Saturday, January 24, 2015

What is the Carrying Capacity of your Target Market?

As the number of organisms increases in a specific environment, their birth rates may tend to decrease while their death rates tends to increase. This takes place until they reach a point of equilibrium at which the population number remains constant. If such threshold was exceeded, population starts decreasing.

In the business world, the threshold can be calculated to determine if a market still has a carrying capacity for more businesses to enter or if it's saturated enough and would only show diminishing returns for any further attempts to penetrate it by new businesses. By entering a market that has already reached its carrying capacity, the only way to survive in it would be to 'kill' already existing businesses working in it. Like in the natural world, not all environments exhibit a birth rate or death rate dependent on density.