STP- targeting Flashcards
SEGMENT ATTRACTIVENESS FACTORS (32 cards)
size
generally larger is better
growth
growing>static>declining… growth tends to reduce competitive tendencies, but if requiring more immediate profit, a mature segment is better
predictability
more predictable, more attractive
profitability
more profitable, more attractive
bargaining power of consumers
lower means more attractive: less able to push prices down
seasonality and cyclicality
If company is serving one seasonal market, another seasonal market may be attractive to utilise capacity all year round
barriers
lower barriers more attractive
bargaining power of suppliers
more bargaining power=monopoly so less attractive
level fo technology utilisation
more technologically advance companies attracted to markets where they can utilise their expertise
competition
good for customers, but not companies, low competition more attractive
degree of differentiation
companies that can offer more product differentiation are attracted to segments with little differentiation
threat of substitution
if less technologically innovative, seek segments where substitution is less likely
exposure to economic fluctuations
vulnerable markets are generally less attractive
degree of regulation
regulated markets Amy offer more protection but this may lead to inefficiencies
social acceptability or physical environment impact
increasing concern: can be used to build a brand
How do you know if a difference is worth establishing?
To the extent it satisfies:
- Important
- Distinctive
- Superior
- Communicable
- Pre-emptive (competitors cannot copy)
- Affordable
- Profitable
traps to be avoided
- Peripheral businesss (strong competitive position, low market attractiveness)
- Illusion business (weak competitive position, high market attractiveness)
- Dead-end business (weak competitive position, low market attractiveness)
ideally firm wants to seek a position in:
. Core business (strong competitive position, high market attractiveness)
questions to ask:
- how do we define the market- scope and constitution?
- how is the market segmented into different customer groups
- how attractive are the alternative market segmentations
- how strong a competitive position could we take- where do our strength lie?
stage of industry evolution
- depending on company’s objectives (cash generation or growth) different stages may be more attractive
- initial targeting: markets in early stages of evolution are generally more attractive> offer more future potential & less competitors
this would require a lot of investment for growth so short term returns = modest
immediate cash and profit is attractive but usually more competitive
predictability
-more predictable > less prone it is to discontinuity and turbulence > easier to predict outcome of potential value of segment.
price elasticity and sensitivity
-unless it has a major cost adv
markets that are less price sensitive> price elasticity demand is low> more attractive than sensitive ones
high sensitivity= higher probability of price wars
bargaining power of customers
buyers have strongest negotiating power so less attractive
seasonality and cyclicality of demand
- extent to which demand fluctuates by season or cycle
- for company in a highly seasonal market a new opportunity in a counter seasonal market might be attractive
