External Analysis. OVERVIEW n External –Analyze Global Societal (Macro) Factors –Analyze Global...
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Transcript of External Analysis. OVERVIEW n External –Analyze Global Societal (Macro) Factors –Analyze Global...
External AnalysisExternal Analysis
OVERVIEWOVERVIEW
ExternalExternal– Analyze Global Societal (Macro) Analyze Global Societal (Macro)
FactorsFactors– Analyze Global Task (Micro) Analyze Global Task (Micro)
FactorsFactors IndustryIndustry CompetitorsCompetitors
SOCIETAL (MACRO)
ECONOMIC POLITICAL/LEGAL
TECHNOLOGICAL
SOCIOCULTURAL
TASK (MICRO)
Competitors
Industry
INTERNAL
INDUSTRYINDUSTRY Definition:Definition:
– Group of firms producing a similar product or Group of firms producing a similar product or serviceservice
– Often defined by government (SIC codes), Often defined by government (SIC codes), analysts (Valueline and Investment Analyses)analysts (Valueline and Investment Analyses)
Share Analysis & ForecastShare Analysis & Forecast Financial Trends & ForecastFinancial Trends & Forecast Porter’s 5 Forces of Industry CompetitionPorter’s 5 Forces of Industry Competition
Overall Assessment of Overall Assessment of CompetitivenessCompetitiveness
Five Forces ModelFive Forces Model
PotentialEntrants
RivalryAmongFirms
Substitutes
BuyersSuppliers
Industry AnalysisIndustry Analysis
Market Share AnalysisMarket Share Analysis– Definition of “market” Definition of “market” – Definition of competitorsDefinition of competitors
ExamplesExamples
SegmentsSegments Business SegmentsBusiness Segments
– Johnson Controls has 4Johnson Controls has 4 Auto; Controls; Plastic; BatteryAuto; Controls; Plastic; Battery
Geographic SegmentsGeographic Segments– U.S.; Europe; Pacific, etc.U.S.; Europe; Pacific, etc.
Customer SegmentsCustomer Segments– home market; business market; government market.home market; business market; government market.
Market SegmentsMarket Segments– fruit-beverage marketfruit-beverage market– alcoholic beverage marketalcoholic beverage market
Two Segment QuestionsTwo Segment Questions
External question:External question:– What share of the total market do we What share of the total market do we
have?have?
Internal question:Internal question:– How much does that market How much does that market
contribute to our:contribute to our: Sales; Net Income; AssetsSales; Net Income; Assets
Industry Analysis Con’t.Industry Analysis Con’t.
Financial AnalysisFinancial Analysis– SalesSales– Net IncomeNet Income– Other IndicatorsOther Indicators– RatiosRatios
Competitor AnalysisCompetitor Analysis
• Who Are the Existing and Potential Who Are the Existing and Potential Competitors? Competitors?
• What Strategic Groups Can Be What Strategic Groups Can Be Identified?Identified?
• What Are Their Levels of Sales, Share What Are Their Levels of Sales, Share and Profits?and Profits?
• What Are Their Growth Trends?What Are Their Growth Trends?• What Are Their Strengths, Weaknesses, What Are Their Strengths, Weaknesses,
Strategies?Strategies?
