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PowerPoint Diagram Pack
MBA Toolkit I
• Porter’s Five Forces • Customer Experience • Market Sizing & Share • Company & Competitor Analysis • PEST Analysis
Collection of 15 core strategic and operational frameworks—over 100 instructional and template slides
• Industry Attractiveness & Business Strength Assessment • BCG Growth-Share Matrix • Key Success Factors Analysis • Product Life Cycle • Economics of Scale • Adoption Cycle • Value Chain Analysis • SWOT Analysis • SWOT Strategies • Balanced Scorecard
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Questions & feedback? Email me – firstname.lastname@example.org The diagrams in this pack are to be used by the original buyer only. 2
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15.
Porter’s Five Forces Customer Experience Market Sizing & Share Company & Competitor Analysis PEST Analysis Industry Attractiveness & Business Strength Assessment BCG Growth-Share Matrix Key Success Factors Analysis Product Life Cycle Economies of Scale Adoption Cycle Value Chain Analysis SWOT Analysis SWOT Strategies Balanced Scorecard
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Questions & feedback? Email me – email@example.com The diagrams in this pack are to be used by the original buyer only.
Porter’s Five Forces learnppt. 4 .1.com Questions & feedback? Email me – firstname.lastname@example.org The diagrams in this pack are to be used by the original buyer only.
Highlight areas in which industry trends may pose opportunities or threats.com The diagrams in this pack are to be used by the original buyer only. Porter assumes that competition in an industry depends on five basic forces: Potential Entrants Threat of new entrants Bargaining power of suppliers Why We Use It Assess attractiveness on the basis of competition in an industry. p.E. 4 Free Press. The collective strength of these forces determines the ultimate profit potential and allocation in the industry. 5 . – Good starting point to understand key drivers and trends. To understand/diagnose levels of return. 1980. learnppt.com Questions & feedback? Email me – dave@learnppt. Limitations: – Very often used strictly qualitatively. Porter. Analyze where the company stands vis-a-vis the underlying causes of each competitive force. Competitive Strategy. Substitutes Source: M. Strengths & Limitations Strengths: Buyers Rivalry Among Existing Firms Threat of substitute products or services Industry Competitors Bargaining power of buyers Suppliers – Quite comprehensive framework.Porter’s five forces – introduction What It Is Porter’s five forces constitutes a framework for analysing a company’s environment (or industry structure): – Porter first structured the framework in his 1980 book Competitive Strategy.
Customers Buyers’ negotiation power 3. Suppliers Suppliers negotiation power 2.com The diagrams in this pack are to be used by the original buyer only. Potential new competitors Threat by new competitors 4. Substitution products Threat by substitution products learnppt.Porter’s five forces 1.com Questions & feedback? Email me – dave@learnppt. Competitors in the industry Rivalry among existing companies 5. 6 .
com Questions & feedback? Email me – dave@learnppt. Require low switching costs. There are no substitute products. It faces few switching costs. Assess buyers’ propensity to substitute. It earns low profits.Porter’s five forces – potential insight/output • Several important economic and technical characteristics of an industry are critical to the strengths of each competitive force: Threat of New Entrants Barriers to entry: Economies of scale (including shared resources) Product differentiation (proprietary) Capital requirements Switching costs Access to distribution channels Cost disadvantages independent of scale Government policy Expected reaction of incumbent Competitive Advantage Lower Cost Cost Leadership Cost Focus Differentiation Differentiation Differentiation Focus Competitive Scope Broad Narrow Bargaining Power of Suppliers A supplier group is powerful when: It is dominated by a few companies and is more concentrated than the industry it sells to. It poses a credible threat of forward integration. Products are differentiated or suppliers have built up switching costs. It poses a credible threat of backward integration. The products represent a significant fraction of the buyers’ costs or purchases. Its products are important to the industry. stable returns High. It has full information. Intensity of Rivalry Intense rivalry results from: Numerous or equally balanced competitors Slow industry growth High fixed or storage costs Lack of differentiation or switching costs Capacity augmented in large increments Diverse competitors High strategic stakes High exit barriers Bargaining Power of Buyers A buyer group is powerful when: It is concentrated or purchases large volumes relative to seller sales. 7 . Focus on those that: Are improving their price performance trade-off compared with the industries products.com The diagrams in this pack are to be used by the original buyer only. The products are standard or undifferentiated. Take offensive or defensive actions to create a defensible position against the forces: Positioning the firm so its capabilities provide the best defence Influencing the balance of forces through strategic moves Anticipating shifts in the factors underlying the forces and responding to them Entry Barriers L H learnppt. The industry is not an important customer. risky returns High. stable returns H Low. The bought product is unimportant. risky returns Search for products that can perform the same function. Pressure from Substitute Products Exit Barriers L Low. Are produced by industries earning high profits.
