Market Analysis Summary
Electronic Detectives will be concentrating on large law firms with a proven track record with fields in the environmental, corporate, malpractice, intellectual property rights, and general law areas. This is because these types of companies have the greatest needs and the highest profit margins.
Profitability and growth in this little-tapped market is astounding, as evidenced by one of our major competitors, who has experienced explosive growth averaging 40% per year. The company, after significant investment, achieved record pre-tax returns on net worth of 65%.
An analysis of the market using the five forces of profitability indicates that there will be a short time where growth of market share and profitability will be extremely high while demand outstrips supply. As new entrants move into the market this opportunity will disappear. This is the time for Electronic Detectives to create its reputation and niche in the industry.
4.1 Market Segmentation
For Electronic Detectives’ first three years it will be concentrating exclusively on acquiring contracts with West coast law firms employing over twenty individuals and having a respectable reputation for at least fifteen years. This is to insure long-term contracts with satisfied customers who can afford our services and create a self-generating word-of-mouth marketing campaign. In addition, we will be focusing on law firms that are in the following fields of practice
- Intellectual property rights;
- Corporate and business law;
- Environmental law;
- General practice;
Firms such as these have high demand for electronic investigations due to their client’s needs and work environments. The Market Analysis table includes all the law firms of these types in the West coast area of California, Oregon, and Washington.
|Year 1||Year 2||Year 3||Year 4||Year 5|
|Intellectual property firms||6%||34||36||38||40||42||5.42%|
|General practice firms||2%||84||86||88||90||92||2.30%|
4.2 Service Business Analysis
The electronic evidence gathering business is an offshoot of the detective industry and it is such a new segment that gathering market data is impossible. However, a look at the profitability of one of our older competitors will give the reader an idea of the profit and growth potential of this untapped market.
Computer Forensics of Bellevue, WA has been in business for four years now and has experienced explosive growth averaging 40% per year. The company, after significant investment, achieved record pre-tax returns on net worth of 65%. This is an indication of how much demand there is in the market and the overall growth capacity. Therefore this is an excellent market to enter now and achieve a defensible position based on customer satisfaction and reputation before more competitors enter.
Within this new market, the existing rivalry among firms is very low. This is because currently demand greatly outstrips the amount of services available. Since this is such a growing market, competing firms are concentrating on growing their own client base and not on market share or direct competitive strategies. However, the threat of new entrants is very high, so high that a large number of new entrants to the market is guaranteed.
This is the reason why Electronic Detectives plans to be first to market with comprehensive services and creating industry standards in customer satisfaction and thoroughness. Additionally, the influence that suppliers have on this market is quite significant. The most important suppliers for Electronic Detectives is specialty software companies producing file encryption/decryption software. Although our firm anticipates creating some of its own software in-house, the majority of our programs will come from the open market. Therefore, much of our success depends on the capability of our suppliers.
4.2.1 Competition and Buying Patterns
There are three competitors within our geographical operating area: Computer Forensics of Bellevue, WA; Techno Solutions of Pasadena, CA; and Booth & Anderson Business Consultants of Los Angeles, CA.
Of these three competitors, only Computer Forensics is a direct threat to us. Techno Solutions is currently concentrating on providing the same services for companies looking to investigate internal fraud and computer misuse such as banks and other financial institutions. Booth & Anderson is a general business consulting firm that offers electronic investigation as only one of its many services, and therefore lacks the focus to offer a comprehensive client-provider experience.
Currently Computer Forensics is going through a rapid expansion phase as it ramps up for maximum service delivery. Due to the high demand for such services we will not have direct competition for some time. Once new entrants become plentiful, we anticipate that this will change.
One of the advantages to operating in this market is that clients tend to be relatively price insensitive as long as they get a professional and satisfying experience. Therefore we expect to be able to charge a significant profit margin.