Unit 3:

INDUSTRY AND MARKET ANALYSIS

Ngô Quý Nhâm Email: quynham@gmail.com Web: sites.google.com/site/ngoquynham

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Lecture outline

 Industry analysis

 Market analysis

Industry size, growth rate and sales projections Industry structure   Key success factors Industry trends 

 Market segmentation and target market

selection

 Buyer behavior  Competitor analysis  Estimate of annual sales and market share

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Industry size, growth rate and sales projections

 Rules of thumb

 Always display financial information in a multiyear format, making it easy to spot trends.

 Display information graphically if possible  Provide information about the industry on a regional, local or segment basis if possible  Avoid the temptation to report only positive

 Not only data but analysis and

implications

or flattering information

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Industry size

 Industry size is normally displayed in

money

 Covers the data over three to five years  The size should be large enough to allow different competitors to serve different segment profitably but small enough that is not attracting large competitors

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E.g. Insurance Industry

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Growth rate

 Should be reported in percentage basis  Provide interpretation of what number

means  May compare to similar industries  May require a creative way  Use Internet, data from association

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Industry sales projections

 Report future sales projections for the

industry

 Use existing sources for projection  if you project the number yourself, explain how you arrive at your projections

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Industry Structure Analysis

Ease of entry into industry

Intensity of competition

Bargaining strength of suppliers

Bargaining strength of customers

Existence of substitutes

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Competition Among Existing Firms

The extent of competition among established

Fragmented industry: low entry barriers & commodity-type products  price wars  Consolidated industry tacit agreement

firms depends on:  Competitive structure

 Rate of industry growth  Amount of fixed costs  Excess capacity  Exit barriers (economic, strategic, emotional

factors)

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Vietnam’s non-life insurance market concentration

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Potential Competitors

 “The greater the barriers to entry, the higher tends to be above-normal profit”

 Barriers to entry

 Brand loyalty (product differentiation)  Cost advantage over new entrants (technology:

learning curve)

 Economies of Scale (Size)  Large fixed costs associate with marketing,

association, R&D and design

 Capital requirements  Government policy

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The bargaining of customers

Customers are most powerful when: 1. There are many small companies in supply

industry and few, large buyers

2. The buyers purchase in large quantities 3. The supply industry depend on the buyers for a

large percentage of its total orders

4. Low switching cost between supply companies 5. Buyers can purchase the input from several

companies at once

6. Buyers can use the threat to supply their own

needs through vertical integration

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The bargaining power of suppliers

 Suppliers become most powerful when: 1. The product that suppliers sell has few

substitutes and is important to the company

2. The company’s industry is not an important

customer to the company

3. Suppliers’ products are differentiated (to such an extent that it’s costly to change supplier) 4. Suppliers can use the threat to of vertically

integrate forward into the company’s industry

5. Buying companies cannot use the threat

vertically integrate backward

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The existence of substitutes

 Substitute products are ones of

industries that serve similar customer needs

 The existence of close substitutes

presents a strong competitive threat

 Key: Elasticity of substitution

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Key Success Factors

 Key success factors (KSFs): factors that determine the relative success of market participants.

 The keys to unlocking the secrets of

competing successfully in a particular market segment.

 An industry may have 6-10 KSFs  KSFs vary widely by industry

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Identifying Key Success Factors

List the skills, characteristics, and core competencies that your business must possess to be successful in its market segment.

Key Success Factor

How Your Company Rates Low 1 2 3 4 5 6 7 8 9 10 High

1.

Low 1 2 3 4 5 6 7 8 9 10 High

2.

Low 1 2 3 4 5 6 7 8 9 10 High

3.

Low 1 2 3 4 5 6 7 8 9 10 High

4.

Low 1 2 3 4 5 6 7 8 9 10 High

5.

Conclusions:

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Example of KSFs

 Quality of products  Competitive price  Brand name recognition  Quality of customer service  Access to distribution channels  Marketing  New product development

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Industry trends

 Environment trends  Economic trends  Social trends  Legal and policy trends  Technological trends

 Business trends  Profit margins Innovation  Inputs costs   New markets

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Application Question

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MARKET ANALYSIS

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Contents of market analysis

 Market segmentation and target market

selection

 Buyer behavior  Competitor analysis  Estimate of annual sales and market

share

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Market Segmentation

 Size and growth rate Profitability and sales   Competitive intensity  Customers’ Purchasing criteria  Risk  Company’s capability of meeting the market demand  Step 3: Segment evaluation and categorization  Step 4: Making choice of market segment

 Step 1: Identify segmentation criteria  Step 2: Market segment Analysis

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Market segmentation

 Identify segmentation criteria :

o Region, Province

Market can be segmented in different ways:  Geography

o Age, Gender, family size, income

 Demographic variables

o personality, lifestyle, values

 Psychographic variables

o benefits sought, product usage rate, brand loyalty

 Behavioral variables:

 Product types

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Market segmentation

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Buyer Behavior

 Consumer Buying Behavior refers to the buying

behavior of the ultimate consumer.

Buyers reactions to a firms marketing strategy has a great impact on the firms success. The marketing concept stresses that a firm should create a marketing mix that satisfies (gives utility to) customers, therefore need to analyze the what, where, when and how consumers buy.

 Marketers can better predict how consumers will respond

to marketing strategies.

 A firm needs to analyze buying behavior for:

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Buyer Behavior

Key question the company must address in Buyer Behavior Analysis:  why consumers make the purchases that they

make?

 what factors influence consumer purchases?  What are the changing factors in our society

that influence consumer purchases?

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Competitor Analysis

 Direct competitors

 Offer the same products and services  Customers often compare prices, features and deals among these competitors when they shop

 Significant competitors

 Offer some of the same or similar products or

services

 Product or service lines overlap but not

completely

 Indirect competitors

 Offer same or similar products in only a small

number of areas

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Analyze Competitors

Analyzing key competitors allows an entrepreneur to:  Avoid surprises from existing competitors’ new

strategies and tactics.

Identify potential new competitors and the threats they pose.

Improve reaction time to competitors’ actions. 

 Anticipate rivals’ next strategic moves.

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Analyze Competitors

Techniques do not require unethical behavior:  Monitor industry and trade publications.  Talk to customers and suppliers.  Debrief employees, especially sales

representatives and purchasing agents.

 Attend trade shows and conferences and study

competitors’ sales literature.

 Watch for competitor’s employment ads.  Conduct patent searches for patents competitors

have filed.

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Analyze Competitors

(continued)

Techniques do not require unethical behavior:  Learn about the kinds of equipment and raw materials competitors are importing from the Journal of Commerce Port Import Export Reporting Service.

 Buy competitors’ products and “benchmark” them.  Get competitors’ credit reports.  Check out the reports publicly-held competitors

must file with the SEC.  Investigate UCC reports.  Check out the resources in your local library.  Use the Internet to learn more about competitors.  Visit competing businesses to observe their

operations.

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Competitive Profile Matrix

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