thesis market analysis

How to Write and Conduct a Market Analysis

3 min. read

Updated January 3, 2024

A market is the total sum of prospective buyers, individuals, or organizations that are willing and able to purchase a business’s potential offering. A market analysis is a detailed assessment of the market you intend to enter. It provides insight into the size and value of the market, potential customer segments, and their buying patterns.

In this section, we’ll be covering what information to include in your business plan after completing your research. If you’re struggling with the research itself, you should check out our market research resources for step-by-step guidance.

• How to write your market analysis

The information featured in your market analysis should focus on firmly defining who your customers are. Here are the two steps you need to take:

Define your target market

Finding your target market requires segmentation based on demographic and psychographic information until you reach the ideal customer. You need to address who they are and how you identified them.

Target market examples

A target market analysis is a key part of any business plan. Let’s walk you through some examples.

Determine your market size

Identifying your potential customers isn’t enough. You also need to prove that the size of the market can support your business. To do this, it’s helpful to define what’s available, serviceable, and can be obtained.

Optional information to include

The main purpose of the market analysis is to show who your customers are. While defining your target market may be enough, it can be helpful to include some of the following supporting details.

Show that you know your industry

Before starting a business, you should know the state of your industry and where it’s headed. This includes industry metrics you’ve collected, any barriers to entry, emerging trends, or common success factors.

Write a customer analysis

Conducting a customer analysis provides additional depth to your target audience. You’ll know them better and go beyond just segmentation.

Use a customer persona to describe your customers

It can be difficult for you, your employees, and potential investors to visualize who your customers are based solely on data. Creating a customer persona can bring them to life and support your target market choice.

• Why conduct a market analysis?

Conducting any sort of in-depth research can be a time-intensive process. However, the benefits far outweigh the investment—so much so that it’s recommended that you revisit your market analysis at least once a year in order to stay on top of emerging trends or changes in the market.

As part of your business plan, it demonstrates that you have a firm understanding of your customers. Here are the other benefits gained by completing a market analysis:

Reduce risk

If you really understand your potential customers and market conditions, you’ll have a better chance of developing a viable product or service. It also helps you explore if your idea will work or not. If you determine that the market size can’t sustain your business, there are too many barriers, high starting costs, intense competition, or some other factor that would lead to a higher chance of failure—you can pivot and avoid wasting your hard-earned time and money.

Better position your business

Researching the market landscape will help you strategically position your business. This may be done through pricing, specific features, production/distribution, or any other method to differentiate your business and make it more attractive to your target audience.

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Verify product/market fit

Part of positioning your business is determining if there is a sustainable market for your business. This starts with segmenting and identifying your ideal customers. It then involves a process of gathering feedback, gauging interest, and finding any sort of demonstrable traction. To learn more about finding product market fit, check out the market research section of our Starting a Business Guide.

Inform investors

Research is not only valuable for informing you as a business owner but in convincing investors and lenders that your idea is worth funding. In many ways, the fact that you spent time pulling together viable information is just as important as the information itself. It shows that you care about finding success as a business owner and are willing to put in the work, even at this early stage.

Tim Berry is the founder and chairman of Palo Alto Software , a co-founder of Borland International, and a recognized expert in business planning. He has an MBA from Stanford and degrees with honors from the University of Oregon and the University of Notre Dame. Today, Tim dedicates most of his time to blogging, teaching and evangelizing for business planning.

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What Is an Investment Thesis?

• Understanding the Thesis

Special Considerations

• What's Included?

The Bottom Line

• Portfolio Management

Investment Thesis: An Argument in Support of Investing Decisions

Charlene Rhinehart is a CPA , CFE, chair of an Illinois CPA Society committee, and has a degree in accounting and finance from DePaul University.

The term investment thesis refers to a reasoned argument for a particular investment strategy, backed up by research and analysis. Investment theses are commonly prepared by (and for) individual investors and businesses. These formal written documents may be prepared by analysts or other financial professionals for presentation to their clients.

