SECTION II

MARKET ANALYSIS

Introduction

Market analysis is one of the essential aspects of a firm. It determines if the product is pleasurable to the market and aids to give an analysis to marketing whether the business is good and aligned to the target market, or if it is growing and recommends tools, methods, and ideas on how to intensify, improve, and develop the business as a whole. It does not only stop on what is happening in the present but also focuses on what will happen in the future. It will give the business an additional significant information whether the demand for business products and services is expanding, if rivalry is anticipated to grow stiffer, if business plans to propose new products or improvements to the products in the future helps seize additional portions of the market or strengthens competitive advantage, and if there are any ideas that enhance the demand for the products and services in the future. Hence, SWOT analysis is needed. SWOT analysis is very useful in market analysis. It is a tool that distinguishes the strengths, weaknesses, opportunities, and threats of a business. It is a fundamental, straightforward model that determines what a business can and cannot do. Strength and weaknesses denotes what a business is capable of doing in the beginning of the business. The opportunities determine if the developments in the market environment may operate favorably for the business and threats exist if it operates unfavorably for the business.

Description of the Industry The Musical Hat Company is manufacturing and retailing Hat Music product that caters various designs, colors, and styles of hat crochets depending on what the buyers would want it to be. Hat Music is made up of crochet and has speakers attached on it where one can insert the SD card or headset and he/she can also connect it to various cell phones headset can be wireless or wired. The company provides the headsets and the subcontractors in Upper Cogon, Carcar City, Cebu will provide all the materials needed for the production of a durable, good quality, and environment-friendly hat music product. The company aims to provide entertainment, trendy and fashionable stuffs, unique, durable, environment-friendly, and with best quality Hat Music product. Most importantly, the company provides stuffs that would reflect the users personality.

Market Segmentation

Market segmentation is the process of identifying the numerous divisions or segments of a companys specific market. It defies differentiation and market saturation due to very close competition and concedes marketer to suit a product or service to the needs of the target market. Segmentation enables different company to know what a customer want and need to a product or what they are looking for a product that can satisfy them. It can help distinguish opportunities for new product development, urges the marketer to be informed of the realities in the market, and enhances the strategic allocation of marketing resources. The purposes of conducting market segmentation are to choose the most profitable segment, maximize insufficient marketing resources, increase marketing efficiency by focusing marketing efforts to a specific group, and establish a market with limited competition.

The Musical Hat Company takes the form of multi-segment strategy that designates for producing products or services to two or more segments of the target market which means that it may even manage the whole target market. In segmenting the market, the company uses the four major categories geographic, demographic, psychographic, and behavioral segmentation. Geographic segmentation prescribes dividing the market into various geographical units like barangays, regions, towns, cities, and provinces. With respect to regions and barangays, the Musical Hat Company can sell their product in rainy and hot places, and, with the use of hat music, it protects and covers the head of the buyers from sunlight and rain and at the same time they can listen to different music which appears so trendy and fashionable to the eyes of the people. Demographic segmentation is used by the company to separate the market into segments on the foundation of demographic variables like age and sex. At this generation, males and females ages 10-18 years old are fond of listening music and using or wearing trendy and fashionable things which gives the hat music its greater advantage. Psychographic segmentation divides buyers according to a persons lifestyle, personality, and social class. Today, buyers tend to buy according to their interests, desires, opinions, activities, and position. Behavioral segmentation helps the company to know if there are non-users or regular users of hat. They will also be given knowledge about the readiness of the buyers to buy, and they can even evaluate the buyers buyi ng behavior and attitude. The Musical Hat Company tends to plan carefully in selecting the target market because the effect of choosing the wrong segments may lead to loss of different opportunities and decrease of company resources.

Market Product Grid

This simply means a penetration to market development and diversity of the constant buyers. The table below unveils the market segmentation process along with its target market. It states that the Musical Hat Companys primary target market are the high schools and our secondary target market are the young professionals, colleges, teens and out of school youths. Market Product Grid Market Segment General Group Hat P S S P S Product Musical Fashion Gadget Hats P S P P S P P S P P

Educational High School Students Attainment College Students Young Professionals Fashion Oriented Teens Out of School Youths Legend: P (Primary target market) S (Secondary target market)

Target Market The Companys Target Market are the younger generations, preferably the students, Young Professionals and people who are young at heart. The Musical Company aims to help their target market be able to express their true self through fashion and music.

