Posted By Megacap | October 5, 2020 Photo Credit

Businesses exist to provide a solution in the form of a service, product or both to an existing or newly identified need. In essence, businesses ideally identify opportunities in gaps within various value chains and seek to address those gaps usually at a cost to themselves, and price their solutions to intended beneficiaries of the product and or service (solution) that they provide. In the simplest form therefore, businesses have something to offer a market which has to have a need – identified or otherwise. Market is the general term for a pool of buyers, existing or potential.

From a strategy relevant perspective and for context, the Oxford Learners’ Dictionary defines markets as ‘business or trade, or the amount of trade in a particular type of goods’, ‘a particular area, country or section of the population that might buy goods’ and ‘the number of people who want to buy something’. These definitions are particularly interesting because they talk about the same thing but in different angles (check out example of sentences for each definition on the online or hard copy version to grasp the said angles). It is important for a business to understand these angles, as it will inform important decisions when positioning to exploit opportunities in their operating environments.

When planning, it is important for a business to understand the space they are in, or intend to get into from the context of market. In particular, it is advisable to have an idea of the total available market for its products and or services. For ease of understanding, let us use a hypothetical business – Kanga Groceries that is keen to address the chronic watermelon shortage, and is based in Juja farm, in Ruiru, Kiambu County. Total market for Kanga groceries would be all households within Juja Farm, Ruiru Constituency, Kiambu County or Kenya that consume the fruit. Kanga therefore ought to have a general understanding of how much households spend on watermelons within a certain period, say month or year. This information is important because it helps visualize demand and supply patterns – who buys the fruit and their characteristics, as well as who sells it and their characteristics, market rates estimates, enhance capacity for optimum growth in future and establish potential areas of further opportunities in the entire value chain. Generally, economic reports and other sectorial surveys and publications by say the Kenya National Bureau of Statistics or other credible repositories will have some form of data that may directly or indirectly help build an idea of the total available market. The same can be said for novel solutions. The obvious conclusion here is that for most businesses, it is most probably impossible to provide solutions to the total available market owing to such constrains as resource limitations, logistical challenges/ reach etc. It is therefore unrealistic for Kanga to target the total available market.

It is however, somewhat realistic for Kanga to think Kiambu County as a market it can serve given ideal conditions. This is the business’ serviceable available market. It therefore makes sense for Kanga to have a rough understanding of the general demand within the county – say how many kilograms are consumed on average within the county within a given time – and understand important facets as estimated number of households and their spending capacities and habits. However, it will still be a difficult ask for Kanga to look to provide melons to all households within the county. In fact, there will be many other businesses supplying watermelons within the county, likely servicing various localities within the county by exploiting their strengths within the said localities. In the case of novel solutions (for instance assuming nobody else supplies melons in the county), it will require a huge capital outlay to develop the value chain infrastructure required to ensure all households that need watermelons can get them. Understanding this aspect of its markets provides for a growth path especially factoring in gaps in the value chain.

The pragmatic positioning for Kanga is to have a thorough understanding of Ruiru constituency, with specific focus on Juja Farm with regard to parameters as outlined under serviceable available market. This provides the serviceable obtainable market – in other words, that part of the market that Kanga can position to effectively service with its three pick-up trucks and five hand pulled stall-carts. From a planning perspective, this is your short term target market that will determine whether or not you will succeed in your chosen industry and thus position you for the larger markets outside your reach, and therefore the one that matters the most when defining your game plan.

It is worth noting that the simple example of Kanga considers one aspect of the market – geographical consideration. There are many other factors that may be considered when determining the target market – including but not limited to age, gender, socioeconomic factors, business model (design, and how the product and or service is to be delivered) etc.

The writer is the Managing Director of Megacap, a top tier consultancy company that offers customized capacity strengthening solutions for businesses and organizations enabling them to flourish.
Web: www.megacap.co.ke