U.S. Restaurant ChainsU.S. Restaurant Chains
Strategic GroupsStrategic Groups
Price
Product-Line Breadth
LimitedMenu
FullMenu
Low
High
McDonaldBurger KingWendy’s
Pizza HutChi-Chi’s
Red LobsterOlive Garden
IHOP Bob EvansShoney’sDenny’s
Levels of Market Levels of Market CompetitionCompetition
Product Form - brands which directly Product Form - brands which directly competecompete
Product Category - products with Product Category - products with similar characteristicssimilar characteristics
Generic Competition - products Generic Competition - products which satisfy the same customer which satisfy the same customer needsneeds
Budget Competition - products which Budget Competition - products which compete for the customer’s budgetcompete for the customer’s budget
Finding Hidden Finding Hidden CompetitorsCompetitors
Although there may be many suppliers Although there may be many suppliers or brands of a product, customers may or brands of a product, customers may see only a small number as suitablesee only a small number as suitable
Use research to identify your relevant Use research to identify your relevant competitors by determining your competitors by determining your customers’ acceptable sets of suppliers customers’ acceptable sets of suppliers or brands plus the criteria which or brands plus the criteria which distinguishes suppliers or brandsdistinguishes suppliers or brands
Market Structure Market Structure AnalysisAnalysis
Understanding Consumer Perceptions Understanding Consumer Perceptions of Products and Brands in a Marketof Products and Brands in a Market
Use of Product Mapping Technology Use of Product Mapping Technology to Visually Display Relationships to Visually Display Relationships among Products or Brands and among Products or Brands and Attributes which Define the SpaceAttributes which Define the Space
Can be Used to Define CompetitorsCan be Used to Define Competitors
Which Competitors to Which Competitors to Analyze?Analyze?
Number Depends on Number Depends on Planning Horizon - the longer the time Planning Horizon - the longer the time
horizon, the more opportunity there is horizon, the more opportunity there is for potential competitors to enterfor potential competitors to enter
Market Rate of Change - the faster Market Rate of Change - the faster the rate of change the greater the the rate of change the greater the opportunity for new entrantsopportunity for new entrants
Which Competitors to Which Competitors to Analyze?Analyze?
Four competitors should always Four competitors should always be included:be included:– The market leader (largest The market leader (largest
share)share)– The most profitable competitorThe most profitable competitor– The competitor most like usThe competitor most like us– The fastest-growing competitorThe fastest-growing competitor
Competitor Strategic Competitor Strategic ProfileProfile
Provide users with a broad Provide users with a broad understanding of competitive strategy, understanding of competitive strategy, including management, goals, including management, goals, capabilities, business/market selection capabilities, business/market selection criteria and likely competitive behavior.criteria and likely competitive behavior.
Include description, direction, Include description, direction, assessment of strategies and assessment of strategies and implications, in terms of threats and implications, in terms of threats and opportunities.opportunities.
Information RequiredInformation Required
Cost structure of competitorsCost structure of competitors Timing of competitor market entryTiming of competitor market entry How competitor will respond to a new How competitor will respond to a new
product introduction, price change, etc.product introduction, price change, etc. How competitors are positioned in the How competitors are positioned in the
marketmarket Competitors’ product performance and Competitors’ product performance and
degree of customer satisfaction/loyaltydegree of customer satisfaction/loyalty
BenchmarkingBenchmarking
1. Determine which functions to benchmark1. Determine which functions to benchmark
2. Identify key performance variables to2. Identify key performance variables to
measuremeasure
3. Identify the “best-in-class” companies3. Identify the “best-in-class” companies
4. Measure performance of “best-in-class”4. Measure performance of “best-in-class”
companiescompanies
BenchmarkingBenchmarking
5. Measure your own performance5. Measure your own performance
6. Specify programs and actions to 6. Specify programs and actions to meetmeet
and surpass the “best-in-class”and surpass the “best-in-class”
7. Implement and monitor results7. Implement and monitor results
Market AnalysisMarket Analysis
• How Attractive Is the Market or How Attractive Is the Market or
Industry and Its Submarkets? Industry and Its Submarkets? • What Are the Forces Reducing What Are the Forces Reducing
Profitability in the Market?Profitability in the Market?• What Entry and Exit Barriers?What Entry and Exit Barriers?• What are the Growth Projections?What are the Growth Projections?• What are the Cost Structures?What are the Cost Structures?• What are the Profitability Prospects?What are the Profitability Prospects?
Market AnalysisMarket Analysis
•What Are the Alternative What Are the Alternative
Distribution Channels Distribution Channels
and Their Relative Strengths?and Their Relative Strengths?•What Industry Trends Are What Industry Trends Are
Significant to Strategy?Significant to Strategy?•What Are the Current and What Are the Current and
Future Key Success Factors?Future Key Success Factors?
