Industry Analysis

MARKET ANALYSIS CUSTOMER ANALYSIS COMPETITOR ANALYSIS

Industry Analysis: Definition and Importance

Industry analysis is a tool that facilitates a company's

understanding of its position relative to other companies that produce similar products or services. Understanding the forces at work in the overall industry is an important component of effective strategic planning.

Source: http://www.answers.com/topic/industry-analysis

Porters Model

Porters Model contd.

Five Competitive Forces

1.

Threat of New Entrants threat of

new competition entering the industry
If this is high the industry attractiveness is diminished However, in the early stages of market development new entrants can help a market expand, bring additional capacity and resources

Five Competitive Forces contd.

Barriers to Entry factors that would help

reduce threat of new entrants

Economies of scale Product differentiation Capital requirements Switching costs Efficient distribution system

Five Competitive Forces contd.

2. Bargaining Power of Buyers

the amount of influence buyers (consumer or business) have on price

If this is high, it is negatively related to the industry attractiveness

Five Competitive Forces contd.

Bargaining power of buyers is high

when:

Product bought is a large percentage of the buyers costs Product bought is undifferentiated Buyer earns low profits Buyer threatens to backward integrate Substitutes exist

Five Competitive Forces contd.

3. Bargaining Power of Suppliers

the degree of influence suppliers have on price. High supplier power is not attractive. This is high when:
There are no substitutes for the product supplied Suppliers are highly concentrated Supplier has differentiated its product or built switching costs Supply is limited

Five Competitive Forces contd.

4. Current Category Rivalry -

the amount and intensity of competition in a category. Product categories with intense competition are not attractive. The following are the characteristics of categories with intense rivalry:

Many or balance competition Slow growth High fixed costs Lack of product differentiation Personal rivalries

Five Competitive Forces contd.

5. Pressure from Substitutes the

number of substitutes available in a category. Categories with larger number of substitutes are lesser attractive than those that deliver unique products.

Business Implications of Five Competitive Forces

High Threat of New Entrants

Over capacity, lower prices, new competitive paradigm Lower prices, higher quality, flexible service, encourage new competition Higher prices, lower quality, reduced supply

High Bargaining Power of Buyers

High Bargaining Power of Suppliers

High Threat from Substitutes

Limited market potential, price ceilings

Lower prices, accelerate new product intro, distribution & service critical, customer loyalty needed

High Competitive Intensity

Source: Go, Josiah, 53rd Marketing Strategy and Plans (2004)

Example
Heineken http://www.slideshare.net/jin88lin/heineken-case-study-analysis-presentation

Example

Walmart

http://classes.bus.oregonstate.edu/.../Industry%20analysis%20example.doc

Porters Five Forces of Competition

Potential Competitors: Medium pressure Grocers could potentially enter into the retail side. Entry barriers are relatively high, as Wal-Mart has an outstanding distribution systems, locations, brand name, and financial capital to fend off competitors. Wal-mart often has an absolute cost advantage over other competitors.

Porters Five Forces of Competition contd.

Rivalry Among Established Companies: Medium

Pressure Currently, there are three main incumbent companies that exist in the same market as Wal-Mart: Sears, K Mart, and Target. Target is the strongest of the three in relation to retail. Target has experienced tremendous growth in their domestic markets and have defined their niche quite effectively. Sears and K-Mart seem to be drifting and have not challenged K-Mart in sometime. Mature industry life cycle.

Porters Five Forces of Competition contd.

The Bargaining Power of Buyers: Low

pressure

The individual buyer has little to no pressure on Wal-Mart. Consumer advocate groups have complained about Wal-Marts pricing techniques. Consumer could shop at a competitor who offers comparable products at comparable prices, but the convenience is lost.

Porters Five Forces of Competition contd.

Bargaining Power of Suppliers: Low to Medium

pressure Since Wal-Mart holds so much of the market share, they offer a lot of business to manufacturers and wholesalers. This gives Wal-Mart a lot of power because by Wal-Mart threatening to switch to a different supplier would create a scare tactic to the suppliers. Wal-Mart could vertically integrate. Wal-Mart does deal with some large suppliers like Proctor & Gamble, Coca-Cola who have more bargaining power than small suppliers.

Porters Five Forces of Competition contd.

