Transcript Document 7565450

External Analysis
OVERVIEW
 External
– Analyze Global Societal (Macro)
Factors
– Analyze Global Task (Micro) Factors
Industry
 Competitors

SOCIETAL (MACRO)
TECHNOLOGICAL
TASK (MICRO)
Industry
ECONOMIC
INTERNAL
Competitors
SOCIOCULTURAL
POLITICAL/
LEGAL
INDUSTRY

Definition:
– Group of firms producing a similar product
or service
– Often defined by government (SIC codes),
analysts (Valueline and Investment
Analyses)
Share Analysis & Forecast
 Financial Trends & Forecast
 Porter’s 5 Forces of Industry
Competition
Overall Assessment of
Competitiveness

Five Forces Model
Suppliers
Potential
Entrants
Rivalry
Among
Firms
Substitutes
Buyers
Industry Analysis
 Market
Share Analysis
– Definition of “market”
– Definition of competitors
 Examples
Segments
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Business Segments
– Johnson Controls has 4
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Auto; Controls; Plastic; Battery
Geographic Segments
– U.S.; Europe; Pacific, etc.
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Customer Segments
– home market; business market; government
market.
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Market Segments
– fruit-beverage market
– alcoholic beverage market
Two Segment Questions
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External question:
– What share of the total market do we
have?
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Internal question:
– How much does that market contribute to
our:
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Sales; Net Income; Assets
Industry Analysis Con’t.
 Financial
Analysis
– Sales
– Net Income
– Other Indicators
– Ratios
Competitor Analysis
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Who Are the Existing and Potential
Competitors?
What Strategic Groups Can Be
Identified?
What Are Their Levels of Sales, Share
and Profits?
What Are Their Growth Trends?
What Are Their Strengths, Weaknesses,
Strategies?
U.S. Restaurant Chains

Strategic Groups
High
Price
Red Lobster
Olive Garden
Pizza Hut
Chi-Chi’s
IHOP
Bob Evans
Shoney’s
Denny’s
McDonald
Burger King
Wendy’s
Low
Limited
Menu
Product-Line Breadth
Full
Menu
Levels of Market Competition
Product Form - brands which directly
compete
 Product Category - products with similar
characteristics
 Generic Competition - products which
satisfy the same customer needs
 Budget Competition - products which
compete for the customer’s budget
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Finding Hidden Competitors
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Although there may be many suppliers
or brands of a product, customers may
see only a small number as suitable
Use research to identify your relevant
competitors by determining your
customers’ acceptable sets of suppliers
or brands plus the criteria which
distinguishes suppliers or brands
Market Structure Analysis
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Understanding Consumer Perceptions of
Products and Brands in a Market
Use of Product Mapping Technology to
Visually Display Relationships among
Products or Brands and Attributes which
Define the Space
Can be Used to Define Competitors
Which Competitors to Analyze?
Number Depends on
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Planning Horizon - the longer the time
horizon, the more opportunity there is
for potential competitors to enter
Market Rate of Change - the faster the
rate of change the greater the
opportunity for new entrants
Which Competitors to Analyze?
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Four competitors should always be
included:
– The market leader (largest share)
– The most profitable competitor
– The competitor most like us
– The fastest-growing competitor
Competitor Strategic Profile

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Provide users with a broad
understanding of competitive strategy,
including management, goals,
capabilities, business/market selection
criteria and likely competitive behavior.
Include description, direction,
assessment of strategies and
implications, in terms of threats and
opportunities.
Information Required
Cost structure of competitors
 Timing of competitor market entry
 How competitor will respond to a new
product introduction, price change, etc.
 How competitors are positioned in the
market
 Competitors’ product performance and
degree of customer satisfaction/loyalty
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Benchmarking
1. Determine which functions to benchmark
2. Identify key performance variables to
measure
3. Identify the “best-in-class” companies
4. Measure performance of “best-in-class”
companies
Benchmarking
5. Measure your own performance
6. Specify programs and actions to meet
and surpass the “best-in-class”
7. Implement and monitor results
Market Analysis
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How Attractive Is the Market or
Industry and Its Submarkets?
What Are the Forces Reducing
Profitability in the Market?
What Entry and Exit Barriers?
What are the Growth Projections?
What are the Cost Structures?
What are the Profitability Prospects?
Market Analysis
•What Are the Alternative
Distribution Channels
and Their Relative Strengths?
•What Industry Trends Are
Significant to Strategy?
•What Are the Current and
Future Key Success Factors?
Customer Analysis
 What
Are the Major
Segments?
 What Are Their Motivations
and Unmet Needs?
Market Segmentation
The process of dividing large
heterogeneous markets into
smaller homogeneous subsets
of people or businesses with
similar needs and/or
responsiveness to marketing
mix offerings.
Market Segmentation
•A managerial strategy that adapts a
firm’s marketing mix to best fit the
various consumer demand curves
existing in a market.
•An adaptive strategy that seeks to
obtain competitive advantage by doing
a better job of satisfying customer
requirements.
Steps in the Market
Segmentation Process
1. Analyze the Market
– Size and Structure
– Attitudes and Usage
– Competitive Position
2. Develop Segment Profiles
– Identify Factors Which Differentiate
Segments
– Describe Characteristics and
Behavior of Segments
Steps in the Market
Segmentation Process
3. Select Target Segments Which
Represent Best Market Opportunity
4. Design Marketing Program for
Each Target Segment
– Positioning
– Marketing Mix
Steps in the Market
Segmentation Process
5. Analysis and Appraisal
– Do We Have the Resources?
– How Flexible Is Our Approach?
– Does Target Segment/Strategic Plan
Meet Our Objectives?
– Does Target Segment/Strategic Plan
Build on Our Strengths?
Bases for Consumer
Market Segmentation
State of Being: Demographic, Geographic
 State of Mind: Psychographic
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– Social Class, Lifestyle
– Personality, Attitudes, Values
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Product Usage:
– Users vs. Non-Users of Brand
– Heavy vs. Light Users
– Users vs. Non-Users of Category
– Usage by Situation
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Benefits Sought
Segmentation Criteria
 Group
Identity
– Within Segment Homogeneity
– Between Segment Heterogeneity
 Sufficient
Size
 Measurable Market Potential
 Clear Variations in Behavior Relative to
Other Segments
 Influence Via Available Media
– Segment Can Be Reached Efficiently
SUMMARY
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External
– Analyze Global Societal (Macro) Factors
– Analyze Global Task (Micro) Factors
Industry
 Competitors
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Why do an External Analysis?
– To identify opportunities and threats.