6% 1994-1999E 5. Veronis. S&P Industry Survey Note: Magazine and newspaper spending includes both advertising and consumer spending learnppt.com Questions & feedback? Email me – dave@learnppt.S. 1989-1999 Includes both consumer and advertising spending – $ Billions 140 120 100 80 60 40 20 0 Total revenues CAGR 1989-1994 4. Suhler & Associates.7% Newspapers Books Magazines 89 90 91 92 93 94 95E 96E 97E 98E 99E • Newspaper and magazine revenue growth has been driven by price increases. printed media revenues. as circulation has been flat to falling • Newspapers and magazines share of total advertisers’ spending has also fallen from 32% to 28% over the last five years • Book publishers have seen growth in book unit volumes. 8 .com The diagrams in this pack are to be used by the original buyer only. with stable prices: – Books remain a popular source for access to fiction and non-fiction despite a growing number of substitutes – Recent growth of discount stores has helped increase sales The internet provides an innovative new distribution medium that magazines and newspapers can Source: use to recover readers and lure advertisers.The publishing industry has seen only modest increases in sales in recent years EXAMPLE Total U.
Indices track independent. is not rewarding print-focused players EXAMPLE Value of $100 invested in March 1985 450 400 350 300 250 200 150 100 50 0 S&P 500 Newspapers Books Magazines The Wall Street appeal of online involvement could help publishers who proactively use the new distribution medium maa-88 maa-90 maa-92 maa-93 maa-94 maa-85 maa-86 Publishing companies must to transition to full media companies.com maa-87 maa-95 maa-89 maa-91 .The stock market. 9 learnppt.com The diagrams in this pack are to be used by the original buyer only. “pure play” print media companies in each print segment Questions & feedback? Email me – dave@learnppt. Source: Note: Compustat All dividends reinvested. expanding beyond print to distribute their products to be seen as long-term competitors. unsure of publishing’s future role.
Leaders in the PC business have changed as quickly as the need for computing power EXAMPLE U. 10 . Unit Market Share U.com The diagrams in this pack are to be used by the original buyer only.com Questions & feedback? Email me – dave@learnppt. Unit Market Share of top 10 competitors (quarterly changes in market share) CompanyX CompanyX CompanyX CompanyX CompanyX CompanyX 70% 60% 50% 40% 30% CompanyX CompanyX 20% CompanyX 10% 0% 1Q 1993 CompanyX 2Q 1993 3Q 1993 4Q 1993 1Q 1994 2Q 1994 3Q 1994 4Q 1994 New entrants and industry consolidation are forcing competitors to continually redefine their business strategies.S.S. learnppt.
13 $0.04 $0. & distribution SG&A $0.05 Operating profit 0 1989 1990 1991 1992 1993 1994 Taiwanese hardware manufacturers. 1989-1994 % Gross margin $0. 11 .com The diagrams in this pack are to be used by the original buyer only. such as Acer. have experienced 25% compound annual revenue growth since 1986 by being the lowest cost suppliers to the top PC makers worldwide.com Questions & feedback? Email me – dave@learnppt.Gross margins have declined as the PC becomes a commodity product EXAMPLE Average PC makers’ revenue spending $1.02 Revenue Cost of goods R&D Mktg. learnppt.76 $0.00 70 60 50 40 30 20 10 Top PC makers’ gross margin.
com Questions & feedback? Email me – dave@learnppt. learnppt.Several factors determine the bargaining power of buyers A buyer group is powerful when: • • • • • • • • • It is concentrated or purchases large volumes relative to seller sales Its purchases from the industry represent a significant fraction of the buyers’ costs or purchases It purchases standard or undifferentiated products Brand identification is low Its switching costs are low Its profits are low It poses a credible threat of backward integration Its purchases from the industry is unimportant for the quality of its products or services It possesses full information These factors may change over time and alter buyer power.com The diagrams in this pack are to be used by the original buyer only. 12 .
