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External Analysis

External Analysis. OVERVIEW. 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. INDUSTRY. Definition:

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External Analysis

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  1. External Analysis

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

  3. SOCIETAL (MACRO) TECHNOLOGICAL TASK (MICRO) Industry ECONOMIC POLITICAL/ LEGAL INTERNAL Competitors SOCIOCULTURAL

  4. INDUSTRY • 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

  5. Overall Assessment of Competitiveness Potential Entrants • Five Forces Model Rivalry Among Firms Buyers Suppliers Substitutes

  6. Industry Analysis • Market Share Analysis • Definition of “market” • Definition of competitors • Examples

  7. Segments • 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

  8. Two Segment Questions • 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

  9. Industry Analysis Con’t. • Financial Analysis • Sales • Net Income • Other Indicators • Ratios

  10. Competitor Analysis • 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?

  11. U.S. Restaurant Chains • 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

  12. Levels of Market Competition • 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

  13. Finding Hidden Competitors • 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

  14. Market Structure Analysis • 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

  15. Which Competitors to Analyze? 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

  16. Which Competitors to Analyze? • Four competitors should always be included: • The market leader (largest share) • The most profitable competitor • The competitor most like us • The fastest-growing competitor

  17. Competitor Strategic Profile • 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.

  18. Information Required • 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

  19. Benchmarking 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

  20. Benchmarking 5. Measure your own performance 6. Specify programs and actions to meet and surpass the “best-in-class” 7. Implement and monitor results

  21. Market Analysis • 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?

  22. Market Analysis • 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?

  23. Customer Analysis • What Are the Major Segments? • What Are Their Motivations and Unmet Needs?

  24. Market Segmentation 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.

  25. Market Segmentation • 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.

  26. Steps in the Market Segmentation Process 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

  27. Steps in the Market Segmentation Process 3. Select Target Segments Which Represent Best Market Opportunity 4. Design Marketing Program for Each Target Segment • Positioning • Marketing Mix

  28. Steps in the MarketSegmentation Process 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?

  29. Bases for Consumer Market Segmentation • 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

  30. Segmentation Criteria • 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

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

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