learning unit 3. discuss the steps that may be followed to analyse the industry identify and discuss...
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Market AnalysisLearning Unit 3
Outcomes• Discuss the steps that may be followed to analyse
the industry• Identify and discuss the elements of an industry
analysis• Identify and discuss the seven dimensions
included in a market analysis• Understand the different portfolio models.
Introduction• Why do market analysis? • Establish how attractive a market (segment) is to a
company.If you know – Make decisions on investment.• Also need to understand the market DYMANICS.• Identify key success factors• Trends• Opportunities• Threads• This can all help analyse the market…………………..More $
$$• Important because: • Determines attractiveness of market• Dynamics which helps determine the business future in
the market
6 Things look at: • Competitive structure of an industry Porters Five Forces Model • Dimensions of Market Analysis Seven Dimensions………• Portfolio Analysis Market growth-market share matrix (BCG Matrix)• Key success factors of industry Market attractiveness-enterprise strength model• Risk analysis - Risk matrix• Porters Generic Strategy Model
Dimensions of Market Analysis• Market analysis builds on customer and
competitor analysis.• Help you to: Enter a new market, launch a new
product or service or to start a new business.• Another aim of market analysis: Get a full
understanding of the dynamics of the market. • To identify trends, threats, opportunities, changes,
success factors. • • NOW: 7 dimensions of market analysis
…………………
7 Dimensions: Market Analysis • Actual and potential market size • Market growth• Market profitability• Cost structures• Distribution systems• Trends and developments • Key success factors.
Actual and potential market size • Actual size must be determined• Detailed analysis of customers that use industry
products• Doing competitor analysis• Looking at published reports.. Government,
financial statements, market research reports. • Ask yourself: What is industry size, what is
industry potential size.• Look at lifecycle of industry, or of segments.
Market Growth and profitability • Seek out markets that have high growth in which
you can persue your objectives. • RISK……..Look at it carefully, make informed
decisions. • Risk is associated with high growth markets.
To many competitors in marketCompetitor can enter with superior product at
low cost Success factors can change, you can adaptTechnology can changeMarket doesn’t grow as expectedYour Business resources can keep up with
growthNot adequate distribution channels available
Cost structure• Def: The expenses that a firm must take into
account when manufacturing a product or providing a service
Determine the cost components of each value-added activity within the industry
• Also anticipate possible changes in industries cost structure.
Distribution System • Ask the following questions: • 1. What are alternative distribution systems? • 2. What are the trends? • 3. What channels are growing, and what new
ones have emerged? • Who has the power in the channel? • Examples: Tupperware – direct channel / Avroy
Shlaine• Ackermans / Pep – Own outlets. • Others types: E-commerce, convenience stores
and petrol stations, Category store like: Mr Price Home….
Market trends and developments in ind. • Info we just did: distinguish trends and foresee
future developments. • Identify: High growth and Low growth• Lots of things can happen: New businesses open,
old ones fail, new competitors enter, some make it, some don’t……
• = TURBULENT• Technology influence, competitive arena will
change.• Look at repositioning towards new growth…. New
key success factors of the industry?
Portfolio analysis: Market Growth – market share matrix BCG Matr
BCG Matrix
• Stars are units with a high market share in a fast-growing industry.
• Generate enough cash to be self sustaining• Strong compared to competition• Need heavy investment to maintain growth • Will slow down in growth and become Cash Cow
Cash Cows• Low Growth• High Share• Mature businesses• High profit margins • Successful businesses • Little need for investment. • Can become stars……. But must generate strong
cash flows continually over time.
Question Marks• PROBLEM CHILD
• High growth / Grow quickly • Use high amounts of cash • Low Share• Requires a lot of cash to maintain in the market.• They have potential, require substantial
investment to grow market share.
Dogs • Low growth• Low market share• Business are a cash trap• Business = Unattractive• Enough cash – Break even • Not worth investing in • Should be sold off!
Key success factors in the Industry• “These are characteristics or conditions in a particular
industry that have a significant impact on the performance of the organisation in that industry.”
p. 58 Text book :
• Image of the org among consumers• Product knowledge of the sales force• Marketing knowledge of the sales force• Advertising and sales promotion activities• Research and development activities• Service elements • Research and manufacturing process of product
• Organisation size to exploit economies of scale• Customer financing• Physical distribution activities • Location • Technical skills of tech department • Quality control • Management of production activities • Effectiveness of purchase department • Labour relations• Technical sophistication of equipment
It’s about what makes you SUCCESSFUL in your industryYou need to FIT into the industry with the Key success factors = you will not make it. CLOSE FIT = help you make it!
Market attractiveness – business strength model
Risk Matrix • Risk assessment = identify process safety risks
and determining the most cost effective means to reduce risk.
• How ? Rank your risk = risk ranking
• Look at the Risk Matrix p. 62 text book.
What risk matrix do? • Illustrates the relationship between risk of
environmental factors affecting a business area. = profits
• Always keep in mind:• Changing technology• New competitors• Unavailability of raw materials or spare parts • Changes in consumer demand / consumption patterns • Changes in legislation
• = THINGS IN THE EXTERNAL ENVIRONMENT
Cost Leadership• Operating at a lover cost level than competitors• Be in better position to be competitive• Still offer value for money to customers.
• When use this? • Increase your market share at low cost strategy
Differentiation• Product or service that differs from the normal
way of doing business. • Value of Uniqueness of the product • It can be = service levels, technology….• Differentiation allows you to charge a premium
price • Helps you cover the costs of the “uniqueness”.
FOCUS
Focus• Very important part in your business. • Concentrate on a focussed segment of market
place to get either a cost advantage or differentiation.
• If you focus correctly in your business you will have:
• = Customer Loyalty
• What do when you focus?• Restrict of activities to a section of the market by
delivering good or services at a lower cost to that segment. Thus = differentiating.
Case Study p. 65• Entering a new market with a new product –
Experian • Please read through, understand.