information.

There are also the trade sources of information. Find out which are the trade magazines and, if they are not free, take out subscriptions. Organize cuttings files. Contact the relevant trade association and obtain information about its members.

Use trade exhibitions as an opportunity to pick up literature about your competitors and talk to potential customers about the market, the suppliers, the products and the gaps.

Interviews

The term 'interview' can cover anything from a chat at аn exhibition, to a brief telephone call, to a long face-to-face discussion in private. The main point is that you can pick up a lot of information simply by talking to people.

Whether you have started your business or not, good sources of information are customers, potential or actual. Perhaps you could carry out a telephone survey, limiting each interview to ten minutes, say. It would help you analyse the information if you had prepared a questionnaire sheet to fill in.

On the whole, you will find that most customers are usually ready to cooperate, as it may mean you develop a product more suited to their needs.

Carry on the number of telephone interviews until you begin to feel that you are learning nothing new, because the same points are being repeated.

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The Language of Small Business

If you want detailed information, you will not find that the telephone is the best method of acquiring it. Instead, try to carry out a number of in-depth interviews.

If you are researching a consumer market, you should try to talk to the distributors and retailers as well as to the end-users. Most people are flattered to be asked their 'professional' opinion. Talking to the final consumers can be a bit of a problem because you may not know who these are. Perhaps a retailer will allow you to spend a day in the shop talking to customers? Asking people in the street outside the store is another possibility. If your product is likely to be exhibited at trade fairs for the consumer, spend some time there asking about the market and product. Use a brief questionnaire to ensure that you ask the same questions so that the information can be analysed.

Interviewing competitors may sound an odd idea, but there is no harm in it and it can help you understand what are common problems. If you come across any ex-employees of competitors, it is always worth a discussion, although you have to bear in mind that their view may not be entirely objective if they did not part on good terms with the business.

Before you start your business, you could carry out some discreet research into how the competition organizes their businesses by pretending to be a prospective customer. In this way you can gain some idea of the literature, prices, the way telephone queries are dealt with, selling methods or even how your potential competitors quote. It may seem unfair, but it is an unrivalled source of information and you may rest assured that once you are in business others will do it to you.

Test Trials

It would be a great help to you if you could test market your product, especially if you will be setting up production facilities or ordering very large quantities. If you can try out a few before you make the substantial investment needed, you would be able to re-

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Who will buy

fine the product, satisfy yourself that the demand does exist and define the likely sales cycle (the length of time from first contact to purchase). To test this, buyers of the trial product need to be followed up and interviewed.

Vocabulary

сокращать. перечень. выйти на рынок.

целевой рынок.

поток денежной наличности. помещение; здания.

представить (к рассмотрению) бизнес-план.

удовлетворять спрос.

отвечать требованиям. убеждать кого-л. покупать, закупать что-л.

развивать в покупателях потреб- ность покупать какой-л. товар. предложение товаров/услуг на рынок.

to differentiate from smth. отличать от чего-л.

forecast, v. прогнозировать, делать прогнозы. n. – прогноз.

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The Language of Small Business

Definitions of terms

Market:

1.com. – a place where buyers and sellers come together to trade in goods; the building, open space or town where they meet to trade; and the persons, buyers and sellers, who form a group to buy and sell a particular commodity.

2.the total public demand for an article or commodity.

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Who will buy

3.econ. theory – an organized group of buyers and sellers of a particular economic good who are sufficiently in touch with each other personally or by telephone for all to know the current conditions of demand and supply, so that there is only one price, called the market price, for the good.

4.the present or possible future demand for a commodity.

5.stk. & commod. exch. – the organized group of professional buyers and sellers who trade together in securities or commodities, such as the London money market, the Liverpool grain and cotton markets.

Active market, stk. exch.:

1.the market that exists for certain popular stocks and shares which are frequently changing hands and can therefore always be bought.

Syn.: free market

Qpp.: limited market

2.a market that is in a state of activity, with much business being done.

Free market:

3.econ. – a market in which buyers and sellers are free of interference and control and are therefore able to determine the market price according to the forces of supply and demand.

Syn.: open market

4.bkg. – in the foreign-exchange market, a situation where the rate of exchange between two currencies is free to rise or fall according to the forces of supply and demand.

5.stk. exch. – the market for a security that is always active there being many people interested in buying or selling the security, and the amount offered being enough to satisfy a relatively large demand.

Opp.: limited market

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The Language of Small Business

Forecast:

1.an account of what may be expected to happen in the future, usu. by looking at conditions that lie ahead.

2.econ. – any methodical attempt to tell the nature, extent and direction of future changes in the economic system, such as a change in the size of the population. Such forecasts, called projections, are essential aids when deciding government policy.

Profit margin (or margins), pl. – the rate of profit generally made in selling an article or commodity.

Product differentiation, econ. & ind. – making one's product as different as possible from its competitors by means of brand names, attractive packaging, etc. so that buyers may recognize and buy the product of their choice. To the economist such products are not perfect substitutes (replacements) for each other and the competition between them is therefore imperfect.

Supply, econ. theory – the amount of economic goods that will be offered for sale in the market at a certain price and time; or at each of a series or range of prices at a certain time. Normally, the higher the price, the greater the supply, except where the supply is fixed or is regressive.

Demand:

1.econ. theory – in economics, not just the desire of a person to have or to own a thing, but his desire to get it by paying a price for it.

2.the wants of buyers in the market.

3.econ. – the amount of a commodity that the public will buy at a certain price.

Laws of Supply and Demand, econ. theory – the natural tendencies that normally cause supply and demand to vary with price, and price to vary with supply and demand. Stated very simple, these tendencies are:

1.if, at a given price, supply exceeds demand, the price tends to fall, and if demand exceeds supply, the price tends to rise;

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