Crown Books 3. 1994 1. Retail Market Share. 13 .4 billion 38.com The diagrams in this pack are to be used by the original buyer only. Borders-Walden 16.Bookstores are the only channel with the ability to exert pressure on publishers EXAMPLE Publishers Primarily newspapers and magazines Direct Distribution (subscription) Convenience Stores & Newsstands Other retail outlets Schools & Universities Primarily books Bookstores U.S. but could bypass bookstores through Internet-based mail-order services and other creative services. but put pricing pressure on publishers • For newspapers and magazines the customer-base is more fragmented Limited bandwidth will slow book publishers’ ability to distribute products on-line.4% • These large national stores played a central role in boosting book sales to record levels in 1994.1% 3.2% 4. Books-a-Million 1.8% Total retail market of $9.3% 2.com Questions & feedback? Email me – dave@learnppt. learnppt. Barnes & Nobles 17.
with most revenue generated by computer-related sales Typically offer a wide range of products. well-merchandized store fronts . Inc. Questions & feedback? Email me – dave@learnppt. including computer-related equipment Offer a wide range of electronic merchandise. or other services Large.com . or representative Provide customized value-added solutions for clients Offer unique.Distinct distribution channels serve the two major different end-user segments EXAMPLE Channels Direct Sales Definitions Those sales made by a manufacturers’ sales force. Do not add unique value to the system but do offer some value in the form of support. especially retailers.com The diagrams in this pack are to be used by the original buyer only. Source: IDC and Merrin Information Services. 14 learnppt. agent. tangible solutions “off-the-shelf” to targeted customers The “traditional” computer dealer channel. training. including computerrelated items Retailers and resellers focusing on office supplies Third-party computer sales that use telephone to perform all levels of sale Direct telephone sales from manufacturers not using third parties Typical buyer Value-added channels System Integrators (SI) Value-Added Resellers (VAR) Dealers Business Computer Superstores Mass Merchants Consumer Electronic Stores Mainstream channels Office Stores Mail Order Direct Response Home users Massive increase of home PC usage has increased the strength of the mainstream channel.
com The diagrams in this pack are to be used by the original buyer only.com Questions & feedback? Email me – dave@learnppt.Substitute products exist Substitutes place a ceiling on the product’s price Identification: A product that performs the same function Position vis-a-vis substitute products may be a matter of collective industry actions Penetration by the substitute depends on: Existence of substitutes – The price-performance trade-off – Tendency of purchasers to reach for substitutes – Switching costs – Risks of failure – learnppt. 15 .
com Questions & feedback? Email me – dave@learnppt. 16 .com The diagrams in this pack are to be used by the original buyer only. learnppt. Services Fax Services As a substitute for … Magazines Newspapers Books on cassette CD-ROM Online / internet Print publishers are rushing into these substitutes to pre-empt a push from niche players.Supply Chain pressures have encouraged publishers to explore non-print opportunities EXAMPLE New innovation Books Telephone Info.
17 .Several substitute end-user devices look to compete with PCs for a share of internet hardware revenues EXAMPLE Substitutes Hand-held communications devices Advantages Limitations Expensive Slow. learnppt. low power appliances focused mainly at Internet access User comfort Difficult to read. with screen.com Questions & feedback? Email me – dave@learnppt. except increasing penetration of those requiring enormous client broader-use PCs processing capability Substitutes to PC access will focus on specific applications.com The diagrams in this pack are to be used by the original buyer only. modem. difficult interface Potential application Remote access to Internet Personal Digital Assistants (PDAs) Highly portable Interactive Televisions Set-top or internal devices which transform the TV into an interactive Internet device Screen Phones Adapted telephones. and keypad. especially if Real time video broadcast extend to use with productivity software Low costs Limited applications Mail and messaging Some commerce Low costs and user complexity Too narrowly focused given Most Internet applications. for basic operations Internet Appliance Low cost. leaving a significant need for multifunctional PCs.
leading to a sharp rise in North American exports – Foreign producers also prefer to sell to more lucrative markets Even partial movement towards non-print media affords publishers greater bargaining power with conventional suppliers Many newspapers and magazines are already on the web.com The diagrams in this pack are to be used by the original buyer only. 18 learnppt. 1994 Top 5 Books Magazines Newspapers 51.5% 64.7% 41.4% Independent Printers Ink Suppliers Other Publishers Many publishers and printers have seen the price of paper double in the first half of 1995 alone: – A world paper shortage has resulted from increased demand for paper-based information – North American paper producers have the option to sell to more lucrative foreign markets. piloting the feasibility of an online presence.2% 56. Source: Publishers Weekly Questions & feedback? Email me – email@example.com% 86.Paper companies’ strong leverage is pushing publishers to explore non-print options EXAMPLE Paper Companies North American Market Share.1% Top 10 74.com .
