Assessing Market & Industry Attractiveness Flashcards
1
Q
Assessing Market & Industry Attractiveness in MACRO Lens
A
With a macro lens, you will examine
- Both markets and industries. Check what environmental conditions affect them both as a whole.
- Does the trend offer an opportunity or a threat to the industry and/or market?
- You do not regard a company’s strategy, target market, or its role in the industry.
- Examples: Porter’s 5 Forces analysis, BCG Market Growth Analysis
2
Q
Assessing Market & Industry Attractiveness in MICRO Lens
A
When assessing with a micro-lens
- Analysis does NOT look at the market or industry overall but instead looks at individuals in the market or industry
- Looks at specific customers and companies themselves, respectively
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Assessing opportunity attractiveness:
- Identified source of customer pain
- Target customers are clearly identified
- The offering provides unique solutions to customer problems
- Target segment likely to grow
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Example: VRIO framework
- Value
- Rarity
- Imitability
- organization
3
Q
Before Choosing a Method to Assess your Market & Industry Attractiveness…
A
You should know…
- Market potential: know the potential size of demand and the number of potential buyers of the buy.
- Penetrated market: how many buyers are actually using the product now?
- Target market: The size of the potential and penetrated market combined
4
Q
Sales Forecast
A
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Top-down approach
- A central person takes responsibility for forecasting and prepares an overall forecast
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Bottom-up approach
- Common in decentralized firms
- Each part of the firm prepares its own sales forecast
- Pro → forces the firm to think clearly about the drivers of demand for each market segment or product line. You will better understand the real potential of the business and all its moving parts.
- Pro → You’re forced to make your assumptions of the drivers of demand EXPLICIT in each category. You’re also forced to make EXPLICIT assumptions that the business can debate. You’re also forced to use evidence gathered from.
- Pro → facilitates “what-if” planning
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Evidence-based methods:
- Statistical methods, observation, surveys, analogy, judgment, experiments, and mathematical approaches
Always use evidence-based forecasting to make decisions because it will always pay off.
5
Q
Statistical Methods
Pros and Cons
A
- Advantages
- Useful in established firms for established products
- Results in a more accurate forecast
- Limitations
- Assumes the future will look very like the past
- When product or market characteristics change:
- Statistical models used without adequate judgment may not keep pace
6
Q
Observation
A
- Advantage
- Based on what people actually do
- Limitation
- Not possible for new-to-the-world products
7
Q
Surveys or Focus Groups
A
- Advantage
- Methods can be done with various kinds of respondents and increasingly done online
- Limitations
- What people say is not always what they do
- People may not be knowledgeable when asked their opinion
- What people imagine about a product concept in a survey:
- May not be what is actually delivered once the product is launched
8
Q
Analogy
A
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Advantages
- Used for new product forecasting where:
- Neither statistical methods nor observations are possible
- Useful for new-to-the-world high-technology products
- Used for new product forecasting where:
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Limitations
- New products and its pricing are never exactly like that to which the analogy is drawn
- Market and competitive conditions may vary from when the analogous product was launched
9
Q
Judgment
A
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Advantage
- Is quite accurate when there is sufficient forecasting experience in known market
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Limitation
- Difficult to defend against evidence based methods
10
Q
Experiments and Market Tests
A
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Done:
- Under controlled experimental conditions
- In live test markets with real advertising and promotion and distribution in stores
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Limitations of test markets
- Expensive to conduct
- Competitors can engage in marketing tactics to mislead the company
11
Q
Other Mathematical Approaches
A
- Chain ratios and indices
- → Market potential is estimated and multiplied by fractional factors
- It starts with market potential and you multiply that by fractional factors to predict the portion of the overall market potential that one firm or product can expect to obtain.
- → Market potential is estimated and multiplied by fractional factors
12
Q
Cautions and Caveats in Forecasting
A
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Psychological biases
- Forecasters often have excessive optimism because of the PLANNING FALLACY (aka delusional optimism). So, they cannot rationally weigh the gains and losses.
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Common sources of error
- Forecasters are subject to anchoring bias
- Capacity constraints are sometimes misinterpreted as forecasts
- Incentive pay
- Unstated but implicit assumptions can overstate a well-intentioned forecast
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Keys to good forecasting
- Make explicit the assumptions on which the forecast is based
- Use multiple methods
13
Q
Market Knowledge Systems
A
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Four commonly used market knowledge systems
- Internal records systems (sales numbers, locations of sales, engagement of company’s marketing programs etc.)
- Marketing databases → Makes CRM possible.
- Competitive intelligence system
- Systems to organize client contact
Effective use of Customer Relationship Management (CRM) will likely result in happier, high volume, loyal customers.
Managing internal records systems is important.
When designing a marketing database to gain competitive advantage, you must consider:
- Cost of collecting the data
- The economic benefits to using the data
- The ability of the company to keep the data current
14
Q
Marketing Research
A
Marketing Research is intended to address carefully defined marketing problems or opportunities
- Questions to be asked by a critical user of marketing research
- What are the research objectives? Will the data to be collected meet them?
- Are the data sources appropriate? Is secondary data used? Qualitative or quantitative?
- Is the research designed well?
- Are the planned analyses appropriate
15
Q
Why does Customer Relationship Management (CRM) often fail?
A
4 Major Pitfalls:
- Without first developing a strategy, it puts CRM in a place where organizational structure/processes haven’t been changed.
If your company has limited resources, a good place to start CRM is to implement sales force automation software.
- This software helps disseminate product information to salespeople quickly to enable them to be more productive and more able to satisfy customer needs.
- Helps collect customer intelligence from salespeople. Keeps track of information from sales calls and you can easily transfer customer information to another sales person if the original sales person is unavailable to help.
