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Chapter Four

Market/Submarket Analysis

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Market Size

Key Success Factors

Market Growth

Trends and Development

Dimensions of Market Analysis

Market Profitability

Distribution System
Chapter 4 - Market and Submarket Analysis

Cost Structure
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Market Size: Actual and Potential


Size refers to volume of sales within a particular market Submarkets
Smaller segments within the larger market that are quite distinct based on defined features

Large subdivided within the shampoo market include antidandruff , medicated

Sources that help identify actual market size include


Governments, trade associations, competitors financial reports.
Chapter 4 - Market and Submarket Analysis

Figure 4.1

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Potential Market: The User Gap


Considerations in terms of
New use of the existing product A new user group for the existing product Increased frequency of use

These factors can dramatically change the size and prospects of the existing market Ghost Potential possibility of existing
potential but can not be exploited due to external reasons. Small market size can be good Chapter 4 - Market and Submarket Analysis PPT 4-4

Chapter 4 - Market and Submarket Analysis

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Market Growth
Estimated market size in future Percentage increase in sales and profits even without increasing market share. Market growth will correspond with product lifecycle Growth pattern and the Driving Forces
Driving Forces and Growth Factor analysis Forecasting growth
Demographic Trends Sales of related equipment
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Detecting Maturity and Decline


Price pressure caused by overcapacity and the lack of product differentiation Buyer sophistication and knowledge Substitute products or technologies Saturation No growth sources Customer disinterest

Chapter 4 - Market and Submarket Analysis

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Porters Five-Factor Model of Market Profitability


Competition among existing firms

Threat of Potential Entrants Bargaining Power of Suppliers


Chapter 4 - Market and Submarket Analysis Figure 4.3

Industry Profitability

Threat of Substitute Products Bargaining Power of Customers

Source: Adapted from Michael E. Porter, Industry Structure and Competitive Strategy: Keys to Profitability Financial Analysis Journal,July-August 1980,p.33.

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Cost Structure
Cost structure analysis will provide into the key success factors Examination of the Value Chain to explore where Cost advantages can be created

Chapter 4 - Market and Submarket Analysis

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Distribution Systems
What are the alternative distribution channels? What trends are observed in terms of growing importance and channel emergence? Who has the power in the channel, what are the trends of shifting power?

Chapter 4 - Market and Submarket Analysis

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Risks of High-Growth Market

Competitive Risk Overcrowding Superior competitive entry Market Changes Changing KSFs

Firm Limitations Resource constraints Distribution unavailable

New technology
Disappointing growth Price instability
Chapter 4 - Market and Submarket Analysis

Figure 4.5

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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.
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Chapter 4 - Market and Submarket Analysis

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 4 - Market and Submarket Analysis

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Ancillary Slides

Chapter 4 - Market and Submarket Analysis

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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.) - Alfred P. Sloan, Jr., General Motors

Chapter 4 - Market and Submarket Analysis

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Vision is the art of seeing things invisible. - Jonathan Swift

Chapter 4 - Market and Submarket Analysis

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To be prepared is half the victory. - Miguel Cervantes

Chapter 4 - Market and Submarket Analysis

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Small opportunities are often the beginning of great enterprises. - Demosthenes

Chapter 4 - Market and Submarket Analysis

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The quality of decision is like the welltimed swoop of a falcon that enables it to strike and destroy its victim. - Sun Tzu

Chapter 4 - Market and Submarket Analysis

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Most of the most important experiences that truly educate cannot be arranged ahead of time with any precision.

- Harold Taylor

Chapter 4 - Market and Submarket Analysis

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