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Chapter Four

Market/Submarket Analysis

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Chapter 4 - Market and Submarket Analysis

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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

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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
Chapter 4 - Market and Submarket Analysis

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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
Competition
among
among
existing
existingfirms
firms
Threat
Threat of
of
Potential
Potential
Entrants
Entrants
Bargaining
Bargaining
Power of
of
Power
Suppliers
Suppliers
Chapter 4 - Market and Submarket Analysis Figure 4.3

Industry
Profitability

Threat of
of
Threat
Substitute
Substitute
Products
Products
Bargaining
Bargaining
Power
Power of
of
Customers
Customers

Source: Adapted from Michael E. Porter, Industry Structure


Competitive
PPTand
4-8
Strategy: Keys to Profitability Financial Analysis Journal,July-August 1980,p.33.

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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Market Trend
What are current market trends?
What's changing
How important?

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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How do you differentiate between


the two
What is driving it?
Solid foundations
Driven by demographics not influence

Accessibility in main stream


Niche vs Broad

How broad is its influence?


Multiple industries will be influenced

Chapter 4 - Market and Submarket Analysis

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Key Success Factors


Assets and competencies that provide the
basis for competing successfully
Strategic necessities
Strategic Strengths

Found in value chain

Chapter 4 - Market and Submarket Analysis

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Risks of
High-Growth
Market
Competitive
CompetitiveRisk
Risk
Overcrowding
Overcrowding
Superior
Superiorcompetitive
competitive
entry
entry

FirmLimitations
Limitations
Firm
Resourceconstraints
constraints
Resource
Distribution
Distribution
unavailable
unavailable

Market Changes
Changes
Market
Changing KSFs
KSFs
Changing
New technology
technology
New

Chapter 4 - Market and Submarket Analysis

Disappointing growth
growth
Disappointing
Price instability
instability
Price
Figure 4.5

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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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