Market Strategy Flashcards
The external (macro) marketing environment can be modeled with which model?
The PEST(EL) framework
PESTEL analysis helpful to establish transparency regarding environmental forces and trends that can ultimately affect business activity
What does the PEST(EL) framework include?
1) Political forces
2) Economic and competitive forces – Capital market situation (incl. interests rate), general economic output level dependent on the global financial situation.
3) Social forces
4) Technological forces
5) Environmental forces
6) Legal and regulatory forces
Describe P in PESTEL and it’s strongly correlated partner
Political forces (P) and Legal Forces and Regulation (L) have a strong interrelation.
1) Tax
2) Regulation (or deregulation)
3) Consumer/patient protective legislation (safety of consumer products, medical drugs and liability of companies)
4) Competition law: Influencing M&A deals to avoid to big corporations.
Describe E in PESTEL
Economic Forces:
1) General economic output level (like GDP or stocks) - influences buying power, willingness to pay expenditure levels, public procurement and infrastructure investments, income equality
2) Capital market environment (incl. interest rates): financing opportunities
3) Stocks, Investments, GDP
4) Business cycle
Prosperity and Expansion: low unemployment, rising incomes, expansion of overall economic activity levels
Recession: rising unemployment, stagnating salary levels, decreasing willingness to pay and buyer purchasing power
Depression: confidence in economy is challenged, low buying power and high levels of unemployment
Describe T in PESTEL
Technological forces
- New tech opportunities like CRISPR, mRNA, Sequencing technology etc.
- New general purpose technologies (GPT) – that can make it into many different application areas, such as semiconductors.´
- New biotechnological discovery like CRISPR (making Zinc finger gene editing almost obsolete)
- Often lead to obsolescence of existing technological capabilities, but also generate new opportunities, and reduce entry barriers
What is GPT?
General Purpose Technologies – that can make it into many different application areas, such as semiconductors, AI etc.
What often happens when inflation rises?
Interests rates are increased by central banks, rotation in capital markets from stocks to bonds, less risk willingness (might go from risky stocks to safe heavens like banks etc.)
Describe Social (S) and Environmental forces (E)
- Demographic trends (like an aging population increasing demand for medical drugs and healthcare)
- Trends (foods, organic, vegan, sustainability)
- Global health shocks like COVID
- Environmental forces: increasing consciousness for green topics, e.g. waste reduction, CO2 emissions, Global Warming
The external (micro) environment (Industry environment) can be modelled with which model?
Porters five forces
Describe the dimensions in Porters Five Forces (PFF).
1) Threats of new entries
2) Bargaining power of suppliers
3) Bargaining powers of buyers
4) Threat of substitute products or services
5) Rivalry among existing competitors
What is the strength of Porters Five Forces (PFF)?
1) Describes relative strengths of players in a market (you and competition).
2) Highlights the relative power of various players active in an industry, and thus allows for inferences on market attractiveness and industry profitability
3) The framework offers a rather comprehensive perspective on competition
4) No specific industry focus, and although not specifically tailored to a biotech / pharma context, it is also applicable there
Describe Entry barriers from PFF
1) Capital requirements for entry
2) IP currently in the market
3) Economics of scale – Supply side
4) Economics of scale – Network effects, a certain customer benefits from all the other using the product.
5) Governmental Policy and Regulations – Pharma example, moving through regulatory approval is often outsourced as it is hard to do so yourself for the first time.
6) Customer switching costs
7) Unequal access to resources & distribution channels
8) Expected retaliation from incumbents
Describe rivalry amongst existing competitors
1) Numerous competitors are active in the market
2) Market concentration and market power distribution
3) Space for product differentiation or competition solely based on prices
4) Slow industry growth and high exit barriers (e.g. due to specialized investments)
5) Relevance of brand equity
6) Role of fixed costs, ability to expand production incrementally
Describe buyer power from PFF
1) Buyer concentration (few vs. many buyers)
2) High purchasing volume
3) Undifferentiated vs. differentiated products
4) Low switching cost of buyers
5) Threat of backward integration
6) Price sensitivity of buyers
7) Availability of substitutes products / inputs
Describe supplier power from PFF
- Supplier concentration (Few dominates vs. many suppliers)
- Do supplier control scarce inputs? (Lack of substitutes)
- Differentiated products (inputs for downstream firms)
- Customer switching costs (but also suppliers may have such costs)
- Importance of volume to supplier / serving other industries?
Describe threat of substitute from PFF
- Substitute offers attractive price – performance ratio
- Substitute goods with specific advantages
- Low buyer switching cost to substitute
How do you implement Porter’s five forces?
1) Define the relevant industry (“line-of-business industry” level)
2) Identify the participants and segments them into the five groups
3) Assess the underlying drivers of each competitive force (strong, medium, weak)
4) Test the analysis for consistency
5) Reflect about recent and likely future changes
6) Avoid common pitfalls (wrong industry scope, paying equal attention to all forces, confusing outcomes with causes)
What is the segmentation rationale and principle?
Key assumption: It is unlikely that a new solution addresses the need and requirement of all customers.
