The main objective of a market analysis is to establish the appeal of a market and to comprehend the fluctuating nature of the opportunities and threats it presents, in relation to the strengths and weaknesses of the company. This analysis is a requisite for market penetration. The most important aspects of market analysis include market size, market growth rate, market profitability, industry cost structure, distribution channels, market trends, and key success factors.

The size of a market can be assessed based on current and potential sales and on potential sales, the latter in the case that product use was expanded. Some market analysis sources that can help determining market size are government data, trade associations, financial data from major players and customer surveys.

Market growth rate can be estimated by extrapolating historical information into the future. This method does not, while simple, does not predict important turning points. Studying growth drivers such as demographic information and sales growth in complementary products might prove to be more efficient market analysis. These drivers more accurate leading indicators than simply extrapolating historical data would. Important inflection points in the market growth rate can often be forecast by designing a product diffusion curve. The shape of the curve can be calculated by studying the traits of the adoption rate of a similar product in the past. Eventually, the maturity and decline stages of the product life cycle will be arrived at. Price pressure caused by competition, a reduction in brand loyalty, the emergence of substitute products, market saturation, and the lack of growth drivers are some of the leading indicators of the decline phase.

While the levels of profitability in a market will vary from company to company, using the average profit potential as a guideline will help the market analysis determine how difficult it is to make money. An useful framework for measuring the appeal of a market is known as Porter’s five forces, which pinpoints five main factors that influence market profitability, to wit: buyer power, supplier power, entry barriers, threat of substitute products and rivalry among firms in the industry.

Cost structure is vital for identifying key success factors in a market analysis, as well as developing strategies to come up with a competitive advantage. For instances, in some climates the experience curve effect can be used to build a cost advantage over the competition.

Existing distribution channels  (can be described by how direct they are to the customer), emerging trends and channels (new channels can offer the opportunity to develop a competitive advantage) and channel power structure are useful aspects when it comes to performing a market analysis.

Shifts in market are valuable because they are frequently the source of new opportunities and threats. Some general examples of market changes include changes in price sensitivity, demand for variety, and level of emphasis on service and support.

Finally, the key success factors are those elements that are needed in order for the company to accomplish its mark penetration goals. A few instances of such factors include access to essential unique resources, ability to achieve economies of scale, access to distribution channels and technological progress. Key success factors may vary over time, in particular as the product evolves through its life cycle.