Key Takeaways

• An investment thesis is a written document that recommends a new investment, based on research and analysis of its potential for profit.
• Individual investors can use this technique to investigate and select investments that meet their goals.
• Financial professionals use the investment thesis to pitch their ideas.

Understanding the Investment Thesis

As noted above, an investment thesis is a written document that provides information about a potential investment. It is a research- and analysis-based proposal that is usually drafted by an investment or financial professional to provide insight into investments and to pitch investment ideas. In some cases, the investor will draft their own investment thesis, as is the case with venture capitalists and private equity firms.

This thesis can be used as a strategic decision-making tool. Investors and companies can use a thesis to decide whether or not to pursue a particular investment, such as a stock or acquiring another company. Or it can be used as a way to look back and analyze why a particular decision was made in the first place—and whether it was the right one. Putting things in writing can have a huge impact on the direction of a potential investment.

Let's say an investor purchases a stock based on the investment thesis that the stock is undervalued . The thesis states that the investor plans to hold the stock for three years, during which its price will rise to reflect its true worth. At that point, the stock will be sold at a profit. A year later, the stock market crashes, and the investor's pick crashes with it. The investor recalls the investment thesis, relies on the integrity of its conclusions, and continues to hold the stock.

That is a sound strategy unless some event that is totally unexpected and entirely absent from the investment thesis occurs. Examples of these might include the 2007-2008 financial crisis or the Brexit vote that forced the United Kingdom out of the European Union (EU) in 2016. These were highly unexpected events, and they might affect someone's investment thesis.

If you think your investment thesis holds up, stick with it through thick and thin.

An investment thesis is generally formally documented, but there are no universal standards for the contents. Some require fast action and are not elaborate compositions. When a thesis concerns a big trend, such as a global macro perspective, the investment thesis may be well documented and might even include a fair amount of promotional materials for presentation to potential investing partners.

Portfolio management is now a science-based discipline, not unlike engineering or medicine. As in those fields, breakthroughs in basic theory, technology, and market structures continuously translate into improvements in products and in professional practices. The investment thesis has been strengthened with qualitative and quantitative methods that are now widely accepted.

As with any thesis, an idea may surface but it is methodical research that takes it from an abstract concept to a recommendation for action. In the world of investments, the thesis serves as a game plan.

What's Included in an Investment Thesis?

Although there's no industry standard, there are usually some common components to this document. Remember, an investment thesis is generally a proposal that is based on research and analysis. As such, it is meant to be a guide about the viability of a particular investment.

Most investment theses include (but aren't limited to) the following information:

• The investment in question
• The investment goal(s)
• Viability of the investment, including any trends that support the investment
• Potential downsides and risks that may be associated with the investment
• Costs and potential returns as well as any losses that may result

Some theses also try to answer some key questions, including:

• Does the investment align with the intended goal(s)?
• What could go wrong?
• What do the financial statements say?
• What is the growth potential of this investment?

Putting everything in writing can help investors make more informed decisions. For instance, a company's management team can use a thesis to decide whether or not to pursue the acquisition of a rival. The thesis may highlight whether the target's vision aligns with the acquirer or it may identify opportunities for growth in the market.

Keep in mind that the complexity of an investment thesis depends on the type of investor involved and the nature of the investment. So the investment thesis for a corporation looking to acquire a rival may be more in-depth and complicated compared to that of an individual investor who wants to develop an investment portfolio.

Examples of an Investment Thesis

Portfolio managers and investment companies often post information about their investment theses on their websites. The following are just two examples.

Morgan Stanley

Morgan Stanley ( MS ) is one of the world's leading financial services firms. It offers investment management services, investment banking, securities, and wealth management services. According to the company, it has five steps that make up its investment process, including idea generation, quality assessment, valuation, risk management , and portfolio construction.

When it comes to developing its investment thesis, the company tries to answer three questions as part of its quality assessment step:

• "Is the company a disruptor or is it insulated from disruptive change? 
• Does the company demonstrate financial strength with high returns on invested capital, high margins, strong cash conversion, low capital intensity and low leverage? 
• Are there environmental or social externalities not borne by the company, or governance and accounting risks that may alter the investment thesis?"

