Detailed Market Analysis for Books&Co.

Market Analysis

In each simulation, you can find market analyses by clicking the "Market Analysis" button.

Key Market Parameters

Selling Price

Indicates the average selling price of similar products offered by competitors, ranging from the lowest to the highest value, known as the "price range."

Delivery Days

The total time required to deliver goods to customers. This number is the sum of two factors:

• Order preparation and packaging time
• Time needed by the courier to deliver the package

Quality

An indicator that encompasses aspects such as manufacturing, choice of raw materials, production process, and order management. This indicator is primarily associated with the product in econoPy.

Reputation

Concerns the image perceived by customers. It's a combination of several factors:

• Community presence
• Promotional investments
• Attention to environmental sustainability
• Employee satisfaction
• Order fulfillment punctuality
• Payment punctuality
• Number of employees

Payment Terms

The time that elapses between the issuance of the sales invoice (in econoPy, this coincides with the shipping moment) and the customer's payment.

Seasonality

Indicates how much the quantities ordered by customers vary throughout the year.

Maximum Number of Daily Orders

Indirectly indicates the number of customers that make up the market.

Average Number of Units per Order

Indicates how many products are typically ordered per single order.

Accepted Delay Days

The number of days within which the order must be delivered beyond the agreed terms, under penalty of order cancellation.

Payment Punctuality (of customers)

Indicates the percentage of payments made by customers within the due date.

Customer Decision-Making Weights

Weights in the customer decision-making process vary from 1 (low) to 5 (high) and refer to:

• Quality / Price Ratio
• Payment Terms
• Delivery Times
• Reputation

Practical Implications for Business Choices

Books&Co operates in a B2B (Business-to-Business) market. This type of market has some advantages compared to B2C (Business-to-Consumer).

Advantages:

• Allows building long-term relationships with customers, ensuring a continuous revenue base throughout the year.
• Larger order quantities.
• Usually longer delivery times.

Disadvantages:

• Can be heavily dependent on a few customers, putting the company at risk if one is lost.
• Lower selling prices and reduced profit margins.
• Delayed cash flow. Payment delays or insolvencies from some customers can put the company at risk.

Strategy

The business strategy in a B2B market with a low unit sales value is usually quantity-focused. The company's focus is on ensuring an average quality level while trying to lower the unit production cost as much as possible. To do this, it's important to pay close attention to production, starting from the procurement cycle and the correct sizing of productivity (i.e., daily production quantity).

It's crucial to pay attention to market seasonality to be prepared for peak order periods with a stock of products already available to ensure on-time deliveries and reduce the risk of canceled orders. Remember that many new customers are acquired due to competitors' production shortfalls!

Managing employee holidays, especially for workers, can play a fundamental role. We'll delve deeper into this aspect in the production-dedicated reading.

Once production is sized to ensure a unit cost lower than the market's average selling price, it's necessary to implement marketing strategies aimed at increasing the perceived value of our product (promotion, quality, reputation, timing) to bring the selling price as high as possible while remaining within market limits.

Remember that revenue equals:

If the price increases, there's usually a compression in the number of orders or quantities ordered.

Example

Company A (price strategy)

Orders: 100

Sales quantity per order: 50

Selling price: 10

Revenue: 100 * 50 * 10 = $5,000

Company B (quality strategy)

Orders: 10

Sales quantity per order: 5

Selling price: 100

Revenue: 10 * 50 * 100 = $5,000

As we can see, the two companies have the same revenue, but the difference lies in the production size: 5,000 units in the first case and 50 in the second.

The first company will require greater investments in production (buildings, machinery, workers, production materials) compared to the second.

As we'll often see in the upcoming readings, doing business is almost always about solving a sizing problem!

Click on the following button to open the page with Books&Co's initial state.