with over 80% of PC Intel manufactures supplies 85% Looked to for third party Supply the vital components for Existing operating systems. including relationship with a similarly high network competes mainly with Motorola motherboards and other presence. suppliers’ leverage will increase EXAMPLE Operating systems Processor makers Contract manufacturers Component makers Microsoft. combined with increased competition. 19 . which server models will change the more competitive with the take on more responsibility for already makes mother-boards.com The diagrams in this pack are to be used by the original buyer only. Cyrix. / decr. AMD and segments of the value chain will increasingly integrate PC NexGen) component making operations Will increasingly have the into their in-house capabilities ability to integrate down the value chain A high pace of innovation. manufacturing and assembly assembling PCs. PC makers Increasing need for client computing power has resulted in must ensure hardware a reliance on cutting edge compatibility processor providers with the Other players: Apple and IBM latest in technology peripherals Supplier leverage (incr. PC Motorola’s PowerPC chip is slowly gaining market share look to outsourcing to cut makers will increasingly rely on through the efforts of Apple and costs affordable components IBM suppliers Contract manufacturers New browsers and client / Clone chipmakers are becoming leverage will increase as they Suppliers like Intel.com Questions & feedback? Email me – dave@learnppt. of all processors for PCs. will fuel an overall increase in supplier leverage.g. learnppt. role Pentium (e. domi-nate this supplier segment.) Rationale Through at least the year 2000 operating system developers will maintain their already dominant positions PC OEMs will increasingly As margins are squeezed.As hardware makers continue to look for ways to cut costs. and Novell.
Don't: – Just use as a static tool – show trends in each of the areas. 20 .Porter’s five forces – top tips Hints and Pitfalls Do: – Define precisely the industry before conducting analysis.com The diagrams in this pack are to be used by the original buyer only.com Questions & feedback? Email me – dave@learnppt. Data Sources Industry reports Analysts’ reports Database searches See also related analytics sources PEST SWOT Segment attractiveness Product life cycle Product substitution Competitors comparison Related Analytics learnppt. – Quantify your findings where possible.
com The diagrams in this pack are to be used by the original buyer only. Substitution products Threat by substitution products learnppt.Porter’s five forces 1 Analyze industry structure 1. Suppliers Suppliers negotiation power 2.com Questions & feedback? Email me – dave@learnppt. 21 . Customers Buyers’ negotiation power Identify rules of the industry and derive chances and risks Develop and implement measures 3. Potential new competitors Threat by new competitors 2 3 4. Competitors in the industry Rivalry among existing companies 5.
22 . continuous low few learnppt.Porter’s five forces Highly UnunattracNeutral attractive tive Economies of scale Product differentiation Brand identity Conversion costs Access to sales channels Capital needs Access to state-of-the-art technology Access to raw materials Protection by government Experience effect Specialised assets One-time exit costs Strategic linkages Emotional restraints Legal and social restrictions Number of comparable competitors Industry growth Fixed or storage costs Product characteristics Capacity increases Diversification of competitors Strategic assignments little poor poor low broad low broad broad not available unimportant many high many many many many slow high consumables large steps high many Attractive Highly attractive high pronounced high high limited high limited limited strong very important few low few few few few fast low specialised prod.com Rivalry among competitors Exit barriers Entry barriers Questions & feedback? Email me – firstname.lastname@example.org The diagrams in this pack are to be used by the original buyer only.
com The diagrams in this pack are to be used by the original buyer only.Porter’s five forces Highly UnunattracNeutral attractive tive Number of important buyers Availability of substitution products from other industries Buyers’ conversion costs Buyers’ threat with backward integration Industry’s threat with forward integration Importance for the quality or service of the buyers Buyers’ total costs in the industry Buyers’ profitability Number of important suppliers Availability of substitution products for the suppliers’ products Differentiation or conversion costs for delivery products Delivery’s threat with forward integration Industry’s threat with backward integration Suppliers’ importance for the quality or service of the industry Overall industry costs caused by suppliers Importance of the industry for the supplier group few high low strong strong high large share low few low high strong strong high large share low Attractive Highly attractive many low high weak low low small share high many high low weak weak low low share high learnppt.com Suppliers’ negotiation power Buyers’ negotiation power Questions & feedback? Email me – dave@learnppt. 23 .