We offer our target market especially the students, the certainty of getting high satisfaction and comfort from our product. We also look forward in building good relationship with our customers and making our company excel in every expectation.

Market Research

Market research is one tool of gathering information about customers or markets. The term specifies important information on how the company can provide the demand of the customers. Through market research, the proponents can discover the needs, wants and desires of the market. The business can determine how to market the product and get advantage over the competitors existing product. Market research also helps the company to gain some support in decision-making and provide important information to analyze the competition and market size. Musical Hat Company's primary target market is the high school students who, at their age (13 to 18 years old), are basically lovers of trendy designs of headgears and at the same time fond of listening to music and most likely can afford to buy our product. The group distributed survey questionnaires as a tool in gathering data. The proponents wrote a letter to the Directress of St. Marys Academy of San Nicolas for the total population of the high school students and at the same asking permission to conduct a survey inside the campus. Then the firm used the Slovines formula in determining the sample size of the total population. After the survey, we found out the following notable suggestions from our respondents: Make designs that are popular, like the characters in the most recent animated movies.

 The product should have an adjustable pocket for earphone speakers to suit where the ear of the user is. Improve the quality of yarns used. Make the speaker easy to remove from its pocket to safely wash the hat. Develop a make-to-order scheme for customers who want to customize their designs. Find ways to lower the product price. Make the product available everywhere possible. Produce more trendy crochet products other than the musical hats. Offer sizes that range from babies to adults.

Research Subject Musical Hat Companys research subjects are high school students from Saint Marys Academy of San Nicolas (SMASN). Under the K+12 scheme, high school students would be generally ranging from the age of thirteen (13) to eighteen (18) years old. These ages are perfect for our product because selfidentity and external appearance tend to be innately strong and high in importance in adolescent stage and our product can surely provide that to them. With this age bracket alone, we are confident to amass huge profit and expanding business.

Research Environment Last August 14, 2013 we conducted a survey at Saint Marys Academy of San Nicolas (SMASN) at T. Abella Street, Cebu City. SMASN is a private Catholic School run by the Religious of Virgin Mary (RVM) Sisters and with 507 total population of high school students. There are four (4) year levels in high school and each year level has three (3) sections.

Competition

Competition consists of trying to get and convince the customers in purchasing the product instead of what is offered by the competitor, and achieving goals to increase sales volume, large market share and higher profit. Competition involves two or more parties having effort acting independently. Through competition, the company is motivated to work hard. The Hat Music product has competitive advantage over the other because of the products unique and colorful designs. Its raw materials are made of quality crochets and built-in speaker. The products feature is reasonable enough to compete with other companies producing hat products, as the primary competitors. These primary competitors strengthen the company to produce more innovative, creative and hassle-free crochet product.

Key Projections

Musical Hat Company would undertake a five-year-estimate with regards to the general operating cost of the business. Hat Musics selling price will increase by 6% per annum depending on its manufacturing costs. The firm would use the survival and skimming strategy in pricing the product. Survival strategy is pricing the product just enough to cover the expenses and make the product stay in the competition. Price-skimming strategy is pricing the product initially high and decreases it over time; the firm makes fewer but more profitable sales. Producing more "Hat Music" and distributing the product to more places would give the firm a larger opportunity to maintain the firms profitability and sustainability. Financial Statement will be made annually to manage risks and for the firm to know the status of the business.

Demand Analysis

Demand is the amount of goods of Hat Music product that consumers or buyers are willing and capable to buy at a specific price. Demand Analysis is used to identify who wants to buy Hat Music, how much they are likely to pay for it, how many pieces they might purchase, and other factors that can be used to determine product, selling cost, and advertising strategy.

Projected Annual Demand

Projected is the scheme of possible market demand in the future. It is used in determining future output level. Having the estimated population of 600 students of St. Mary, they can now identify the projected annual demand of the Hat Music. (See Appendix C, Table 5) Formula: Pjd = Projected Demand Prd = Present Demand % = Percentage Increase Pjd = Prd+ (Prd* %)

Past Demand Past Demand describes a consumers past desire, willingness, and ability to pay a price for a specific good or service. The company needs to analyze the past demand of the product so that it will have an idea on how to improve it. Its

products past demand is about the buyers who bought customized hats in the market. The proponents cannot determine our Hat Musics past demand because the product is new in the Philippine market.

