Fad is short lived mushrooming of opportunity which is difficult to predict and forecast. Business profit from fad is pure matter of luck and chance. Trend is something which takes time to build up compared to fad and has a predictable future. Trend is sometimes co-related with changes in social culture and economical situation. Megatrend is much slower in development and is associated with political, socio-economical, technology and regulatory changes. Megatrends are estimated to last around half decade or more.
For companies trend and megatrend are of great importance because they present business opportunities to them. Currently portable music player and hand held devices are real craze in the market with consumer willing to pay premium for them. However the direction in which market is going to develop is only possible by continuous following of market.
This trend-spotting activity can be undertaken by company itself or through market research. This activity can also be outsourced to companies, which specialize in analyzing current social and economical changes. Fitness and diet are another trend, which witness growth across the globe.
Trends developing in markets are under the influence of a number of factors to which company’s stakeholders are participants. Some of the factors are as follows:
- Globalization is affecting the way companies are conducting their business.
- Communication and connectivity are reaching at a new level every day.
- New economic powers like India, China, Brazil and Russia are exerting their influence.
There are many other factors beyond the above mention which affect business working making it essential for companies to scan market condition.
Factors influencing the market can be categorized under 6 different titles, demographic, economic, ecology, technology, regulatory-political and society-culture.
- Demographic factors: are associated with changing nature and volume of population. It follows how people are conducting themselves in the new world, increasing per capita income, urban migration, ethnically diverse cities and mega cities. These are some demographic factors companies are monitoring. For example, a country like India and China are showing highest concentration of youth population where as Japan is showing high number of retired workers. Therefore, demand and consumption of product will also be different.
- Economic factors: deals with function like purchasing power parity, income level, savings level and interest rates among many other. For example, countries with a high income level are more likely to afford luxury items compare to a low income level country. Savings level and interest rate determine the borrowing power as well as spending power of consumer.
- Ecological factors: consist of natural resource composition in a given county. For example, demand for fossil fuel has sky rocketed in recent years there by increasing general price level in the market. Companies, therefore, are looking forward to designing products which eco-friendly design that is they are less fuel dependent and give out less pollution.
- Technology factors: like internet and connectivity are changing the face of business. More and more people are doing business online. Science and medicine are also part of technology factors. Challenge for the company is to keep up with innovation and offer products, which are not obsolete.
- Political environment: is also changing with more and more market based system rather than the socialist system. Furthermore, regulatory requirements like competition policy, investment policy, tax policy, etc. companies should investigate before taking their business to a particular country.
- Culture environment: deals with factors like opinion people have towards themselves, others, organization and society in general. People have become more eco conscious, contributing one or many causes they can relate to, want organization to be responsible for their action and are looking to open society with meaningful co-existence.
All these 6 factors define any market environment and companies must understand them before developing their business plan.