com Questions & feedback? Email me – dave@learnppt. 24 .Porter’s five forces Highly UnunattracNeutral attractive tive Attractive Highly attractive low high low low advantageous advantageous high unlimited low unlimited unlimited no Availability of substitution products Availability of closely related substitution products Users’ conversion costs Profitability and aggressiveness of the substitution product manufacturers Value for money of substitution products Industry protection Industry regulations high low high high disadvantageous disadvantageous low limited high limited limited substantial Authority measures Political continuity International capital transfer Customs Foreign exchange operations Foreign ownership Help for competitors learnppt.com The diagrams in this pack are to be used by the original buyer only.
com Questions & feedback? Email me – dave@learnppt. New products due to technology development learnppt. location. subsidies. raw materials. via common standards. 25 .Porter’s five forces Competitive Dimensions Short Characterization of the Industry Factors Influencing the Relevant Competitive Dimensions Market entry barriers for new competitors are: – – – – – – Economies of scale Product differences reflected by a corresponding buyer loyalty High capital need for market entry Conversion costs for the buyer when switching to another product Extraordinarily good and expensive sales channels Size-independent cost advantages (patents. governmental barriers) Potential competitors New competitors Intensive rivalry emerges from: – – – – – – Many similar competitors Weak industry growth High fixed costs in case of high capacity reserves Differentiation of competitors only via the price High strategic stakes (gains in market share at any cost) High exit barriers Threat of substitution Substitution threat develops due to: – – – – Real or potential attractive substitution products Offensive marketing for substitution products and services Impossible defense against substitution products e.com The diagrams in this pack are to be used by the original buyer only.g. using sales channels etc.
com The diagrams in this pack are to be used by the original buyer only. who want to pass them on to their suppliers – Credible threat with backward integration in the value chain learnppt.com Questions & feedback? Email me – dave@learnppt. marketplaces) – Few buyers emerge in a concentrated fashion – Low conversion costs and risks for the buyer when switching the supplier – High industry products’ share of total costs at buyer side (strategic purchasing policy) – Revenue problems at buyer side.Porter’s five forces Competitive Dimensions Short Characterization of the Industry Factors Influencing the Relevant Competitive Dimensions Factors increasing the suppliers’ negotiation power : – – – – – – Large competitive advantages of the delivered product Low number of potential suppliers Great importance of the product for the quality of the client’s product High conversion costs when switching the supplier Low significance of the client for the supplier Credible interest in a forward integration Suppliers Customers Factors increasing the buyers’ negotiation power: – High market power at buyer side – Large number of alternative providers for the buyer (standardised exchangeable products) – Cost and market transparency for the buyers (ex. 26 .
com Questions & feedback? Email me – email@example.com The diagrams in this pack are to be used by the original buyer only. 27 .Porter’s five forces Industry Attractiveness Currently low Entry barriers Exit barriers Rivalry of competitors Buyers’ negotiation power Suppliers’ negotiation power Availability of substitution products Authority measures Overall assessment middle high Future low middle high learnppt.
Porter’s five forces Industry Attractiveness Currently low … … … … … … … Overall assessment middle high Future low middle high learnppt.com Questions & feedback? Email me – firstname.lastname@example.org The diagrams in this pack are to be used by the original buyer only. 28 .
Customer Experience learnppt.com The diagrams in this pack are to be used by the original buyer only.com Questions & feedback? Email me – email@example.com. 29 .
R&D) • Help focus creativity on areas where opportunities to create a competitive advantage appear Strengths & Limitations • Strengths: – Interprets the industry/company value chain from customers’ perspective –Helps put them in their customers’ shares: – Can help make understanding very tangible for clients: –Puts them in their customers’ shoes. where. • Limitations: – Lengthy process – Requires wide ranging customer surveys learnppt.g. 30 . when. how and why customers buy.com Questions & feedback? Email me – dave@learnppt.: – How do consumers become aware of their needs? – How do consumers order and purchase? – How is your product repaired or serviced? • Highlights what criteria are important to customers in purchase and discontinuation decisions • A variant of the value chain concept: – Plots customer interaction against it Why We Use It • Understand what events affect the customer’s relationship to decide what levers the client should manage strategically and operationally to retain the customer • Highlight what processes are key to efficiently serve and retain the customer: – Both practical (eg.com The diagrams in this pack are to be used by the original buyer only. e. switchboard) and technical (eg.Customer experience – introduction What It Is • Illustrates key areas of customers interactions with a business: – Usually shown as a succession of interaction with a company – Should account for what the customer goes through from the time they first become aware of a product to the point they stop using it – Can be generic for an industry or specific for a given company • Provides a starting point to identify areas of potential differentiation • Answers a series of questions as to what.