Present Demand

Present Demand refers to the consumers who are willing to avail the product in the market. Through this, the company will know if its product really catches the attention of the consumer. This also determines if the product could stay longer in the market. (See Appendix C, Table 4)

Projected Demand

It is essentially a reasonable judgment of future probabilities of the market activities or events based on scientific background. Conducting a survey and or research is one of the most common scientific method used nowadays. Therefore, projected demand will rely or be based largely on the result of a survey or research to avoid falling into non-scientific basis like speculating or guessing. Demand forecasting is an estimate of future demand. It cannot be hundred per cent precise. But it gives a reliable approximation regarding the possible outcome, with a reasonable accuracy. It is based on probability or we may say "it is the nearest to the truth". (See Appendix C, Table 4)

Supply Analysis

Supply Analysis is often used to make key policy decisions by manufacturing business managers since it gives them insight into how shifts in

production are likely to influence market. We come up to this product because of the availability of raw materials and good in our climate.

Past Supply

Past Supply is the basis whether the business is doing well. It is also an important factor of knowing if the population of the place is increasing. Since Hat Music is new in the market, it cannot provide a past supply.

Present Supply of Hat Music

Present Supply is the existing number of a specific product or service which is available to fulfill the needs of the consumer. Present supply exists because of the past supply. It is dependent on the past supply. For now, in forecasting the present supply of hat music, producers cannot rely on past supply because it is new in the market.

Current Annual Supply of Alternative Hat

Since Hat Music is a new comer in the market, the current annual supply will largely depend on the result of the survey that will be conducted by the firm and also on the subcontractors capacity in production. And base on the two accounts, the maximum annual supply of the product at present is 3,120 pieces (excluding Sundays) and a minimum of 780 pieces. (See Appendix C, Table 8)

Projected Annual Supply

Projected annual supply is necessary to identify the future attainment of the product for the next five years. The projection starts from the midyear 2013 where the business is about to start up to 2016. (See Appendix C, Table 9) Formula: Pjs= Projected Supply Prs= Present Supply % = Percentage Increase Pjs= Pjs+ (Pjs * %)

Production Capacity

Production capacity refers to the maximum output/product of a certain object. The Musical Hat Company will be able to produce 260 pieces of Hat Music monthly and an annual yield of 3,120 pieces. This is the estimated annual output available for purchase, meeting the demand of our market over a given period of time. (See Appendix C, Table 12) Demand Supply Gap Analysis

Base on the account of the subcontractor, one worker can finish one Hat Music (HM) in one day. So, currently they have 10 workers, they can finish 10 HM products in a day. Within a month, lets say not including Sundays, they can produce at least 260 HMs or 3,120 in a year. This production capacity is obviously not enough if the demand for HM exceeds 10 pieces a day.

The Musical Hat Company must consider this seriously and must increase its production capacity by looking for a technology that can make the production effective and efficient in meeting or exceeding the demand of expanding customers and market. The least the firm can do, in case it cannot find for a modern technology that can produce crochet caps/hats faster than human labor, is to increase the number of laborers. And this too is no easy thing to do. It is hard to look for skilled workers that can make a variety of trendy designs and with a speed of at least two (2) HM a day. Or the company may also improve the capacity of its current workers by providing necessary skills trainings and seminars regularly. Supply of materials necessary in making the product is not yet a problem at present. Leading materials in making HM products like yarn and earphones are abundant in the market. The best that the firm can do for now is to look for suppliers, other than existing ones, who can offer the firm discounts and cheaper price, most especially on a wholesale basis. (See Appendix C, Table 10)

Market Share

Market Share is the percentage of an industry or market's total sales that is earned by a particular company over a specified time period. It is calculated by taking the company's sales over the period and dividing it by the total sales of the industry over the same period. Market share is a key indicator of market competitiveness that is, how well a firm is doing against its competitors. (See Appendix C, Table 11)