The market growth rate is a measure of change, from period X to Y. It helps you to determine your possibilities by assessing your environment:
- Is your market getting bigger or smaller? It’s pretty tough to build sales in a shrinking market, unless you have a huge cost advantage or easy access to lots of customers. On the other hand, a rising tide does lift all boats.
- How quickly is it changing? Are you getting into your market at its peak or does it have some runway ahead before it starts to stabilize or slow down.
- Is the trend sustainable? Good times don’t last forever and it is very risky to assume they will. New markets are notoriously difficult to predict; you can reduce your risk by focusing on the trends that are driving the growth (population growth, demographics, economic expansion, regulation) and determining which are short term and which drivers have some staying power.
Companies never operate in a vacuum. They expand or contract as a consequence of their actions and reactions to their markets. A fundamental part of planning requires you to have a solid understanding of market changes.