External Analysis - PowerPoint PPT Presentation

External Analysis

• External
• Analyze Global Societal (Macro) Factors
• Analyze Global Task (Micro) Factors
• Industry
• Competitors

SOCIETAL (MACRO)

TECHNOLOGICAL

TASK (MICRO)

Industry

ECONOMIC

POLITICAL/

LEGAL

INTERNAL

Competitors

SOCIOCULTURAL

• Definition:
• Group of firms producing a similar product or service
• Often defined by government (SIC codes), analysts (Valueline and Investment Analyses)

Share Analysis & Forecast

• Financial Trends & Forecast
• Porter’s 5 Forces of Industry Competition

Potential

Entrants

• Five Forces Model

Rivalry

Among

Firms

Buyers

Suppliers

Substitutes

• Market Share Analysis
• Definition of “market”
• Definition of competitors
• Examples

• Business Segments
• Johnson Controls has 4
• Auto; Controls; Plastic; Battery
• Geographic Segments
• U.S.; Europe; Pacific, etc.
• Customer Segments
• home market; business market; government market.
• Market Segments
• fruit-beverage market
• alcoholic beverage market

• External question:
• What share of the total market do we have?
• Internal question:
• How much does that market contribute to our:
• Sales; Net Income; Assets

• Financial Analysis
• Sales
• Net Income
• Other Indicators
• Ratios

• Who Are the Existing and Potential Competitors?
• What Strategic Groups Can Be Identified?
• What Are Their Levels of Sales, Share and Profits?
• What Are Their Growth Trends?
• What Are Their Strengths, Weaknesses, Strategies?

• Strategic Groups

High

Red Lobster

Olive Garden

Bob Evans

Shoney’s

Denny’s

Pizza Hut

Chi-Chi’s

IHOP

Price

McDonald

Burger King

Wendy’s

Low

Limited

Menu

Full

Menu

Product-Line Breadth

• Product Form - brands which directly compete
• Product Category - products with similar characteristics
• Generic Competition - products which satisfy the same customer needs
• Budget Competition - products which compete for the customer’s budget

• Although there may be many suppliers or brands of a product, customers may see only a small number as suitable
• Use research to identify your relevant competitors by determining your customers’ acceptable sets of suppliers or brands plus the criteria which distinguishes suppliers or brands

• Understanding Consumer Perceptions of Products and Brands in a Market
• Use of Product Mapping Technology to Visually Display Relationships among Products or Brands and Attributes which Define the Space
• Can be Used to Define Competitors

Number Depends on

• Planning Horizon - the longer the time horizon, the more opportunity there is for potential competitors to enter
• Market Rate of Change - the faster the rate of change the greater the opportunity for new entrants

• Four competitors should always be included:
• The market leader (largest share)
• The most profitable competitor
• The competitor most like us
• The fastest-growing competitor

• Provide users with a broad understanding of competitive strategy, including management, goals, capabilities, business/market selection criteria and likely competitive behavior.
• Include description, direction, assessment of strategies and implications, in terms of threats and opportunities.

• Cost structure of competitors
• Timing of competitor market entry
• How competitor will respond to a new product introduction, price change, etc.
• How competitors are positioned in the market
• Competitors’ product performance and degree of customer satisfaction/loyalty

1. Determine which functions to benchmark

2. Identify key performance variables to

measure

3. Identify the “best-in-class” companies

4. Measure performance of “best-in-class”

companies

5. Measure your own performance

6. Specify programs and actions to meet

and surpass the “best-in-class”

7. Implement and monitor results

• How Attractive Is the Market or

Industry and Its Submarkets?

• What Are the Forces Reducing

Profitability in the Market?

• What Entry and Exit Barriers?
• What are the Growth Projections?
• What are the Cost Structures?
• What are the Profitability Prospects?

• What Are the Alternative
• Distribution Channels
• and Their Relative Strengths?
• What Industry Trends Are
• Significant to Strategy?
• What Are the Current and
• Future Key Success Factors?

• What Are the Major Segments?
• What Are Their Motivations and Unmet Needs?

The process of dividing large heterogeneous markets into smaller homogeneous subsets of people or businesses with similar needs and/or responsiveness to marketing mix offerings.

• A managerial strategy that adapts a firm’s marketing mix to best fit the various consumer demand curves existing in a market.
• An adaptive strategy that seeks to obtain competitive advantage by doing a better job of satisfying customer requirements.

1. Analyze the Market

• Size and Structure
• Attitudes and Usage
• Competitive Position

2. Develop Segment Profiles

• Identify Factors Which Differentiate Segments
• Describe Characteristics and

Behavior of Segments

3. Select Target Segments Which

Represent Best Market Opportunity

4. Design Marketing Program for

Each Target Segment

• Positioning
• Marketing Mix

5. Analysis and Appraisal

• Do We Have the Resources?
• How Flexible Is Our Approach?
• Does Target Segment/Strategic Plan Meet Our Objectives?
• Does Target Segment/Strategic Plan Build on Our Strengths?

• State of Being: Demographic, Geographic
• State of Mind: Psychographic
• Social Class, Lifestyle
• Personality, Attitudes, Values
• Product Usage:
• Users vs. Non-Users of Brand
• Heavy vs. Light Users
• Users vs. Non-Users of Category
• Usage by Situation
• Benefits Sought

• Group Identity
• Within Segment Homogeneity
• Between Segment Heterogeneity
• Sufficient Size
• Measurable Market Potential
• Clear Variations in Behavior Relative to Other Segments
• Influence Via Available Media
• Segment Can Be Reached Efficiently

• External
• Analyze Global Societal (Macro) Factors
• Analyze Global Task (Micro) Factors
• Industry
• Competitors
• Why do an External Analysis?
• To identify opportunities and threats.