1. Market Analysis
Learning Unit 3

2. 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.

3. 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

4. 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

6. 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. 7 Dimensions: Market Analysis
Actual and potential market size
Market growth
Market profitability
Cost structures
Distribution systems
Trends and developments
Key success factors.

8. 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.

9. 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 market
Competitor can enter with superior product at low cost
Success factors can change, you can adapt
Technology can change
Market doesn’t grow as expected
Your Business resources can keep up with growth
Not adequate distribution channels available

10. 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.

11. 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….

12. 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?

13. Portfolio analysis:
Market Growth – market share matrix BCG Matr

14. 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

15. 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.

16. 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.

17. 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!

18. 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

19. 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

20. It’s about what makes you SUCCESSFUL in your industry You need to FIT into the industry with the Key success factors = you will not make it. CLOSE FIT = help you make it!

21. Market attractiveness – business strength model

22. 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.

24. 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

26. 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

27. 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”.

30. FOCUS

31. 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.

32. Case Study p. 65 Entering a new market with a new product – Experian
Please read through, understand.