Understanding Market opportunities

Chapter # 4

The Seven Domains of Attractive Opportunities

Market Domains Macro Level
Market Attractiveness
Mission, Aspirations, Propensity for Risk

(Exhibit: 4.1.)

Industry Domains
Industry Attractiveness
Ability to Execute on CSFs

Micro Level

Team Domains Connectedness up and down Value Chain

Target Segment Benefits and Attractiveness

Sustainable Advantage

Market and Industry

Market is comprised of individuals and organizations who are interested and willing to buy a good or service to obtain benefits that will satisfy a particular need or want and who have the resources to engage in such a transaction. An industry is a group of firms that offer a product or class of products that are similar and are close substitutes for one another.

Macro trend analysis. DEMOGRAPHIC ENVIRONMENT

Aging. Providers of health care , vacation homes, life insurance and other goods and services have taken a note of the graying of the worlds population and are taking steps to develop marketing strategies to serve this fast growing market.

Demographic environment AIDS

According to a research 15 million Africans have died of AIDS from 2000 to 2005. Across Africa grand parents are raising an entire generation of children, as parents have died. Pharma companies and WHO are struggling to develop strategies to deal with AIDS, that represents a huge market but with little ability to for advanced drug therapies that offer hope to AIDS victims.

Demographic environment Imbalanced population growth

There are 6.7 billion people in the world today, a number that is growing by some 77 million each year, an annual rate of just 1.2 percent. Virtually all the growth in the population will be in developing countries. On the other hand 33 countries will have smaller populations in 2050 than today.

Implications for marketers

For marketers , these changes are very important. For makers of capital goods, population growth in Asia and Africa means a growing need for capital goods to satisfy growing demands for manufactured goods to serve local and export markets. For western FMCG firms, seeking to grow in Asia and Africa, their strategies will be much different from those pursued in Western markets.

Demographic environment Increased immigration.

In US many years of immigration from Mexico and Latin America have made the sun belt a bilingual region and many now view Miami as the crossroads of Latin America. The implications for marketers seeking to gain market share among Hispanic Americans are obvious.

Demographic environment Declining marriage rates.

Marriage in much of the western world is on the wane. Married couples which were 80 % of households in the 1950s, now account for just 50.7%. Young couples are delaying marriage, cohabitating in great numbers, and remarrying less after divorce. As a result most couples end up planning and paying for their own wedding.

Socio-cultural environment
These trends have to do with the values, attitudes and behavior of individuals in a given society. Cultures tend to evolve slowly, so certain trends take one or more generation to have significant impact, and people like to carry the values for life, with which they grow up. These trends exert powerful effects on markets for a great variety of goods and services.

Socio-cultural environment Business ethics

In 2003 Kraft was competing closely with Nestle for the no. 1 spot in market share globally, reached agreement with Rainforest Alliance, that seeks to improve the working, social and environmental conditions in agriculture in the third world . The agreement calls for Kraft to buy RA certified coffee from Brazil, Colombia, Mexico, and Central America in 2004, paying 20% premium to farmers. Is this philanthropy??

Fitness and Nutrition

Running, working out, Fitness clubs, sugar cholesterol, organic foods etc. The implications of such trends are playing out in grocery store produce departments, and restaurant menus. These trends are driving more than just food business. Attendance at health and fitness clubs is booming. Sales of home fitness equipments are up, along with advice on purchase and usage.

The Economic environment

When peoples income rise or fall , when interest rates rise or fall, when the fiscal policy of the governments results in increased or decreased government spending, entire sectors of economies are influenced deeply. These implications can be dramatic for marketers.

The Regulatory environment

The regulatory environment can have powerful impact on the market attractiveness. Overregulation protects inefficiencies, restricts entry by new competitors and creates inflationary pressure. Deregulation has typically changed the structure of the affected industries as well as lowered prices creating rapid growth in some markets as a result.

The Technological environment

In past three decades, a great number of new technologies have created new markets for products like cds dvds, laptops, palm top, ipad, ipod, iphones, also the highly effective genetically engineered drugs, stem cell research and so on. Technology changes the way business is done today (banks, airlines, retail stores, and marketing research firms).

Contd.
In addition to creating new markets, these technologies have profound effects on all aspects of marketing practices, such as marketing communication, distribution, packaging and research.

The Natural environment

This refers to the changes in the earths resource and climate, have far reaching effects. The worlds oil supply is finite, which has influenced the need for fuel efficient cars, hybrid gas electric vehicles, solar cars. Opportunities lie in developing ways to save energy, wind farms and hydroelectric projects, and in development of hundreds of green products.

Porters five competitive forces

These forces explain why some industries are consistently more profitable than the others and provides further insights into which resources are required and which strategies to pursue.

A Tool for Assessing Industry Attractiveness: Porters Five Forces

Threat of new entrants Bargaining power of suppliers Rivalry among existing industry firms Threat of substitute products

Bargaining power of buyers

Source: Adapted from Michael E. Porter, Industry Structure and Competitive Strategy: Keys to Profitability, Financial Analysts Journal, July-August 1980, p. 33.

Rivalry among present competitor

There is high investment intensity, required fixed and working capital is high. There are many small firms in the industry or no dominant firm exists. There is little product differentiation. Switching is easy for the customers or buyers.

Threat of new entrants

When strong economies of scale and learning effects are present. If the industry has strong capital requirements. When strong product differentiation exist among current players. If gaining distribution is particularly difficult.

Bargaining power of suppliers

If the cost of switching suppliers is high. If prices of substitutes are high If suppliers can realistically threaten forward integration. When the supplier's product is large part of the buyer's value added.

Bargaining power of buyers

The extent of buyer concentration. Switching cost that may increase or decrease the bargaining power. The threat of backward integration. The products importance to the performance of the buyers product. Buyer profitability.

Threat of a substitute products

Substitutes are alternative product types NOT BRANDS that perform essentially the same functions, such as plastic bottles versus aluminum cans, oleomargarine versus butter, faxing or overnight delivery. Substitute products put a ceiling on the profitability of an industry by limiting the price that can be charged.

Markets at Micro level opportunities are attractive when

Theres a clearly identified source of customer pain, for some clearly identifiable set of target customers, which the offering resolves. This offering would provide such solution or offering that no other product can. The target segment is likely to grow. Current target segment may provide a springboard for subsequent entry.

Opportunities at micro level are attractive when:

The firm possesses something proprietary, that others cannot easily duplicate. The company has superior organizational processes or resources that are difficult to duplicate or imitate. The companys business model is economically viable.

How to identify CSF?

Which few decisions or activities are the ones that, if gotten wrong, will almost always have severely negative effects on company performance? Which decisions or activities, done right , will almost always deliver positive effects on performance?

Key questions before pursuing an opportunity.

Does the opportunity fit what we want to do?? Do we have the people who can execute on whatever it takes to be successful in this particular industry? Do we have the right connections/ networking?