where. Use focus groups to analyse where areas exist for potential improvement learnppt.com Questions & feedback? Email me – dave@learnppt.Customer experience – how to do it 1. Map the customer’s experience to the client’s processes 3. and how What influences the customer and why What customers are satisfied/dissatisfied with and why – Validate your understanding with customers: – Conduct customer focus groups and customer interviews 2. Identify associated activities—to deliver the customers’ experience 4. capture: • • • What takes place. with whom. Get a rough understanding of how and why consumers are buying: – Analyse consumer surveys – Talk to experts in the client company – For each key dimension of the customer experience.com The diagrams in this pack are to be used by the original buyer only. 31 .
com . 32 learnppt.Customer experience – illustrative output An Illustration of Customer Experience in the Telcos The Customer Experience Brand awareness Product & service availability Ease of buying Ease of connection The First Experience Usage quality Quality of service Ease of leaving Delivering the Customer Experience Branding & Positioning Product Development Sales Credit Checking Set-up & Activation Delivery Usage Customer Services Billing & Collection Service Termination Activities to Deliver the Customer Experience Company/Industry Value Chain Source: London Shop Training Module: “Production Market/Industry Analyses and Using Strategic Frameworks”. 27/2/98. 14.com The diagrams in this pack are to be used by the original buyer only. Questions & feedback? Email me – dave@learnppt. p.
Its complexity may suggest levers for differentiation – Develop your point of view from a too limited set of specific experiences learnppt.Customer experience – top tips Potential Insights • Highlights typical source of customer satisfaction and retention by appreciating the context within which each step of the consumption chain unfolds • Suggests levers for differentiation • Provides a basis for exploring many non-traditional ways to create value Hints and Pitfalls • Do: – Perform the exercise for each important customer segment – Compare customers’ actual experience with your client’s perception of what that experience is – Link to functions and processes – Use personal experience a a starting point to understand the process • Don’t: – Over simplify the customer experience: . 33 .com Questions & feedback? Email me – firstname.lastname@example.org The diagrams in this pack are to be used by the original buyer only.
com Questions & feedback? Email me – dave@learnppt. case examples and related analytics Data Sources • Personal experience • Customer survey • Interviews: – Customer – Experts • Focus groups • Market research • Experience on other projects • Most useful when conducting a customer analysis • Can be complemented by the following analytics: – Needs based segmentation Related Analytics learnppt. 34 .com The diagrams in this pack are to be used by the original buyer only.Customer experience – data sources.
Market Sizing and Share learnppt.com Questions & feedback? Email me – email@example.com The diagrams in this pack are to be used by the original buyer only. 35 .
g. – Forecasting (projecting out over future years). and relative market share (i. – Whether it is growing. Measure of how much of a business market or segment individual competitors account for. customers.e. segments in which our client competes). e. – Absolute and relative share of total business segment. and performance. learnppt. it is important to show the dynamic. and suppliers.e. i.com The diagrams in this pack are to be used by the original buyer only. To determine the relative performance and position of competitors. flat. Determine the power of competitors compared with each other. – Provides the key benchmark against which we measure market share.f. or shrinking. – Volume (of units produced over a specified period). Limitations: – Sizing a market from scratch can take weeks or months. – Not the only determinant of attractiveness c. In some cases.e. importance. market size may be available from secondary data sources—otherwise we must estimate it.e. Typically. – Absolute and relative share of total addressable market (i. proportion of total units produced). establishes whether share builds other advantages. – Essential to understanding competitors’ relative size. RMS vs. potential to make money.Market-sizing and share – introduction What It Is Quantifying the size and growth of a market or segments either by: – Value (of revenue or profitability over a specified period). and determine relative performance of competitors.e. proportion of total revenue or profit). quantify the size of a business or segment over time: – Historically (over a number of years). 36 . lower unit costs. Strengths & Limitations Strengths: – Provides a quantitative measure of business of segment attractiveness.com Questions & feedback? Email me – dave@learnppt. Market share can be measured by: – Value (i. As with many strategy analyses. ROCE. and how this is changing over time: – Who’s successful/unsuccessful? Why? – Are new entrants gaining share? – Are substitutes being used? In conjunction with other analytics. – Relative attractiveness compared with other businesses or segments. There are several market share measures: – Absolute and relative share of total business market. Helps determine the attractiveness of a business or segment: – Its size. share compared with other competitors’). we look at both absolute market share. Why We Use It Help determine absolute and relative share of competitors in a business or segment: – Essential to understand which competitors are successful or unsuccessful. – Volume (i.
