7 junio, 2024

Analysis of the offer: what it consists of, how it is done, example

He offer analysis Its purpose is to establish the conditions and quantities of a good or service that is intended to be sold in the market. The offer is the quantity of products that are placed at the disposal of the consuming public (market) in certain quantities, prices, times and places.

The analysis of the offer allows to evaluate strengths and weaknesses and implement strategies to improve the competitive advantage. A historical, current, and future supply review should be done to establish how many goods competitors have delivered, how many they are delivering, and how many they will be able to offer to the market.

The conditions under which said offer is handled must also be analyzed, in order to have the minimum elements necessary to establish the possibilities that the good or service of the project will have, depending on the existing competition.

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What does offer analysis consist of?

With the analysis of the offer, it is intended to determine the quantity of the good that the producers, constituted in competition, are able to offer to the market, as well as the conditions in which they would be willing to make said offer.

Studying the offer of a product is analyzing the competition that must be faced. The more knowledge is obtained from the competitors, the better elements of judgment will be available to design marketing strategies that increase the success of said products in the market.

Factors that determine supply

The analysis of the offer must take into account the factors that determine it and that condition the quantities offered. These factors are:

Price of the product

The quantity offered of a product increases according to its price increase. Higher prices generate higher profits, making them more attractive to bidders. However, consumers can decrease the quantity demanded, generating excess supply.

This creates strong competition, causing the price to fall until it breaks even with a given price.

If the price of the product is lowered, the quantities supplied are reduced and the demand increases. This can lead to price increases until a new equilibrium.

Technology

The incorporation of technology leads to the reduction of costs and increases in the quantity produced, since greater efficiency is achieved.

Availability of inputs and their prices

When inputs are scarce, the quantity of goods produced is limited. Likewise, if their price increases there will be an increase in the cost of the product of which they are a part.

market meddling

By applying subsidies and taxes, the State disturbs the supply of products. Any tax increases costs and therefore supply contracts. A subsidy creates the opposite effect: it reduces the cost of production and increases the supply.

Competence

To the extent that the number of companies in an industry increases, each one of these will tend to decrease its offer.

competitive environment

A direct competitor is any company that sells a product similar to ours in the same geographic area. An indirect competitor is the company that offers a different or substitute product in relation to ours.

For example, there is indirect competition between a butter manufacturer and a margarine manufacturer who sell to the same customers. There is also indirect competition between the eyeglass manufacturer that competes indirectly with the contact lens manufacturers.

The competitive environment for supply analysis can be one of the following:

competitive offer

Bidders are in free competition. The number of suppliers of the same article is such that their participation in the market is determined by the quality, price and service offered to the consumer.

Oligopolistic bid

A few bidders dominate the market and determine supply and prices. An example is the market for new cars.

monopoly bid

There is only one provider of the service or product. It dominates the market completely by implanting price, quality and quantity. The classic case is state monopolies.

How is the offer analysis done?

It is done through the following steps:
Collect information from primary sources.
Collect information from secondary sources.
Analyze the information of the offer.
Determine competitive position.

Collect information from primary sources

It is necessary to know both the quantitative and qualitative elements that influence the offer. Market research is carried out with consumers, through focus groups and questionnaires, providing valuable information about the offer.

Answers should be obtained to questions such as these:

Who are the main competitors?
What is the range of products and services offered?
Are the competitors profitable? Are they expanding or shrinking?
How long have they been in business?
What are the positive and negative attributes according to customers?
How do current customers see us compared to the competition?
How can you differentiate your company from competitors?
What is your marketing and promotion strategy?
What are your pricing structures?
Do they operate in the same geographic area?
What is your market share percentage?
What is your sales volume?

Collect information from secondary sources

Secondary sources contain competitor-related information for a purpose and are available for public access. Examples of this are books, published magazine articles, and sales brochures.

Marketing reports are also considered secondary sources, just like all content that can be found on the Internet.

Other secondary sources are:

Advertising, which shows the price and information of the products and, in addition, provides an indicator of the promotional plan of the competition.
Annual reports, which provide financial information, including sales volume, revenue growth, and total market share.
Own sales force.
Direct observation of products in stores.

Analyze offer information

Once all the information of the offer is collected, it is analyzed to establish the product information and marketing strategies, and to identify the strengths and weaknesses of the competition.

The competitive position of a product or service is determined by its price and how well it differentiates itself from the competition.

The product attributes are listed in order of importance, and a comparative table is prepared showing whether each of the competitors has them or not.

Determine competitive position

Finally, the product is evaluated with that of the competition. How does the product compare to the nearest competitor? What attributes are unique to each product?

The more unique attributes the product has, the stronger the competitive position in the market will be.

Example

The logistics management of the XYZ company is requesting a quote from its suppliers for the purchase of the ABC supply, required for the production of packaging. This quote must include at least the following information:

Supply price.
Delivery time in days.
Credit days to pay.

Quotes are received from three vendors. With this information, the following quote evaluation table for the ABC supply is made:

The logistics manager must select the bidder from whom this supply will be purchased, based on the following considerations:

The price is the most important attribute, since it is essential for the company to generate the highest profitability in the sale of the packaging.
The time of existence of the ABC supply in the inventory will be 15 days.
The financial capacity of the company is very solvent.

When analyzing the offer in the table, the manager chooses the AA supplier for offering the best price, having a delivery time of less than 15 days of existence of the supply, and offering a competitive payment period.

References

Bacca Urbina (1990). Market study Part II Chapter 2.6. Project evaluation. McGraw-Hill 2nd. Edition.
Susan Magee (2018). How to Conduct and Prepare a Competitive Analysis. Edward Lowe Foundation. Taken from: edwardlowe.org.
Michael Kerr (2018). How to Write a Market Analysis. Bplans Starting a business made easy. Taken from: articles.bplans.com.
Raymond Hehmann (1984). Development and execution of marketing strategies. Editorial Norma. Second printing 1991.

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