Market analysis tools allow a company to review external factors that dictate how it sells goods or services to consumers. A few common tools include independent studies, PEST analysis, or the use of a third-party company. Each of these tools provides companies with specific information for making decisions. In short, they add knowledge to the company’s decision support system. More information adds to an individual's or company’s business intelligence, allowing them to be more informed and competitive in the overall economy.
Independent studies often look at a single aspect of a larger market, population, or economy. For example, a company may desire information on a specific group of consumers, market location, or international economy. Market analysis tools in the independent study then focus on the requisite information for the desired target. Demographics, information on competitors, availability of resources, and other data may all be a part of the independent study. These studies may include several smaller pieces that make up a much larger report for use by a company’s management team.
PEST stands for political, economic, social, and technological factors that can affect a company. All markets tend to have some or all of these factors in them. Political factors include any intervention by a government agency. Regulations, laws, or taxes may all play a part, both positively and negatively. Economic factors include inflation, money supply, fiscal policy, and other items often out of the control of the company. In many cases, the government may be involved in both of these two factors.
Social factors in PEST market analysis tools often deal with the perceptions of consumers about a company or its products. This can also include environmental factors, such as the use of natural resources by a company. Technological factors represent any use of technology by the company or its competitors. A company that fails to implement technology, for example, may lose market share because other companies leverage those opportunities. Market analysis tools using this approach can have information from multiple markets or economic environments.
In some cases, a company may discover it simply does not have the tools to conduct a market analysis. When this is the situation, third-party companies or consultants can tailor market analysis tools for the business. This allows a company to pay for a multitude of tools that include all the important data. Though third-party resources can be expensive, they may have more knowledge or expertise in these areas. Therefore, the information is better and provides more knowledge than an internal report.