Chapter 2 Opportunities Analysis_2

8/12/2019 Chapter 2 Opportunities Analysis_2

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Chapter 2:

Opportunities Analysis

Lecturer: Bunny Wathanak Panha

MN415


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Five Forces Model

Five forces interact with one another todetermine the setting in which companiescompete and, hence, the attractiveness ofthe industry:

1. Rivalry among companies in the industry

2. Bargaining power of suppliers

3. Bargaining power of buyers

4. Threat of new entrants

5. Threat of substitute products or services


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Five Forces Model

Industry

Competitors

Rivalry

among

existing firms

Buyers

Bargaining Power

of BuyersSuppliers

Bargaining Powerof Suppliers

Substitutes

Potential

Entrants

Threat of

New Entrants

Threat of

Substitute

Products or

Services

6-8


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Five Forces Model

Industry

Competitors

Rivalry

among

existing firms

Buyers

Bargaining Power

of BuyersSuppliers


Substitutes

Potential

Entrants

Threat of

New Entrants

Threat of

Substitute

Products or

Services

6-9


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Rivalry Among Companies

Strongest of the five forces

Industry is more attractive when:

Number of competitors is large, or, at

the other extreme, quite small

Competitors are not similar in size or

capacity Industry is growing fast

Opportunity to sell a differentiated

product or service exists


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Five Forces Model

Industry

Competitors

Rivalry

among

existing firms

Buyers

Bargaining Power

of BuyersSuppliers


Substitutes

Potential

Entrants

Threat of

New Entrants

Threat of

Substitute

Products or

Services


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Bargaining Power of Suppliers

The greater the leverage ofsuppliers, the less attractive the

industry Industry is more attractive when:

Many suppliers sell a commodityproduct

Substitutes are available

Switching costs are low

Items account for a small portion of

the cost of finished products


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Five Forces Model

Industry

Competitors

Rivalry

among

existing firms

Buyers

Bargaining Power

of BuyersSuppliers


Substitutes

Potential

Entrants

Threat of

New Entrants

Threat of

Substitute

Products or

Services


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Bargaining Power of Buyers

Buyers influence is high when number ofcustomers is small and cost of switching to acompetitors product is low

Industry is more attractive when: Customers switching costs are high

Number of buyers is large

Customers want differentiated products Customers find it difficult to collect informationfor comparing suppliers

Items account for a small portion of customersfinished products


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Five Forces Model

Industry

Competitors

Rivalry

among

existing firms

Buyers

Bargaining Power

of BuyersSuppliers


Substitutes

Potential

Entrants

Threat of

New Entrants

Threat of

Substitute

Products or

Services


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Threat of New Entrants

The larger the pool of potential new

entrants, the less attractive an industry is

Industry is more attractive to new entrants

when:

Advantages of economies of scale are absent

Capital requirements to enter are low Cost advantages are not related to company size

Buyers are not loyal to existing brands

Government does not restrict the entrance of new

companies


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Five Forces Model

Industry

Competitors

Rivalry

among

existing firms

Buyers

Bargaining Power

of BuyersSuppliers


Substitutes

Potential

Entrants

Threat of

New Entrants

Threat of

Substitute

Products or

Services


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Threat of Substitutes

Substitute products or services can turn an

industry on its head

Industry is more attractive to new entrants

when:

Quality substitutes are not readily available

Prices of substitute products are not

significantly lower than those of the industrys

products

Buyers switching costs are high


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Five Forces Matrix

0

10

20

30

40

5060

70

80

90

1st Qtr 2nd Qtr 3rd Qtr 4th Qtr

East

West

North


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Consumption Chain

Consumption chain analysis is a tool that helps

businesses differentiate their offerings within

a market. This tool works on the premise that

opportunities for differentiation lurk at every

step of the way your customers take from thetime they first become aware of their need for

your product to the time they finally dispose.


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Consumption Chain


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Consumption Chain


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Construct Your Consumption Chain

1)Select a target segment.

2) Identify the people within your company

who come into contact with members of that

customer segment.

3) Put together a group of people from your

company who come into contact with this

segment.


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4) Ask them to describe your customers' experience,

from point of initial awareness of need to where

product is exhausted or relationship ends. 5) Build the chain while noting "trigger events" that

transpire when a customer moves from one "scene" to

the next.

6) Remember: each business and each segment is

likely to have its own way in which the whole chain

fits together.


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7)Make a critical assessment of how well you are

doing at improving that customers' consumption

experience. Are there links the customer would prefer to do without?

Are there ways you could serve that segment better?

Are there things you are offering that the customer doesn't

value?

8)Consider the provocative questions in the next

section.

What can you do to create a better overall customer

experience?


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Developing a Consumption Chain

When you construct a consumption chain, your

goal is to capture the most important steps a

customer goes through.

The goal here is not to be compulsive but

rather to get a really good feel for how

customers are behaving as they try to get their

needs met. I


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Developing a Consumption Chain

Be aware that industry transformations will

show up pragmatically as changes in your

customers' experience. Links change.

Draw a chain that reflects the experiences

they think your customers have with your

company.


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PESTLEanalysis

PESTLE is an analytical tool which considers

external factors and helps you to think about

their impacts.


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PESTLE analysis

Is a useful tool for understanding the bigpicture of the environment in which you areoperating

By understanding your environment, you cantake advantage of the opportunities andminimize the threats.


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POLITICAL

Environmental protection/legislation

Consumer protection

Governments attitude

Competition regulation

Advertising standards


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Economic

Economic growth

Taxation international trade

Exchange Rate Employment law

Inflation

Consumer confidence Minimum wage


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Social

Income distribution

Demographics

Labour & Social mobility Lifestyle changes

Attitudes to work and leisure

Education

Fashion and Fads Health & Welfare

Living conditions


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Technological

Changes in physical sciences

Internet

Energy use and costs

Rates of technological obsolescence

New discoveries Technology revolutions


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Legal

Employment law

Health and Safety

Taxation both corporate and consumer

Other regulations

International trade barriers

Strength of the rule of law


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Environmental

How peoples perception and reaction to

environmental issues can affect a

business.

Chapter 2 Opportunities Analysis_2

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