Connetic Ventures

Connetic Adventures is a venture capital firm that invests in early-stage companies. The company uses data to develop its investment thesis, which is made up of three pillars. According to its blog, there were three pillars or principles that contributed to Connetic's venture capital investment strategy. These included diversification, value, and follow-on—each of which comes with a pro and con.

Why Is an Investment Thesis Important?

An investment thesis is a written proposal or research-based analysis of why investors or companies should pursue an investment. In some cases, it may also serve as a historical guide as to whether the investment was a good move or not. Whatever the reason, an investment thesis allows investors to make better, more informed decisions about whether to put their money into a specific investment. This written document provides insight into what the investment is, the goals of the investment, any associated costs, the potential for returns, as well as any possible risks and losses that may result.

Who Should Have an Investment Thesis?

An investment thesis is important for anyone who wants to invest their money. Individual investors can use a thesis to decide whether to purchase stock in a particular company and what strategy they should use, whether it's a buy-and-hold strategy or one where they only have the stock for a short period of time. A company can craft its own investment thesis to help weigh out whether an acquisition or growth strategy is worthwhile.

How Do You Create an Investment Thesis?

It's important to put your investment thesis in writing. Seeing your proposal in print can help you make a better decision. When you're writing your investment thesis, be sure to be clear and concise. Make sure you do your research and include any facts and figures that can help you make your decision. Be sure to include your goals, the potential for upside, and any risks that you may come across. Try to ask and answer some key questions, including whether the investment meets your investment goals and what could go wrong if you go ahead with the deal.

It's always important to have a plan, especially when it comes to investing. After all, you are putting your money at risk. Having an investment thesis can help you make more informed decisions about whether a potential investment is worth your while. Make sure you put your thesis in writing and answer some key questions about your goals, costs, and potential outcomes. Having a concrete proposal in place can spell the difference between earning returns and losing all your money. And that's if your thesis supports the investment in the first place.

Harvard Business School. " Writing a Credible Investment Thesis ."

Lanturn. " What is an Investment Thesis and 3 Tips to Make One ."

Morgan Stanley. " Global Opportunity ."

Medium. " The Data That Built Our Fund's Investment Thesis ."

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How Feeling Like a Minority Affects Preferences for Autonomous Digital Interfaces , Ye Seul Kim

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Spillover Effects in Product Customization , Samuel Babu Sekar

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External and Internal Factors of Sports Sponsorship Selling Cycles in North American Professional Sports , Dan Kaufmann

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The Effects of Product Recalls on Competitors’ Market Value and Recalling Firm’s Reputation , Dong Liu

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How Digital versus Non-Digital Modes of Food Ordering Influence Menu Healthfulness Perceptions and Food Choices , Annika Abell

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Hate is a Strong Word: The Influence of Hate-Acknowledging Advertising on Brand Outcomes , Lisa Monahan

The Effects of Loneliness on Consumers’ Digital Engagement with Social Media Ads , Yu Qin

Product Shadows and Ad Evaluations , Nazuk Sharma

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Understanding the Complexity of Product Returns Management: A Complex Adaptive Systems Theory Perspective , Jennifer Anne Espinosa

Branding Implications of Co-Created Social Responsibility , Alexander J. Kull

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How You Categorize Influences How Helpful You Are: The Effect of Categorization Mindset on Consumers’ Social Decisions , Hsiao-Ching Kuo

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Taken for Granted or Taken with Gratitude? An Examination of the Differential Effects of Donations of Time and Money on Consumers' Evaluation of Corporate Philanthropy , Ryan Langan

Essays on Consumer's Psychological and Behavioral Responses toward Social Coupons , Chinintorn Nakhata

Muscling Consumers to Optimal Option Differentiation: The Influence of Incidental Muscular Sensations on Option Differentiation , Courtney Szocs

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Essays on Mental Accounting and Consumers' Decision Making , Ali Besharat

