I have sometimes made the point that ‘market forecasts’ are of little value as a start-point for strategy development [ sorry to the folk who make a living feeding the apparently insatiable demand for ‘independent market forecasts’]. This is because market development is not an ‘independent variable’. The way customers respond is a function of what suppliers offer, as much as it reflects some innate desire to consume. An old example – the ‘market’ for 24-hour global TV news was zero before CNN offered it, but then grew at a rate that reflected CNN’s success in getting its service adopted – not because the number of people who wanted it grew by x,000 per month.
Just come across another couple of extreme cases.
- The ‘market’ for mortgages in middle-east countries is apparently near-zero – but the rate at which ‘demand’ will grow will reflect the rate at which banks develop and provide Shariah-compliant products. For such a bank, ‘forecasting’ growth of this market is pointless, as its growth will depend totally on what suppliers will do.
- Same applies to some alternative-energy markets – roof-top solar heating, domestic combined-heat-and-power, ground-source heat pumps etc. The current ‘market size’ for many of these is currently tiny, because the technology is immature and costly, and ‘growth in demand’ is a meaningless concept – demand will develop in response to the rate at which each technology’s performance and price improves … which in turn depends on the sales rate. [All explained in chapter 6 of the book]
The exceptions to this general point relate to highly mature markets, where interactions between competitive suppliers and potential customers long ago played out, leaving demand to be most strongly influenced by economic, social and other mechanisms. Even then, there is often much that strategy can do to improve performance way out of line with market ‘trends’.
Kim
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