It is important to know your total addressable market, TAM, sometimes also referred to as total available market before you can properly predict your likely earnings and your required degree of commitment to enter that market. Total addressable market represents the overall market demand for your product or service and reflects your absolute earnings potential.
For us at Asian Insiders, this question also comes up early in conversations with clients that wish to verify or improve current performance through existing sales channels – “How well are we performing relative to market potential?” We believe this is a valid question to examine regularly, and especially when there is a shift in market conditions due to significant competitor behaviour, a change in political climate or global circumstances and so on. Asian Insiders have developed a proven dynamic model to address your total addressable market, which combines practical assessments with future influences coming from sector developments along with government policies and legislation.
A useful prediction of the future total addressable market size should be based on at least five years historical values derived from import databases, your own internal figures if already in the market along with revenue generated by local manufacturers over the same period. Whenever solid data is not available, we’ll develop certain assumptions, agreed with the client and deploy these through a model control panel. This tool allows input of a range of variables at any time to view different outcomes. These totals present a clear recent historical view of the total addressable market as well as trends and patterns. So that’s looking back, lets now look ahead at the next five years.
This is where our experience in each Asian market is critical. We study industry sectors and other factors influencing the specific market, usually verified by conducting interviews with market participants and officials. We apply these influences or modifiers as indices on an annual basis. With this information, we can then visualise the data so that variables to the control panel can be introduced to allow for risk, unforeseen events and so forth. The outcome is a useful, living tool allowing a clear view of the total addressable market, separated into annual values and allowing results and variables to be updated over time.
However, a purely mathematical treatment of a 5-year prediction may be misleading. Variables must be carefully considered across company internal factors, sector and segment issues, political and global events. Sector issues themselves may be subject to complex niche factors, requiring further variables so when considering the total addressable market for our clients, Asian Insiders has the market knowledge and connections to also bring a qualitative dimension to what is traditionally a quantitative analysis.
There are subsets of total addressable market (TAM) to consider. These are serviceable available market (SAM) which is an effort to define that percentage of TAM that might actually become customers based on their customer profile and your business model – pricing, capabilities, location, service systems etc. Then there is your serviceable obtainable market (SOM) which is a calculation of exactly what market share you can realistically attain, and build from.
Whether your company is already active in your Asian market or you are considering entering, it is critical to consider your total addressable market. For a no-obligation call to discuss this, please contact Jari Hietala, Managing Partner jari.hietala(at)asianinsiders.com