Customer AnalysisCustomer Analysis
What Are the Major What Are the Major Segments?Segments?
What Are Their What Are Their Motivations and Unmet Motivations and Unmet Needs?Needs?
Market SegmentationMarket Segmentation
The process of dividing large The process of dividing large heterogeneous markets into heterogeneous markets into smaller homogeneous smaller homogeneous subsets of people or subsets of people or businesses with similar needs businesses with similar needs and/or responsiveness to and/or responsiveness to marketing mix offerings.marketing mix offerings.
Market SegmentationMarket Segmentation
•A managerial strategy that adapts A managerial strategy that adapts
a firm’s marketing mix to best fit a firm’s marketing mix to best fit
the various consumer demand the various consumer demand
curves existing in a market.curves existing in a market.
•An adaptive strategy that seeks An adaptive strategy that seeks
to obtain competitive advantage to obtain competitive advantage
by doing a better job of satisfying by doing a better job of satisfying
customer requirements.customer requirements.
Steps in the Market Steps in the Market Segmentation ProcessSegmentation Process
1. Analyze the Market1. Analyze the Market– Size and StructureSize and Structure– Attitudes and UsageAttitudes and Usage– Competitive PositionCompetitive Position
2. Develop Segment Profiles2. Develop Segment Profiles– Identify Factors Which Differentiate Identify Factors Which Differentiate
SegmentsSegments– Describe Characteristics and Describe Characteristics and Behavior of SegmentsBehavior of Segments
Steps in the Market Steps in the Market Segmentation ProcessSegmentation Process
3. Select Target Segments Which 3. Select Target Segments Which
Represent Best Market OpportunityRepresent Best Market Opportunity
4. Design Marketing Program for 4. Design Marketing Program for
Each Target SegmentEach Target Segment– PositioningPositioning– Marketing MixMarketing Mix
Steps in the MarketSteps in the MarketSegmentation ProcessSegmentation Process
5. Analysis and Appraisal5. Analysis and Appraisal– Do We Have the Resources?Do We Have the Resources?– How Flexible Is Our Approach?How Flexible Is Our Approach?– Does Target Segment/Strategic Does Target Segment/Strategic
Plan Meet Our Objectives?Plan Meet Our Objectives?– Does Target Segment/Strategic Does Target Segment/Strategic
Plan Build on Our Strengths?Plan Build on Our Strengths?
Bases for Consumer Bases for Consumer Market SegmentationMarket Segmentation State of Being: Demographic, State of Being: Demographic,
GeographicGeographic State of Mind: Psychographic State of Mind: Psychographic
– Social Class, LifestyleSocial Class, Lifestyle– Personality, Attitudes, ValuesPersonality, Attitudes, Values
Product Usage:Product Usage:– Users vs. Non-Users of BrandUsers vs. Non-Users of Brand– Heavy vs. Light UsersHeavy vs. Light Users– Users vs. Non-Users of CategoryUsers vs. Non-Users of Category– Usage by SituationUsage by Situation
Benefits SoughtBenefits Sought
Segmentation CriteriaSegmentation Criteria
Group IdentityGroup Identity– Within Segment HomogeneityWithin Segment Homogeneity– Between Segment HeterogeneityBetween Segment Heterogeneity
Sufficient SizeSufficient Size Measurable Market PotentialMeasurable Market Potential Clear Variations in Behavior Relative to Clear Variations in Behavior Relative to
Other SegmentsOther Segments Influence Via Available MediaInfluence Via Available Media
– Segment Can Be Reached EfficientlySegment Can Be Reached Efficiently
SUMMARYSUMMARY
ExternalExternal– Analyze Global Societal (Macro) Analyze Global Societal (Macro)
FactorsFactors– Analyze Global Task (Micro) FactorsAnalyze Global Task (Micro) Factors
IndustryIndustry CompetitorsCompetitors
Why do an External Analysis?Why do an External Analysis?– To identify opportunities and threats.To identify opportunities and threats.