Perceived Firm Transparency: Scale and Model Development , Jennifer Dapko

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Antecedents and Consequences of Channel Alienation: An Empirical Investigation within Franchised Channels of Distribution , Ivan Lapuka

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An Empirical Examination of the Dark Side of Relationship Marketing within a Business to Business Context , Brent L. Baker

Developing the Nomological Network of Perceived Corporate Affinity for Technology: A Three Essay Dissertation , David Earl Fleming

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Self-Directed Learning: Measures and Models for Salesperson Training and Development , Stefanie Leigh Boyer

Emotional Exhaustion and Its Role in Service Sabotage among Boundary Spanners , Diane R. Edmondson

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Essays on multiple identities and motivated consumption: Exploring the role of identity centrality on self-brand connections , Tracy R. Harmon

The impact of organizational climate variables of perceived organizational support, workplace isolation, and ethical climate on salesperson psychological and behavioral work outcomes , Robert J. Riggle

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The Effect of Perceived Entitativity on Implicit Image Transfer in Multiple Sponsorships , FrancoÌ?is Anthony Carrillat

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Relationship Advertising: Investigating the Strategic Appeal of Intimacy (Disclosure) in Services Marketing , Andrea Diahann Gaye Scott

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The Dow is set to surge 50% by 2030 as the 'roaring 20s' are alive and well for stocks, market vet says

• With the stock market trading at record highs, the "Roaring 20s" thesis is alive and well.
• That's according to Ed Yardeni, who expects the Dow and S&P 500 to soar 50% by 2030.
• "That target could be achieved with a forward P/E of 20 and forward earnings at $400 per share," Yardeni said.

With stocks trading at record highs, the "Roaring 20's" bull thesis remains intact, according to market veteran Ed Yardeni.

Yardeni said in a recent note that his roaring 20s thesis, which is based on the idea that AI will help unleash a productivity boom in the economy, will help drive the stock market 50% higher by 2030, with the Dow Jones Industrial Average and S&P 500 rising to 60,000 and 8,000, respectively. 

Yardeni said his 2030 targets are based on continued earnings growth and a simple 6% compounded annual growth rate, which is slightly lower than the stock market's historical average annual return of 7% net of inflation.

"That target could be achieved with a forward P/E of 20 and forward earnings at $400 per share, up 60% from an estimated $250 per share this year. We think that's possible in our Roaring 2020s scenario," Yardeni said. 

Forward S&P 500 earnings per share hit $257.20 last week, and analysts currently estimate that S&P 500 EPS will rise to $278 in 2025 and $313 in 2026. 

"These estimates suggest that $400 by 2030 is quite possible," Yardeni said.

Helping fuel those earnings, according to Yardeni, is continued consumer resilience, which will be driven by tens of millions of baby boomers that are set to spend their nest egg on all kinds of goods and services over the next few decades.

In an interview with CNBC on Tuesday, Yardeni Research chief market strategist Eric Wallerstein outlined the firm's broad outlook for stocks over the next few years.

"This whole roaring 2020s scenario right now is our highest probability outcome. We attribute a 60% likelihood of that. We have a 20% scenario of a meltup in the stock market, and if the Fed preliminary cuts, we can see that. Meltups are fine you just have to know when to get out," Wallerstein said.

"And then there's that 20% scenario where there's another revival in inflation. But for now we see productivity growth really being a strong driver of real incomes and for the next several years driving the market higher."

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Global Critical Minerals Outlook 2024

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About this report

Critical minerals, which are essential for a range of clean energy technologies, have risen up the policy agenda in recent years due to increasing demand, volatile price movements, supply chain bottlenecks and geopolitical concerns. The dynamic nature of the market necessitates greater transparency and reliable information to facilitate informed decision-making, as underscored by the request from Group of Seven (G7) ministers for the IEA to produce medium- and long-term outlooks for critical minerals.

The Global Critical Minerals Outlook 2024 follows the IEA’s inaugural review of the market last year. It provides a snapshot of industry developments in 2023 and early 2024 and offers medium- and long-term outlooks for the demand and supply of key energy transition minerals based on the latest technology and policy trends.