Validate total size and trends with client and/or industry experts. or average purchases per customer. – Changes influencing customer demand. i. methodology). – Validating and refining market size estimates. total size of related businesses). Develop methodology to size the market—there are two broad approaches: – Top-down. number of customers). – Often we use both a top-down and bottom-up approach to check results. 37 .e.: – Relevant macroeconomic trends.e. the key stages are: – Developing and documenting assumptions. Develop picture of how things have changed over time: – What is the 5 year growth rate? – Calculate Compound Annual Growth Rate (CAGR).g.com Questions & feedback? Email me – dave@learnppt. – Gathering data. i. from micro-variables (e. The time available and degree of accuracy required will determine choice of methodology. e. CAGR = Current size Starting size 1 /n n = number of years growth Split out real and nominal growth for value basis.Market sizing and share – how to apply it Market Sizing Sizing Based on Publicly Available Data Understand how sources size the market (i.g. – Changes in number of customers. adjust for inflation. – Building market size estimates. i.: – Number of customers in total business or segment.com The diagrams in this pack are to be used by the original buyer only.e. number of cars produced). number of flights.g.g. from macro-variables (e. and cross-check estimates. Constructing Own Estimate of Market Size Identify key drivers of market size. Try to obtain 2–3 independent estimates of market or segment size. learnppt. Identify key drivers of future market size. e.e. Once you have developed your methodology. – Bottom-up. – Number of units of goods or services (e. – Average number of units purchased per customer.g. Understand trends in market size and underlying root causes. Evaluate reliability of source data.
compare to other players.Market sizing and share – how to apply It Calculating Market Size Steps before Determining Market Share Determine the business market(s) or segments to be sized Size the business market(s) or segment(s): – See Market-sizing Identify the company's or individual competitors’ sales.com The diagrams in this pack are to be used by the original buyer only.com Questions & feedback? Email me – dave@learnppt. 38 . learnppt. profits or units of output Various Market Share Measures Exist Measure of Share Absolute Market Share – Business Absolute Market Share – Segment Relative Market Share – Business1 Relative Market Share – Segment1 How to Do Total Company Sales Total Market Sales Company Segment Sales Market Segment Sales Total Company Sales Total Sales of Largest Competitor Company Segment Sales Biggest Competitors’ Segment Sales 1 If company is the largest.
com The diagrams in this pack are to be used by the original buyer only. 39 .com Questions & feedback? Email me – dave@learnppt.Market-sizing and share – Illustrative output Market Sizing Evolution of sales by Business Segment 5000 4500 4000 3500 3000 2500 2000 1500 1000 500 0 1993 1994 1995 1996 100% 90% 80% Evolution of % of Total Sales by Business Segment Business Other Medipsy GSMS Dynamis Acute care Overall CAGR 9% 11 % 301 % 23 % 25 % 24 % 70% 60% 50% 40% 30% 20% 10% 0% 1993 1994 1995 1996 learnppt.
– Over analyse—insight often comes from other analysis. other countries). e. cost advantages of holding dominant share). – Relative performance of competitors. Test/validate with client market size assumptions and output. 40 . not solely absolute share). Don’t: – Only use this data to determine attractiveness – Just use to size revenue (can size by other units.com The diagrams in this pack are to be used by the original buyer only. – Look at relative share (i. – Hypotheses regarding market share and profitability of competitors. learnppt. – Assume a client’s calculation is correct: – Always check industry assumptions. units at output). and future market size estimates. Probe for the root causes of changes in total market size. why competitor X is gaining share. – Relative success of competitors (when used to determine absolute and relative market share).g.Market-sizing and share – top tips Potential Insights Analytic helps determine: – Industry attractiveness (past. Gather past. present. Cross-check all data (both publicly available market size data and own estimates).com Questions & feedback? Email me – dave@learnppt. – Degree of market concentration/fragmentation.g. demographic data. – Forget to look at historical developments. Ensure consistency between methodology for measuring total market size and measuring individual companies’ performance.e. future). Hints & Pitfalls Do: – – – – – – Sanity check first (comparisons with GDP. – Critical issues to probe further (e. present. – Competitive pressure (from growth rates and consolidation). and how this is changing.
