Storytelling Flashcards
Fragmented Competitive Landscape Characteristics (and examples)
No player has considerable market power, no dominant player enjoys market share of more than 50%
These markets are likely to have small and medium size competitors, ie gas stations in the US, fast food chains in the us
Even largest players have a lot of potential to scale further
Less challenging to effort this market than consolidated; don’t have to fight against big name competitors that enjoy a lot of resources
Provides lot of opportunities for inorganic growth (M&A) and sales growth
Typical indicators: location driven businesses, high end markets, taste driven businesses, B2B segment
Examples of high fixed cost businesses (4)
Telecommunications (cell phone, internet, cable, video streaming) - Capex heavy, require a lot of maintenance, high depreciation, B2C (high marketing to maintain brand awareness and differentiation)
Rental businesses (noncurrent assets lead to high maintenance costs and depreciation) Hotel and ski resorts, commercial real estate companies, car rental companies.)
Businesses in high end segment (invest heavily in marketing); cogs can be high since high end offerings are made from high quality materials
Software - heavy R&D (engineering) and marketing (if B2C focus)
Examples of high variable cost businesses (3)
Professional services - consultant, lawyers, surgery facilities (biggest cost is salary, directly dependent on time spent)
Trading businesses (reselling products) - ie: Kroger, Macy’s, Grainger etc.
Consumer products (mass products, not high end)
Characteristics of high variable cost businesses (3)
Labor intensive businesses (however this isn’t always true so stay hypothesis driven)
Dependent on commodity markets (ie: oil and gas, cotton)
Operational excellence > economies of scale (economies of scale are more important in high fixed cost businesses)
Characteristics of commoditised markets and 3 examples of commoditised markets
Products/services are similar across different players. No substantial differentiating points. Lack of differentiation →
Customers choose the cheapest.
Price is key decision making criteria
Price pressure is high
Margins are slim → need higher market share and economies of scale
Competitive landscape highly dominated with several players that dominate the market
Examples: raw materials, like agricultural products, copper, crude oil, etc.
Characteristics of Mature Markets
Products/services that have been around for a long time (ie: cellphones, suitcases)
Low growth rate 2-3% (similar to GDP)
Typically saturated with limited growth potential
Big players are established - with developed distribution, marketing, brand awareness, etc. (stable competitive landscape)
Growth comes from stealing market share or unveiling a new value proposition
