Analysis of the Offer: What It Is and How It Is Done (With Example)

The purpose of a bid analysis is to establish the conditions and quantities of a good or service that could be placed on the market. The offer is the quantity of products that a set of bidders places at the disposal of the consumer public (market) in certain quantities, prices, times and places, so that they acquire them.

The analysis of the offer allows evaluating the strengths and weaknesses of the bidders and implementing strategies to improve the competitive advantage. A historical, current and future review of the offer must be carried out to establish how many goods the competitors have delivered, how many are being delivered and how many may be offered to the market.

The conditions under which the offer is handled must also be analyzed, in order to have the minimum elements necessary to establish the possibilities that the good or service of the project will have, depending on the existing competition.

What is it?

The analysis of the offer is intended to determine the quantity of the good that the producers, constituted in competition, are able to offer to the market, as well as the conditions in which they would be willing to make such an offer.

To study the offer of a product is to analyze the competition that must be faced. The more knowledge obtained from the competitors, the better judgment elements will be used to design marketing strategies that increase the success of these products in the market.

Factors that determine the offer

The analysis of the offer must take into account the factors that determine it and that condition the quantities offered. These factors are:

Price of the product

The quantity offered of a product grows according to its price increase. Higher prices generate higher profits, making them more interesting for the bidders. However, consumers can reduce the quantity demanded, generating an excess supply.

This creates a strong competition, causing the price to decrease until reaching a point of equilibrium with a certain price. If the price of the product is reduced, the quantities offered are reduced and the demand increases. This can lead to increases in the price to a new equilibrium.

Technology

The incorporation of technology leads to the reduction of costs and increases in the quantity produced, given that greater efficiency is achieved.

Availability of inputs and their prices

When inputs are scarce, the quantity of goods produced is limited. Likewise, if its price increases there will be an increase in the cost of the product of which they are a part.

Market intrusion

By applying subsidies and taxes, the State disturbs the supply of products. Any tax increases the costs and, therefore, the offer is contracted. A subsidy creates the opposite effect: it reduces the cost of production and increases the supply.

Competition

To the extent that the number of companies in an industry increases, each of these will tend to decrease its offer.

Competitive environment

A direct competitor is any company that markets a product similar to ours in the same geographical area. An indirect competitor is the company that offers a different or substitute product in relation to ours.

For example, there is indirect competition between a manufacturer of butter and margarine that they sell to the same customers. There is also indirect competition between the eyeglass manufacturer that indirectly competes with contact lens manufacturers.

The competitive environment for the analysis of the offer may be one of the following:

Competitive offer

The bidders are in free competition. The number of suppliers of the same article is such that their participation in the market is determined by the quality, the price and the service offered to the consumer.

Oligopolistic offer

A few suppliers dominate the market and determine supply and prices. As an example you have the new car market.

Monopoly offer

There is only one provider of the service or product. It dominates the market completely implanting price, quality and quantity. The classic case is state monopolies.

How is the analysis of the offer made?

It is done through the following steps:

- Collect information from primary sources.

- Collect information from secondary sources.

- Analyze the information of the offer.

- Determine the competitive position.

Collect information from primary sources

It is necessary to know both the quantitative and qualitative elements that influence the offer. Market research is carried out with consumers, through discussion groups and questionnaires, providing valuable information about the offer.

You should get answers to questions like these:

- Who are the main competitors?

- What is the range of products and services offered?

- Are the competitors profitable? Are they expanding or decreasing?

- How long have you been in the business?

- What are the positive and negative attributes according to the clients?

- How do current customers see us compared to the competition?

- How can one differentiate the company from the competitors?

- What is your marketing and promotion strategy?

- What are your price structures?

- Do they operate in the same geographical area?

- What is your percentage of participation in the market?

- What is your sales volume?

Collect information from secondary sources

Secondary sources contain information related to competitors for a purpose and are available for public access. Examples of this are books, articles published in magazines and sales brochures.

Marketing reports are also considered secondary sources, as well as all content that can be found on the Internet.

Other secondary sources are:

- Advertising, which shows the price and information of the products and, in addition, provides an indicator of the competition's promotional plan.

- Annual reports, which offer financial information, including sales volume, increase in revenues and total market share.

- The own sales force.

- Direct observation of products in stores.

Analyze the information of the offer

Once all the information on the offer has been compiled, it is analyzed to establish the product information and marketing strategies, and to identify the strengths and weaknesses of the competition. The competitive position of a product or service is determined by its price and by how well it differentiates itself from the competition.

A list is made with the attributes of the product in order of importance, and a comparative table is prepared that shows if each one of the competitors has them or not.

Determine the competitive position

Finally, the product is evaluated with that of the competition. How does the product compare with the closest competitor? What attributes are unique to each product?

The more unique attributes the product has, the stronger the competitive position in the market will be.

Example

The logistics management of the company XYZ is asking its suppliers for a quote for the purchase of the ABC supply, required for the production of packaging. This quote must include at least the following information:

- Price of the supply.

- Delivery time in days.

- Credit days to pay.

Quotes are received from three suppliers. With this information, the following quotation assessment table for the ABC supply is made:

The logistics manager must select the bidder to whom this supply will be purchased, based on the following considerations:

- The price is the most important attribute, since it is fundamental for the company to generate the highest profitability in the sale of the packaging.

- The time of existence of the ABC supply in the inventory will be 15 days.

- The financial capacity of the company is very solvent.

When analyzing the offer in the table, the manager chooses the AA provider for offering the best price, having a delivery time of less than 15 days of existence of the supply and offering a term to pay competitively.

References

1. Bacca Urbina (1990). Market study Part II Chapter 2.6. Project evaluation McGraw-Hill 2nd Edition.
2. Susan MaGee (2018). How to Conduct and Prepare to Competitive Analysis. Edward Lowe Foundation. Taken from: edwardlowe.org.
3. Michael Kerr (2018). How to Write a Market Analysis Bplans Starting a business made easy. Taken from: articles.bplans.com.
4. Soledad Orjuela Córdova, Paulina Sandoval Medina (2002). Market study guide for project evaluation. University of Chile. Faculty of Economic and Administrative Sciences. Taken from: emprendeunefa.files.wordpress.com
5. Raymond Hehman (1984). Development and execution of marketing strategies. Editorial Norma. Second reprint 1991.