Market Size and Structure

Market Size Structure refers to the distribution of shares of different size classes of local market participants. There are three important questions to consider when gauging market size and structure: 1. Is the market emerging and/or fragmented**? In other words, envision the big picture of an industry lifecycle. A fragmented market that can be consolidated around a superior product or service is rich entrepreneurial territory. For example, prior to the emergence of Jiffy Lube in the U.S., the concept of an oil change was the domain of small, full-service gas stations. The founders of Jiffy Lube identified the unmet need of fast, on-demand oil changes, which quickly evolved into a new market for automotive preventive maintenance for busy consumers. 2. Are there proprietary barriers to entry or excessive costs of exit? Even in a potentially fruitful market, there may be little opportunity if the field is dominated by a few competitors who control intellectual property or other key ingredients needed for the product. Clearly, the allure of technology companies is the competitive advantage provided by patents or technological secrets. No venture is a sure thing, but a close examination of the market size and structure will help minimize risk. 3. What is the stage of the product lifecycle? Look at the product on the lifecycle curve.  The high-growth stage represents the greatest potential for success, as well as the lowest risk.  Of course, that doesn’t mean that money can’t be made on other parts of this curve. Many entrepreneurs have discovered opportunities by mining emerging or mature markets for hidden potential.