The report also assesses key risks to the reliability, sustainability and diversity of critical mineral supply chains and analyses the consequences for policy and industry stakeholders. It will be accompanied by an updated version of the Critical Minerals Data Explorer , an interactive online tool that allows users to explore the latest IEA projections.

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3.0 outlook for key minerals, outlook for key energy transition minerals.

This report provides an outlook for demand and supply for key energy transition minerals including copper, lithium, nickel, cobalt, graphite and rare earth elements. Demand projections encompass both clean energy applications and other uses, focusing on the three IEA Scenarios – the Stated Policies Scenario (STEPS), the Announced Pledges Scenario (APS) and the Net Zero Emissions by 2050 (NZE) Scenario. Supply projections are based on a detailed review of all announced projects. They show how today's geographical concentration evolves over time, for both mining and refining and how expected supply compares with primary supply requirements in climate-driven scenarios. The outlook is complemented by structured “clean energy transitions risk assessments” across four major dimensions – supply risks, geopolitical risks, ability to respond to supply disruptions, and exposure to ESG and climate risks, which were designed to help policymakers identify potential areas of weakness for each material.

Critical Minerals Data Explorer

Global demand projections for 37 critical minerals needed for clean energy transitions across the three main IEA scenarios and 11 technology-specific cases.

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IEA (2024), Global Critical Minerals Outlook 2024 , IEA, Paris https://www.iea.org/reports/global-critical-minerals-outlook-2024, Licence: CC BY 4.0

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Few Chinese Electric Cars Are Sold in U.S., but Industry Fears a Flood

Automakers in the United States and their supporters welcomed President Biden’s tariffs, saying they would protect domestic manufacturing and jobs from cheap Chinese vehicles.

By Neal E. Boudette

The Biden administration’s new tariffs on Chinese electric vehicles won’t have a huge immediate impact on American consumers or the car market because very few such cars are sold in the United States.

But the decision reflects deep concern within the American automotive industry, which has grown increasingly worried about China’s ability to churn out cheap electric vehicles. American automakers welcomed the decision by the Biden administration on Tuesday to impose a 100 percent tariff on electric vehicles from China, saying those vehicles would undercut billions of dollars of investment in electric vehicle and battery factories in the United States.

“Today’s announcement is a necessary response to combat the Chinese government’s unfair trade practices that endanger the future of our auto industry,” Senator Gary Peters, a Michigan Democrat, said in a statement. “It will help level the playing field, keep our auto industry competitive and support good-paying, union jobs here at home.”

On Tuesday, President Biden announced a series of new and increased tariffs on certain Chinese-made goods, including a 25 percent duty on steel and aluminum and 50 percent levies on semiconductors and solar panels. The tariff on electric vehicles made in China was quadrupled from 25 percent. Chinese lithium-ion batteries for electric cars will now face a 25 percent tariff, up from 7.5 percent.

The United States imports only a few makes — electric or gasoline — from China. One is the Polestar 2, an electric vehicle made in China by a Swedish automaker in which the Chinese company Zhejiang Geely has a controlling stake. In a statement, Polestar said it was evaluating the impact of Mr. Biden’s announcement.

“We believe that free trade is essential to speed up the transition to more sustainable mobility through increased E.V. adoption,” the company said.

In the first quarter of this year, Polestar sold just 2,200 vehicles in the United States. Later this year, however, it is scheduled to start producing a new model, the Polestar 3, at a South Carolina plant operated by Volvo Cars, which Geely owns.

Volvo sells a Chinese-made plug-in hybrid sedan, the S90 Recharge, in the United States, and plans to start importing a new small sport utility vehicle, the EX30, to the United States from China this year. The car is expected to start at $35,000, making it one of the most affordable battery-powered models available in the country. The model has quickly become Volvo’s top-selling vehicle in Europe .

Volvo said on Tuesday that it was evaluating the potential impact of Mr. Biden’s new tariffs on its plans.

