Chapter Four © 2007 John Wiley & Sons Market/Submarket Analysis Copyright © 2010 John Wiley & Sons, Inc All rights reserved Reproduction or translation of this work beyond that permitted in Section 117 of the 1976 United States Copyright Act without the express written permission of the copyright owner is unlawful Requests for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc The purchaser may make back-up copies for his/her own use only and not for distribution or resale The Publisher assumes no responsibility for errors, omissions, or damages, caused by the use of these programs or from the use of the information contained herein Chapter - Market and Submarket Analysis PPT 4-1 Dimensions of a Market Analysis • Emerging submarkets • Actual and potential market and submarket size • Market and submarket growth © 2007 John Wiley & Sons • Market and submarket profitability • Cost structure • Distribution systems • Trends and developments • Key success factors Chapter - Market and Submarket Analysis PPT 4-2 Emerging Submarkets © 2007 John Wiley & Sons Relevance! Chapter - Market and Submarket Analysis PPT 4-3 Marketing the Wrong Product © 2007 John Wiley & Sons SUV Chapter - Market and Submarket Analysis Hybrid PPT 4-4 © 2007 John Wiley & Sons “Having great products is not enough You need to make what customers want to buy.” - David Aaker Chapter - Market and Submarket Analysis PPT 4-5 Customer Decision Process Brand Relevance © 2007 John Wiley & Sons Select Product Category or Subcategory SUV Brand Preference Determine Brands to Consider Lexus Select Brand to Buy Mercedes BMW Mercedes Chapter - Market and Submarket Analysis PPT 4-6 Questions to Help Structure a Market Analysis • Submarkets © 2007 John Wiley & Sons Are augmented products, emerging niches, trend toward systems, new applications, repositioned product classes, customer trends, or new technologies creating worthwhile submarkets? How should they be defined? • Size and Growth Potentially important submarkets? Size and growth characteristics? Submarkets declining? How fast? Driving forces behind the trends? Chapter - Market and Submarket Analysis Figure 4.1 PPT 4-7 Questions to Help Structure a Market Analysis • Profitability © 2007 John Wiley & Sons How intense is the competition among existing firms? Threats from potential entrants and substitute products? Bargaining power of suppliers and customers? Attractive/profitable markets or submarkets? • Cost Structure Major cost and value-added components for various types of competitors? Chapter - Market and Submarket Analysis Figure 4.1 PPT 4-8 Questions to Help Structure a Market Analysis • Distribution Systems Alternative channels of distribution? How are they changing? © 2007 John Wiley & Sons • Market Trends • Key Success Factors Key success factors, assets, and competencies to compete successfully? Can assets and competencies of competitors be neutralized? Chapter - Market and Submarket Analysis Figure 4.1 PPT 4-9 Detecting Maturity and Decline • Price pressure caused by overcapacity and the lack of product differentiation • Buyer sophistication and knowledge © 2007 John Wiley & Sons • Substitute products or technologies • Saturation • No growth sources • Customer disinterest Chapter - Market and Submarket Analysis PPT 4-10 Porter’s Five-Factor Model of Market Profitability © 2007 John Wiley & Sons Competition Competition among among Existing Existingfirms firms Threat Threatof of Potential Potential Entrants Entrants Bargaining Bargaining Powerof of Power Suppliers Suppliers Chapter - Market and Submarket Analysis Figure 4.3 Industry Profitability Threatof of Threat Substitute Substitute Products Products Bargaining Bargaining Power Powerof of Customers Customers Source: Adapted from Michael E Porter, “Industry Structure and Competitive PPT Strategy: Keys to Profitability” Financial Analysis Journal,July-August 1980,p.33 4-11 Risks of High-Growth Market Competitive CompetitiveRisk Risk FirmLimitations Limitations Firm ••Overcrowding Overcrowding Resourceconstraints constraints ••Resource Distributionunavailable unavailable ••Distribution © 2007 John Wiley & Sons ••Superior Superiorcompetitive competitiveentry entry Market Changes Changes Market Changing KSFs KSFs •• Changing New technology technology •• New Disappointing growth growth •• Disappointing Price instability instability •• Price Chapter - Market and Submarket Analysis Figure 4.5 PPT 4-12 © 2007 John Wiley & Sons Key Learnings • The emergence of submarkets can signal a relevance problem • Market analysis should assess the attractiveness of a market, as well as its structure and dynamics • A usage gap can cause the market size to be understated • Market growth can be forecast by looking at driving forces, leading indicators, and analogous industries • Market profitability will depend on five factors – existing competitors, supplier power, customer power, substitute products, and potential entrants • Cost structure can be analyzed by looking at the value added at each production stage Chapter - Market and Submarket Analysis PPT 4-13 © 2007 John Wiley & Sons Key Learnings • Distribution channels and trends will often affect who wins • Market trends will affect both the profitability of strategies and key success factors • Key success factors are the skills and competencies needed to compete in a market • Growth market challenges involve the threat of competitors, market changes, and firm limitations Chapter - Market and Submarket Analysis PPT 4-14 © 2007 John Wiley & Sons Ancillary Slides Chapter - Market and Submarket Analysis PPT 4-15 © 2007 John Wiley & Sons “As the economy, led by the automobile industry, rose to a new high level in the twenties, a complex of new elements came into existence to transform the market: installment selling, the used-car trade-in, the closed body, and the annual model (I would add improved roads if I were to take into account the environment of the automobile.)” Chapter - Market and Submarket Analysis - Alfred P Sloan, Jr., General Motors PPT 4-16 © 2007 John Wiley & Sons “Vision is the art of seeing things invisible.” - Jonathan Swift Chapter - Market and Submarket Analysis PPT 4-17 “To be prepared is half the victory.” © 2007 John Wiley & Sons - Miguel Cervantes Chapter - Market and Submarket Analysis PPT 4-18 “Small opportunities are often the beginning of great enterprises.” © 2007 John Wiley & Sons - Demosthenes Chapter - Market and Submarket Analysis PPT 4-19 “The quality of decision is like the welltimed swoop of a falcon that enables it to strike and destroy its victim.” © 2007 John Wiley & Sons - Sun Tzu Chapter - Market and Submarket Analysis PPT 4-20 “Most of the most important experiences that truly educate cannot be arranged ahead of time with any precision.” © 2007 John Wiley & Sons - Harold Taylor Chapter - Market and Submarket Analysis PPT 4-21 ... Key success factors Chapter - Market and Submarket Analysis PPT 4- 2 Emerging Submarkets © 2007 John Wiley & Sons Relevance! Chapter - Market and Submarket Analysis PPT 4- 3 Marketing the Wrong...Dimensions of a Market Analysis • Emerging submarkets • Actual and potential market and submarket size • Market and submarket growth © 2007 John Wiley & Sons • Market and submarket profitability... needed to compete in a market • Growth market challenges involve the threat of competitors, market changes, and firm limitations Chapter - Market and Submarket Analysis PPT 4- 14 © 2007 John Wiley