2 OutcomesDiscuss the steps that may be followed to analyse the industryIdentify and discuss the elements of an industry analysisIdentify and discuss the seven dimensions included in a market analysisUnderstand 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 factorsTrendsOpportunitiesThreadsThis can all help analyse the market…………………..More $$$Important because:Determines attractiveness of marketDynamics which helps determine the business future in the market
4 6 Things look at: Competitive structure of an industry Porters Five Forces ModelDimensions of Market AnalysisSeven Dimensions………Portfolio AnalysisMarket growth-market share matrix (BCG Matrix)Key success factors of industryMarket attractiveness-enterprise strength modelRisk analysis - Risk matrixPorters 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 sizeMarket growthMarket profitabilityCost structuresDistribution systemsTrends and developmentsKey success factors.
8 Actual and potential market size Actual size must be determinedDetailed analysis of customers that use industry productsDoing competitor analysisLooking 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 marketCompetitor can enter with superior product at low costSuccess factors can change, you can adaptTechnology can changeMarket doesn’t grow as expectedYour Business resources can keep up with growthNot adequate distribution channels available
10 Cost structureDef: 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 industryAlso 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 ShlaineAckermans / 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 growthLots of things can happen: New businesses open, old ones fail, new competitors enter, some make it, some don’t……= TURBULENTTechnology influence, competitive arena will change.Look at repositioning towards new growth…. New key success factors of the industry?
14 BCG MatrixStars are units with a high market share in a fast-growing industry.Generate enough cash to be self sustainingStrong compared to competitionNeed heavy investment to maintain growthWill slow down in growth and become Cash Cow
15 Cash Cows Low Growth High Share Mature businesses High profit margins Successful businessesLittle 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 cashLow ShareRequires 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 = UnattractiveEnough cash – Break evenNot worth investing inShould 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 consumersProduct knowledge of the sales forceMarketing knowledge of the sales forceAdvertising and sales promotion activitiesResearch and development activitiesService elementsResearch and manufacturing process of product
19 Organisation size to exploit economies of scale Customer financingPhysical distribution activitiesLocationTechnical skills of tech departmentQuality controlManagement of production activitiesEffectiveness of purchase departmentLabour relationsTechnical 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 MatrixRisk assessment = identify process safety risks and determining the most cost effective means to reduce risk.How ? Rank your risk = risk rankingLook 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. = profitsAlways keep in mind:Changing technologyNew competitorsUnavailability of raw materials or spare partsChanges in consumer demand / consumption patternsChanges in legislation= THINGS IN THE EXTERNAL ENVIRONMENT
26 Cost Leadership Operating at a lover cost level than competitors Be in better position to be competitiveStill offer value for money to customers.When use this?Increase your market share at low cost strategy
27 DifferentiationProduct or service that differs from the normal way of doing business.Value of Uniqueness of the productIt can be = service levels, technology….Differentiation allows you to charge a premium priceHelps you cover the costs of the “uniqueness”.
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 LoyaltyWhat 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.