Internal combustion models that are made in China and sold in the United States include the Buick Envision S.U.V. made by General Motors, and Ford Motors’ Lincoln Nautilus. They are unaffected by the tariffs.

Tesla, G.M., Ford, Volkswagen, Hyundai and several other automakers have invested tens of billions of dollars in battery and electric vehicle factories in the United States. But with the exception of Tesla, automakers in the United States, Europe and Japan trail Chinese companies in scale, raw materials production and key technologies.

Contemporary Amperex Technology Company Limited, or CATL, the Chinese manufacturer that is the world’s largest producer of electric car batteries, said last month that it had developed a battery that could charge up enough in 10 minutes to allow a car to travel about 370 miles — a major leap compared with the batteries used by established Western and Asian automakers, including Tesla.

China’s lead in electric vehicles, which are seen as central to the auto industry’s future, has spurred concerns that Chinese cars could hit the U.S. market at prices that G.M., Ford and other traditional automakers wouldn’t be able to compete with.

BYD, a leading and fast-growing Chinese car and battery company, already sells a compact electric car, the Seagull, for less than $15,000 in China. And on Tuesday, it said it would begin selling a plug-in hybrid pickup truck in Mexico, although it added that it did not yet plan to sell the vehicle in the United States.

Chinese automakers like BYD, Geely and SAIC have been increasing car exports to Europe, Latin America and various Asian countries. The European Commission, the executive arm of the European Union, is investigating Chinese state subsidies to electric carmakers.

Some representatives of the U.S. auto industry have said the Chinese government’s support of its automakers has left factories there with the capacity to make vastly more cars than can be sold in the country.

“They’ve got a major E.V. overcapacity problem,” said John Bozzella, president of the Alliance for Automotive Innovation, the main lobbying arm for U.S. automakers.

“They’re building too many E.V.s — too many heavily subsidized E.V.s — for the domestic market and have no choice but to look abroad to offload those vehicles at budget prices,” Mr. Bozzella added. “The competitiveness of the auto industry in the U.S. will be harmed if heavily subsidized Chinese E.V.s can be sold at below-market prices to U.S. consumers”

Chinese officials have denied that the country is overproducing electric vehicles, solar panels and other products targeted by the Biden administration. “We hope the U.S. can take a positive view of China’s development and stop using overcapacity as an excuse for trade protectionism,” a spokesman for the Chinese Embassy in Washington, Liu Pengyu, said on Tuesday.

Automakers have already had a taste of how price competition can disrupt their electric vehicle plans. Over the last year, Tesla has cut prices on its models several times, reducing the costs of some models by more than 20 percent in total. Those cuts, combined with a slowdown in the growth of electric car sales, have made it extremely hard for G.M. and Ford to make money on battery-powered models.

In the first three months of the year, Ford’s electric vehicle division lost $1.3 billion before taking into account some expenses. Both Ford and G.M. have slowed electric vehicle production and delayed the introduction of new models. While G.M. is losing money on electric cars, the company has said it expects those vehicles to begin generating profits later this year.

The Biden administration has sought to support and encourage the production of batteries and electric vehicles in the United States to address climate change and encourage more domestic manufacturing.

China isn’t the only obstacle in the way. Americans’ enthusiasm for electric cars has waned over the past year, mainly because such vehicles sell for relatively high prices. Some buyers are also reluctant to buy because they are not sure there will be enough places to charge those cars easily and quickly.

In the first quarter of this year, 269,000 E.V.s were sold in the U.S. market, according to Kelley Blue Book. That was an increase of just 2.6 percent from a year earlier. Total sales of cars and light trucks grew more than 5 percent to 3.8 million vehicles.

“In a lot of ways, buying an E.V. requires a lifestyle change,” said Jessica Caldwell, executive director of insights at Edmunds, a market researcher. “A lot of people just say, ‘I don’t want the hassle of an E.V.’”

Alan Rappeport contributed reporting.

Neal E. Boudette is based in Michigan and has been covering the auto industry for two decades. He joined The New York Times in 2016 after more than 15 years at The Wall Street Journal. More about Neal E. Boudette

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