how should a company choose the most attractive target markets?

Choosing most attractive Target markets

BySanchit Aggarwal

Bits Pilani K.K Birla Goa Campus

Porter’s five forces analysis

Analysis scheme developed by Harvard Business School professor: Michael E. Porter

•It allows business managers to gauge the intrinsic long-run attractiveness of a market segment and thus assess current and potential lines of business.•3 out of 5 forces relate to industry participants•The other 2 relate to the vertical participants: SUPPLIER and CONSUMER

• PORTER’S FIVE FORCES ANAYLSIS

Threat of new entrants

• Analyses the ease of entry for new participants in the market place

• If it is easy- Level of competition is HIGH

Threat of intense segment rivalry

• It evaluates the number and activity of a company's rivals

• Numerous, strong and aggressive competitors: Segment unattractive

Threat of substitute product

• A new good or service coming to the market erodes sales of established products.

Bargaining power of suppliers• Scarcity of supplier

resources can increase competition among manufacturers, thus increasing costs

• Segment is unattractive is bargaining power of suppliers is high

Bargaining power of Buyer• If consumer has

good bargaining position then it can reduce finished good prices and hence reduce profitability

Combining the 2 factorsSegment's

attractiveness

measured using

porter’s analysis

Company’s

objectives and

resources

Most attractive

target market