Substitute Products: Low pressure

When it comes to this market, there are not many substitutes that offer convenience and low pricing. The customer has the choice of going to many specialty stores to get their desired products but are not going to find Wal-Marts low pricing. Online shopping proves another alternative because it is so different and the customer can gain price advantages because the company does not necessarily have to have a brick and mortar store, passing the savings onto the consumer.

Porters Five Forces of Competition contd.

Complementors: Low pressure

One complementor that exists for Wal-Mart is Sams Wholesale Clubs. Although the same company owns this, it complements Wal-Mart by offering the same products in wholesale form, making the company more profitable. Suppliers of goods need to have innovative products to attract customers. For the most part, complementors do not affect Wal-Marts business model

MARKET ANALYSIS

Market Analysis
Dimensions according to David Aaker Market size (current and future) Market growth rate Market profitability Industry cost structure Distribution channels Market trends Key success factors
Source: http://www.netmba.com/marketing/market/analysis/

Market Size
Actual refers to entire market size; i.e. total market

of soft drinks, shampoo, etc. Estimate can be known through customer survey, published sources as government and trade Potential untapped market, new use/user

Small markets

Market Growth
Market size in the future Increasing market means more sales and profit;

decreasing means reduced sales and profit

Market Growth contd.

Determine market growth by: Identifying driving forces What are the forces that drive sales (e.g. price, design, convenience, etc.) Forecasting Growth Market sales indicators demographic data (e.g. number of health conscious individuals as indicator of nutritional supplements); sales of related equipment (e.g. presence of call centers is an indicator of 24-hour convenience stores); based on previous experience of same industries (e.g. Krispy Kreme and J Co)

Market Growth contd.

Determine market growth by: Detecting Maturity and Decline Over capacity and lack of differentiation Buyer Knowledge Substitute products or technologies Saturation No growth sources Customer disinterest

Market Growth contd.

Determine market growth by: Growth of submarkets Example: Coffee market Nescafe, Kopiko, Maxwell Coffee submarket Starbucks, Figaro

Market Profitability
There are five factors that influence profitability: Buyer power Supplier power Barriers to entry Threat of substitute products Rivalry among firms in the industry

Industry Cost Structure

Value chain model - useful for determining where value is added and for isolating the costs. The goal of these activities is to offer the customer a level of value that exceeds the cost of the activities, thereby resulting in a profit margin.

Industry Cost Structure contd.

Industry Cost Structure contd.

The primary value chain activities are: Inbound Logistics: the receiving and warehousing of raw materials, and their distribution to manufacturing as they are required. Operations: the processes of transforming inputs into finished products and services. Outbound Logistics: the warehousing and distribution of finished goods. Marketing & Sales: the identification of customer needs and the generation of sales. Service: the support of customers after the products and services are sold to them.

Industry Cost Structure contd.

These primary activities are supported by: The infrastructure of the firm: organizational structure, control systems, company culture, etc. Human resource management: employee recruiting, hiring, training, development, and compensation. Technology development: technologies to support valuecreating activities. Procurement: purchasing inputs such as materials, supplies, and equipment.

Industry Cost Structure contd.

The firm's margin or profit then depends on its

effectiveness in performing these activities efficiently, so that the amount that the customer is willing to pay for the products exceeds the cost of the activities in the value chain. It is in these activities that a firm has the opportunity to generate superior value. A competitive advantage may be achieved by reconfiguring the value chain to provide lower cost or better differentiation.

Industry Cost Structure contd.

Applications of Analytics Across the Value Chain

Source: http://ph.images.search.yahoo.com/search/images?_adv_prop=image&fr=yfp-t-711&va=example+of+value+chain+analysis

Distribution Systems
The following aspects of the distribution system are useful

in a market analysis: Existing distribution channels - can be described by how direct they are to the customer. (see Kantar World Panel Consumer Index) Trends and emerging channels - new channels can offer the opportunity to develop a competitive advantage. Channel power structure - for example, in the case of a product having little brand equity, retailers have negotiating power over manufacturers and can capture more margin.

Distribution Systems contd.

Alternative Distribution Channels Direct selling Mail orders Own retail stores Distributors Creation of New Channels Emerging changes within the distribution channel i.e. home shopping, convenience stores in gas stations, food cart in MRT/LRT stations, exhibits/sales expo

Distribution Systems contd.

