Energy market analysis requires market research, identification of market segmentation, and industry analysis. An individual or company seeking to invest capital or expand operations in the energy industry uses energy market analysis to evaluate risk and determine potential returns on investment. This decreases the likelihood of large capital losses and provides investors with a realistic view of the industry.
Market research involves compiling historical information regarding the industry, financial data and information regarding the top companies, statistics related to customer demographics, and graphs or charts showing key trends. Knowing the history of the industry helps an investor determine how tumultuous it is. History also demonstrates an industry's longevity and ability to survive business cycles, technological advancements, and changes in consumer buying patterns.
Obtaining background information and financial figures related to the top companies in an industry is an important aspect of energy market analysis. Such information shows the impact competition, customers, suppliers, and employees have on profitability. These are important factors to consider during the industry analysis stage of energy market analysis.
Trade magazines, government agencies, online financial databases, and publications specializing in business or finance contain the information necessary for proper market research. Some data is available for free online. When using such facts and figures, however, the timeliness and credibility of the source should be evaluated. Other data may require subscriptions or one-time purchases. Local libraries usually have the publishers of such information on file or stored in databases.
The energy industry is comprised of multiple segments including, but not limited to, power generators, network operators, commodities traders, and service providers. Identifying market segmentation is important when conducting energy market analysis because each segment has distinct profit sources and expenses. Such variables must be factored into industry analysis.
Industry analysis, also known as environmental analysis, is the final stage of energy market analysis. It is used identify revenue sources and inhibitors of profit. When conducting initial market analysis, an individual must consider the impact of socioeconomic policies like government regulation. Competition must also be evaluated; a market saturated with companies gives customers more bargaining power and limits the price a business can charge.
Market segments dependent on employees may have to deal with expenses related to uniforms and service vehicles or high salaries and unions. These factors create more expenses. They also limit a company's ability to create reserve funds or expand into new markets.
