10. Market Analysis and Competitive advantage Flashcards
What is Porters 5 forces used for
Analysing the business domain
The pressures from within a business domain that an organisation faces
Identification of the domain is important
What are the 5 forces of Porters 5 forces
Industry competitors New entrants Substitute products - Services Buyers Suppliers
How do the 5 forces influence each other?
The five forces shape industry competition
5 forces - When thinking about Industry competitors what should we consider?
Level of competitiveness within domain
How many competitors there are
Who has market share or Power within domain
5 forces - When thinking about new entrants to an industry domain what should be considered?
The threat of new entrants
How easy it is for a new entrant to enter the market
What barriers there are to entry
- Whether new barriers can be erected
5 forces - When thinking about Substitute products what should be considered?
The threat of the new products or services
Are substitutes for the product available
Competing with suppliers of substitute products as well as competing products
Lack of control over creation of new products by competitors (excluding copyrights and patents)
5 forces - When thinking about Buyers what should be considered?
What is their bargaining power
How easily can they switch to another competitor
How many customers
How strongly are they tied to you
Power to increase your price - Who has the power to increase/decrease your price?
5 forces - When thinking about Suppliers what should be considered?
The bargaining power of suppliers How many suppliers there are What is freedom of choice How can we avoid being tied in to a supplier Their power to increase the price
What is the Boston Box used for?
To analyse the portfolio of a Business
Used to assess an organisations products and services according to market share and prospects for Market growth
What are the 4 options in the boston box?
Wild Cat - High Market Growth, Low Market Share
Star - High Market Growth, High market share
Dog - Low Market growth, Low market share
Cash Cow - Low market growth, High market share
What is a Star product/service is the Boston box?
something with high growth and a high market share
could become a cash cow over time when market growth slows if share maintained
Can be profitable
May need investment to maintain position
What is a Wild cat product/service is the Boston box?
A problem child - There is high market growth, however we have low market share
Often new products that we are unsure how they will perform, if not new consider what is causing low market share
May require substantial investment to develop market share (importance on marketing and market analysis)
Organisation needs to decide which Wild cats to invest in to become STARS
What is a Cash cow product/service in the Boston box?
A service with high market share in a low growth or declining market
Mature, successful and established, needing little investment to maintain
Cash cows provide the funding to turn Wild cats into stars
What is a Dog product/service is the Boston box?
Products with low market share in a low growth or declining market
Is it breaking even? Will it be in the future?
Little potential for growth, not worth investment
options - Withdraw or update product
- Careful consideration of investment required
- Improve market share
- move to new market and become wild cat
When might a company keep a Dog product/service
Some companies will keep a dog in order to keep market share and encourage other products e.g. Nestle Machines to keep pods alive
What are the basic rules after applying the Boston box
Choose the WILD CAT while investing in the STARS, milking the CASH COWS and shooting the DOGS
What methodology could be utilised when looking at how we deliver value?
Porter’s value chain analysis
What is Porter’s Value chain (PVC) used for
To structure thinking and identify the processes that bring value to our customers
Shows how different organisational activities and grouped together to provide value to our customers
Aids looking at an Organisation in a process led way rather than an antiquated departmentalised way
What are the different sections of PVC?
Value adding activities - e.g. Logistics, Sales (primary business processes)
Value enabling activities - e.g. Procurement, HR (Support processes)
Value proposition
In PVC what is Value proposition
The customer perspective of the organisation - Definition of product or service that shows the organisation can understand and satisfy customer needs
What differentiates them from the competition
- Efficiency
- Product differentiation
- Customer service
Reasons for buying the product, why choose this supplier over another, especially in a competitive market
What is the use of Value proposition analysis
Value proposition analysis is used to highlight what an organisation, or part of one, is required to deliver to its customers
Name a value adding and a value enabling activity
Value adding; Inbound logistics Operations Outbound logistics Marketing and sales Servicing
Value enabling
IT
HR
Procurement
Which of the following is not considered by Porter 5 forces?
- Market growth
- New entrants to the market
- Substitute products
- Suppliers
Market growth (Analysed against portfolio using the boston box)
What is the central force in Porter’s 5 forces?
Rivalry among existing competitors
Impacting on the rivalry is; Bargaining power of suppliers Threat of new entrants Threat of substitute products or services Bargaining power of buyers