Channel Power - who has the power in the channel? Supermarket up by 8.4% Grocery store sales down by 8.6% Drugstores down by 2% Top 3 retailers are SM, Robinsons and Puregold

Source: Kantar World Panel (2011)

Market Trends
Changes in the market are important because they

often are the source of new opportunities and threats The relevant trends are industry-dependent, but some examples include changes in price sensitivity, demand for variety, and level of emphasis on service and support. Examples: Travel Lite

Key Success Factors

The key success factors are those elements that are necessary in order for the firm to achieve its marketing objectives. These are assets and skills that provide the bases for competing successfully. A few examples of such factors include:
Access to essential unique resources Ability to achieve economies of scale

Access to distribution channels

Technological progress It is important to consider that key success factors may change over

time, especially as the product progresses through its life cycle.

CUSTOMER ANALYSIS

Customer Analysis
Identifying customers segments, motivations, and

unmet needs. Collection and evaluation of data associated with customer needs and market trends through FGDs, customer satisfaction measurement, field testing, etc.

 Demographic profile of Filipinos

Source: National Statistics Board

Average Income and Expenditure of Families by Region, at 2000 Prices: 2009 (in thousand PhP)
Average Income 129 227 136 116 115 139 158 90 95 99 111 98 88 98 99 96 88 62 Average Expenditure 110 197 108 94 90 119 135 77 85 89 92 78 71 83 85 82 74 54

Region Philippines NCR CAR Ilocos Cagayan Valley Central Luzon Calabarzon Mimaropa Bicol Western Visayas Central Visayas Eastern Visayas Zamboanga Peninsula Northern Mindanao Davao Soccsksargen Caraga ARMM

Population by Age Group, by Sex and by Region: 2010

Age Group Philippines Under 5 5-9 10-14 15-19 20-24 25-29 30-34 35-39

Both Sexes 92,097,978 10,231,648 10,317,657 10,168,219 9,676,359 8,370,398 7,390,062 6,744,028 5,990,108

Male 46,459,318 5,291,880 5,329,978 5,230,893 4,914,379 4,229,958 3,719,437 3,419,039 3,037,467

Female 45,638,660 4,939,768 4,987,679 4,937,326 4,761,980 4,140,440 3,670,625 3,324,989 2,952,641

40-44
45-49 50-54 55-59 60-64 65-69 70-74 75-79 80-84

5,450,679
4,664,537 3,883,630 2,980,350 2,224,105 1,495,115 1,140,951 705,977 393,387

2,761,377
2,354,757 1,945,258 1,470,861 1,061,324 678,782 491,491 285,693 145,686

2,689,302
2,309,780 1,938,372 1,509,489 1,162,781 816,333 649,460 420,284 247,701

Population by Age Group, by Sex and by Region: 2010

Age Group

Both Sexes

Male

Female

Philippines Under 5 5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75-79 80-84

92,097,978 10,231,648 10,317,657 10,168,219 9,676,359 8,370,398 7,390,062 6,744,028 5,990,108 5,450,679 4,664,537 3,883,630 2,980,350 2,224,105 1,495,115 1,140,951 705,977 393,387

46,459,318 5,291,880 5,329,978 5,230,893 4,914,379 4,229,958 3,719,437 3,419,039 3,037,467 2,761,377 2,354,757 1,945,258 1,470,861 1,061,324 678,782 491,491 285,693 145,686

45,638,660 4,939,768 4,987,679 4,937,326 4,761,980 4,140,440 3,670,625 3,324,989 2,952,641 2,689,302 2,309,780 1,938,372 1,509,489 1,162,781 816,333 649,460 420,284 247,701

85 and over

270,768

91,058

179,710

Population, by Region Census Years 1980, 1990, 1995, 2000, 2007 and 2010

Area Philippines National Capital Region Cordillera Administrative Region Ilocos Region Cagayan Valley Central Luzon

