Chapters Four & Five
Identifying & Analyzing
Attractive Markets
Macro Trend Analysis: A Framework for
Assessing Market Attractiveness
•
•
•
•
•
•
Demographic environment
Sociocultural environment
Economic environment
Political/legal environment
Technological environment
Physical environment
Threat Matrix
Level of Impact
on Company*
Probability of Occurrence
High
Low
High
4
1
Low
2
3
Compare weaknesses
to threats
Opportunity Matrix
Attractiveness
to Company*
Compare strengths
to opportunities
*Profits or market share or both.
Probability of Success
High
Low
High
4
1
Low
2
3
Exhibit 5.2
The Major Forces that Determine
Industry Attractiveness
Threat of new
entrants
Bargaining
power
of suppliers
Rivalry among
existing industry
firms
Bargaining
power
of buyers
Threat of substitute
products
Source: Adapted from Michael E. Porter, “Industry Structure and Competitive Strategy: Keys to Profitability,” Financial Analysts Journal, July-August 1980, p. 33.
Segment Rivalry
• The industry is less attractive if:
–
–
–
–
–
numerous strong competitors
stable or declining market
large capacity increments
high fixed costs
high exit barriers
Threat of Substitutes
• The industry is less attractive if:
– numerous current substitutes
– numerous potential substitutes
Supplier Power
• The industry is less attractive if:
–
–
–
–
–
suppliers are concentrated or organized
suppliers are few in number
providing critical component
high switching costs exist
forward integration is easy
Buyer Power
• The industry is less attractive if:
– buyers are few, large or organized
– your product is a large percentage of buyer’s
total costs
– your product is undifferentiated
– switching costs are low
– backward integration is easy
– buyer profits are low
Potential Entrants
Exit Barriers
Low
High
Entry Barriers
Low
Low Stable
Returns
Low Risky
Returns
High
High Stable
Returns
High Risky
Returns
If alternative fuel vehicles are a major
opportunity for the auto industry, how
fast will customers adopt?
Laggards
and
nonadopters
Innovators
2.5%
Early
adopters
13.5%
Early
majority
34%
Late
majority
34%
16%
Source: Adapted with permission from Marketing, 11/e, Acetate 8-8, by Michael J. Etzel, Bruce J. Walker, and William J. Stanton. The McGraw-Hill Companies,
Inc. © 1997. All rights reserved.
Exhibit 5.8
Profit per unit Product category sales
(real dollars)
(real dollars)
Generalized Product Life Cycle
Life cycle
extension
Profit/unit
Sales
Introduction
Growth
Maturity
Decline or
extension
Competitive
turbulence
Time (years)
Source: Reprinted with permission from p. 60 of Analysis for Strategic Marketing Decisions, by George Day. Copyright © 1986 by West Publishing
Company. All rights reserved.
Exhibit 5.9
Common Product Life-Cycle Curves
I. Growth-decline-plateau
Unit
sales
II. Cycle-recycle
Unit
sales
Time
Time
Time
Decline
Unit
sales
Maturity
Unit
sales
IV. Classical
Growth
III. Innovative-maturity
Time
Source: Adapted from J.E. Swann and D.R. Rink, “Effective Use of Industrial Product Life Cycle Trends,” in Marketing in the ‘80s (New York, American
Marketing Association, 1980), pp. 198-99.
Competitive Analysis
• Identify & assess existing and potential
competitors at all levels of competition
–
–
–
–
product market: SUV’s (for all important segments)
product category: Family Cars
generic product: Automobiles
budget category: Transportation