Chapter 13 - Selecting target markets Flashcards
Who suggested the 2 ways markets can be defined?
Day, 1992
Day, 1992
Markets can be defined in two ways
What are the 2 ways markets can be defined? (Day, 1992)
Customer-defined market
Competitor-defined market
Customer-defined markets (Day, 1992)
Substitutes in use
All the products and services which may meet same customer needs and problems
More insightful in understanding dynamics of market, attractiveness of alt. markets, developing strong competitive positions
Competitor-defined markets (Day, 1992)
What is it important for?
All the competitors that could possibly serve needs of group of customers
Reflects technological similarity, relative production costs and distribution methods
Important for allocating marketing resource and managing market programme
What is a market?
Group of customers
What is an industry?
Group of companies/firms
What are the 7 market characteristics that influence might assessment of market attractiveness?
1) Size of segment
2) Segment growth rate
3) Stage of industry evolution
4) Predicability
5) Price elasticity and sensitivity
6) Bargaining power of customers
7) Seasonality and cyclicality of demand
What 6 economic characteristics of a market might influence the assessment of market attractiveness?
1) Barriers to entry
2) Barriers to exit
3) Bargaining power of suppliers
4) Level of technology utilisation
5) Investment required
6) Margins available
What are the 4 competitive characteristics that might influence assessment of market attractiveness?
1) Competitive intensity
2) Quality of competition
3) Threat/strength of substitution
4) Degree of differentiation
What are the 4 general business environment factors that might influence assessment of market attractiveness?
1) Exposure to economic fluctuations
2) Exposure to legal and political factors
3) Degree of regulation
4) Social acceptability and physical environment impact
Barriers to entry
Example = protected technology/high switching cost for customers
Costs of overcoming barriers may make venture prohibitively expensive and uneconomic
Barriers to exit
Locked into untenable or uneconomic positions
Substantial investment hurdles (barrier to entry) once undertaken lock company into continuing to use facilities created
Level of technology utilisation
More technologically advanced will be attracted to market which utilise their expertise more fully
Can be used as barrier to entry to other companies
Margins available
Margins vary from market to market
Result of price sensitivity and partly result of competitive rivalry
Size of segment
The right size for a company is not always a large/the largest one
High volume markets offer great potential for sales expansion
Potential for achieving economies of scale in production and marketing
More efficient operations
Segment growth rate
Companies sales growth is more easily achieved in growing markets
Stage of industry evolution
Different stages more attractive depending on company’s objectives
For initial targeting, markets in early stages of evolution generally more attractive -> more future potential and less likely to be crowded by competitors
Short-term returns = modest (growth requires investment)
Predictability
More predictable the market, the less prone it is to discontinuity and turbulence
Easier to predict accurately the potential value of segment
More certain of longer-term viability of target
Price elasticity
Markets which are less price sensitive, where the price elasticity of demand is low = more attractive than more sensitive markets
More price-sensitive markets = greater chance of price wars and shakeout of less efficient suppliers
Bargaining power of customers
Prefer markets dictated by suppliers not customers
UK supermarket = buying power of supermarket chains is considerable
Seasonality and cyclicality of demand
Extent to which demand fluctuates by season or cycle
For company already surviving highly seasonal market, new opportunity in counter-seasonal market might be particularly attractive -> utilise capacity all year round
Degree of differentiation
Where there is little differentiation between product offerings offer significant opportunities to companies that can achieve differentiation