2010 (Aug 1) 92,337,852 11,855,975 1,616,867 4,748,372 3,229,163 10,137,737

2007 (Aug 1) 88,566,732 11,566,325 1,520,847 4,546,789 3,051,487 9,709,177

2000 (May 1) 76,506,928a 9,932,560 b 1,365,220 4,200,478 2,813,159 8,204,742

1995 (Sep 1) 68,616,536 9,454,040 1,254,838 3,803,890 2,536,035 7,092,191

1990 (May 1) 60,703,206 7,948,392 1,146,191 3,550,642 2,340,545 6,338,590

1980 (May 1) 48,098,460 5,925,884 914,432 2,922,892 1,919,091 4,909,938

IVA- Calabarzon
IVB- Mimaropa Bicol Region Western Visayas Central Visayas Eastern Visayas Zamboanga Peninzula Northern Mindanao Davao Region SOCCSKSARGEN Caraga Autonomous Region in Muslim Mindanao Filipinos in Philippine Embassies/Consulates and Missions Abroad

12,609,803
2,744,671 5,420,411 7,102,438 6,800,180 4,101,322 3,407,353 4,297,323 4,468,563 4,109,571 2,429,224 3,256,140

11,757,755
2,559,791 5,106,160 6,843,643 6,400,698 3,915,140 3,230,094 3,952,437 4,159,469 3,830,500 2,293,346 4,120,795

9,320,629
2,299,229 4,674,855 6,211,038 5,706,953 3,610,355 2,831,412 3,505,708 3,676,163 3,222,169 2,095,367 2,803,045

7,750,204
2,033,271 4,325,307 5,776,938 5,014,588 3,366,917 2,567,651 3,197,059 3,288,824 2,846,966 1,942,687 2,362,300

6,349,452
1,774,074 3,910,001 5,393,333 4,740,318 3,054,490 2,221,382 2,811,646 2,933,743 2,399,953 1,764,297 2,075,238

4,603,435
1,408,040 3,476,982 4,525,615 3,886,097 2,799,534 1,771,860 2,226,169 2,198,683 1,722,727 1,371,512 1,560,480

2,739

2,279

2,851

2,830

2,336

Summary of Projected Population by Sex, by Five-Year Interval: Philippines: 2000-2040

Year 2000 2005

Both Sexes 76,946,500 85,261,000

Male 38,748,500 42,887,300

Female 38,198,000 42,373,700

2010
2015 2020 2025 2030 2035 2040

94,013,200
102,965,300 111,784,600 120,224,500 128,110,000 135,301,100 141,669,900

47,263,600
51,733,400 56,123,600 60,311,700 64,203,600 67,741,300 70,871,100

46,749,600
51,231,900 55,661,000 59,912,800 63,906,400 67,559,800 70,798,800

What Filipinos Buy

Top categories include milk products, snacks, fabric

cleaning, food seasonings, coffee, canned goods, noodles, hair products, cooking oil and softdrinks.

Source: Osorio (2012) Article in Philippine Star

Average Income and Expenditures

Urban P24,000/month Rural P15,000/month Average total monthly household expenses between

13,500 and 15,500 Food expenses pegged at 6,500-7,500/month

Sample Customer Questionnaire Format

Name: ____________________________ [Name of the customer] Address: __________________________ [Home Address of the customer] Gender: _____________________ [Gender of the customer (M/F)] Age: ___________________ [Age of the customer] Home Phone: ________________________ [Phone number of the customer] Email: ______________________________ [Email Address of the customer] First Question: [The First Question should revolve around the customers relationship with the company, product, or services. How long has the customer been with the company? What type of products does the customer buy? These are some of the questions to set the ball rolling and will throw light on the customers loyalty towards the company or any product or service.] Second Question: [The second Question should focus on the various services of the company that the customer is satisfied with or unsatisfied. Questions can be created to derive a yes/no reply like: are you satisfied with the product range or are you satisfied with our current services. Such questions will bring to the forefront a customers level of satisfaction with the company.] Third Question: [The third category of questions should focus on the various attributes of the companys products and services as well as the usefulness in the customers life or their role in his/her lifestyle. Questions should include: Is the abc product perfect for your household or does the xyz service fulfill all your requirements?] Fourth Question: [The fourth category of questions needs to be created to enhance customer faith in the company and its products or services. This question needs to ask the customer how willing they are to try new products of the company and what they would like to suggest to the company for improvement in product or service quality. ]

Source: http://www.samplequestionnaire.com/customer-questionnaire-format.html

Customer Analysis Template

Competitor As product Who are the customers? What do they buy and how do they use it? Where do they buy? When do they buy? How do they choose? Why they prefer a product How do they respond to marketing programs?

Competitor Bs product

Competitor Cs product

Your Product

Customer Analysis Illustration: Energy Bars

Who the Customers are: 63.7 percent of volume is from households with greater than $40,000 income 32.4 percent of volume is from households with greater than $60,000 income 72.8 percent of volume is from households with no kids 65.8 percent of volume is from households where the Head has some college education 39.4 percent of volume is from households with the Head under 35 years old

Customer Analysis Illustration: Energy Bars

Percent Who Have Eaten Energy Bars in the Last Six Months

Female Male 65 and over 55-65 45-54 36-44 25-34 18-24

20% 18% 12% 10% 20% 21% 21% 27%

Customer Analysis Illustration: Energy Bars

Customer Segments: Hard-core Athletes Musclemen Dieters Health Purists Health Conscious and On-the-Go Sports Enthusiasts Specialty Segments Nutrition-seeking Families

Customer Analysis Illustration: Energy Bars

What They Buy:

Convenience Taste Texture Health Benefits Performance/Energy Hunger Satisfaction Price (expect to pay $1.00 to $1.50 per bar) Packaging/Buy In Bulk Availability

Customer Analysis Illustration: Energy Bars

What Use For: Meal Replacements Snacks Athletic Energy Booster

Customer Analysis Illustration: Energy Bars

Where They Buy: Health Food Stores Outdoor Retailers (e.g., REI) Grocery Stores Drug Stores Convenience Stores Mass Merchandisers Club Stores

COMPETITOR ANALYSIS

Competitor Analysis
Competitor analysis in marketing and strategic

management is an assessment of the strengths and weaknesses of current and potential competitors. This analysis provides both an offensive and defensive strategic context to identify opportunities and threats. Profiling coalesces all of the relevant sources of competitor analysis into one framework in the support of efficient and effective strategy formulation, implementation, monitoring and adjustment.[1]

Competitor Analysis System

Secondary data Primary data

Key questions: Who are they? What are the competing product features? What do they want? What is their current strategy?

Differential competitor advantage analysis i.e. Who has the competitive product advantage?

What are they going to do?

Competitor Analysis Who are your competitors?

Beers

Ice cream

Tea

Regular colas Diet-Rite cola Diet Pepsi Diet Coke

Diet lemon limes Product form competition: Diet colas

Wine Fast food

Juices

Bottled water

Fruit flavored colas

Lemon limes Coffee

Product category competition: Soft drinks

Video rentals

Baseball cards

Generic competition: Beverages Budget competition: Food and entertainment

Competitor Analysis What are the competing product features?

Competitor Analysis Product Feature Analysis Example

Product feature Good Bacteria Chamyto 4 billion live good bacteria Bear Brand 4 billion live good bacteria Yakult 8 billion live good bacteria

Type of Bacteria
Benefits

Lactobacillus Lactobacillus Lactobacilli Fortis Fortis Shirota Strain

Enhances natural resistance to intestinal infection 78 ml Enhances natural resistance to intestinal infection 78 ml Aids in digestion

Product volume

80 ml

Competitor Analysis What are their strategies?

Target market selection Core strategy (Positioning) Supporting Marketing Mix (Pricing, Promotion,

Distribution, Product/Service Capabilities)

Differential Advantage Analysis

Strategic Marketing Plan Format Part I

I. Situation Analysis A. SWOT/TOWS Analysis B. PEST C. Industry Analysis a. Threat of New Entrants b. Bargaining Power of Buyers c. Bargaining Power of Suppliers d. Rivalry e. Substitutes

Strategic Marketing Plan Format Part I

D. Market Analysis

a. Market size (current and future) b. Market growth rate c. Market profitability d. Industry cost structure e. Distribution channels f. Market trends g. Key success factors

Strategic Marketing Plan Format Part I

E. Customer Analysis

a. Survey (Please refer to sample/guide) b. Profile (who are the customers, what do they buy and how do they use it, where do they buy, when do they buy, how do they choose, why they prefer a product, how they respond to marketing programs?)

Strategic Marketing Plan Format Part I

Competitor Analysis a. Competitor Profile company profile, mission/vision, founder/management team b. Competing product features c. Target market selection d. Positioning strategy e. Marketing Mix Strategies d. Differential advantage analysis - survey using key industry success factors extensive distribution, customer focus, economies of scale, and product innovation

F.