and internal reports) – Annual reports (for client and competitors) – Broker reports (from investment banks) – Industry reports – Database sources – Industry associations Covered in relevant sections on related analytics: – No additional data required to determine market share. 41 . Related Analytics Market-sizing is a critical step within Business Definition (see introduction of this section) Company/competitor analysis Financial analysis/ratios analysis learnppt.com The diagrams in this pack are to be used by the original buyer only. case examples and related analytics Data Sources Publicly available data: – Client’s data (business plans.Market-sizing and share – data sources.com Questions & feedback? Email me – dave@learnppt.
learnppt. or by creating an approximation in-house Approaches to market sizing Publicly available data from 3rd party Not publicly available data from 3rd party Create an in-house approximation using component data and proxies / assumptions where necessary Top down Bottom up x+y+z a+b+c $ $ $ rd In reality it is rare to be able to pluck a market size estimate directly from a 3rd party.com The diagrams in this pack are to be used by the original buyer only.com Questions & feedback? Email me – dave@learnppt. 42 .Markets can either be sized using data from a 3rd party provider.
e. and cross-check estimates (triangulation of data) Use opinion from industry experts – vital to confirm this with other industry experts and to validate with your client Why important Definition or scope of market may be different Source must be credible with client.com Questions & feedback? Email me – dave@learnppt. 43 .Whenever data from a 3rd party is used to estimate a market size or as part of a sizing calculation. does not mean it is correct or exactly meets your needs. certain ‘tests’ should be applied Checklist for 3rd party data Understand how sources size the market i. methodology Evaluate reliability of source data Try to obtain 2-3 independent estimates of market or segment size. learnppt.com The diagrams in this pack are to be used by the original buyer only. Are the assumptions valid? Gives a degree of confidence and a sense check of ‘the answer’ Industry experts hold good credibility and may provide information that is not available from a 3rd party report rd Just because a 3rd party has published a figure.
very detailed and require high level of logic and cross-referencing of data Whichever method is used.com Questions & feedback? Email me – firstname.lastname@example.org The diagrams in this pack are to be used by the original buyer only. adults in UK Macro industry level data e. assumptions and data sources. size of beverage industry Percentage splits / data points to break down high level data e.different purposes.g.g. 44 . learnppt. it is important to clearly present your method. and each approach has associated advantages / disadvantages When to use Likely type of data sources Global / national statistics e. % of adults in UK who drink coffee Advantages / disadvantages Can be as quick and simple as required Gives a good estimate of the rough size Highly assumption driven and less accurate than bottom-up Answer may produce a large range Top-down When answer is required quickly High degree of accuracy is not required – approximation only No data available to support bottom-up Bottom-up When a more detailed and accurate answer is required To validate a top-down approximation Company specific data of organization in the segment / industry Data for substitute products or comparable markets / industries Data for a certain / partial time period Customer data Most accurate way to approximate size if no 3rd party data available Can be time consuming.g.
45 .com Questions & feedback? Email me – dave@learnppt. who each have an equal number of visitors UK (non London) residents 50m Assumption: 20% visit London once a year UK visitors to London 10m Assumption: 2 tourist attractions per person London residents 10m London residents 10m Assumption: London residents 10m 1 tourist attraction per year 61m 21m 34m learnppt.Top-down – a worked example How many people go on the London Eye every year? Total potential visitors to London Foreign visitors to London 1m Total visitors to London Foreign visitors to London 1m Assumption: 4 tourist attractions per person Total visits to tourist attractions Foreign visitors to London 4m Total visitors to London Eye Assumption UK (non London) residents 20m There are 25 main tourist attractions in London.com The diagrams in this pack are to be used by the original buyer only.
29m visitors learnppt. occupancy of pods per hour 25% of 1000 x Opening hours 6 hours x Opening days (26 weeks) 5 days per week Total annual visitors to London Eye 1000 people per hour 1.Bottom up – a worked example How many people go on the London Eye every year? Visitor capacity of London Eye per hour Number of pods 20 pods x Rotation of each pod per hour 2 rotations x Capacity of each pod 25 people Summer visitors to London Eye Av.09m summer visitors 0. occupancy of pods per hour 50% of 1000 x Opening hours 12 hours x Opening days (26 weeks) 7 days per week Winter visitors to London Eye Av.com Questions & feedback? Email me – email@example.com The diagrams in this pack are to be used by the original buyer only.20m winter visitors 1. 46 .
Having sized an industry.g.com The diagrams in this pack are to be used by the original buyer only. depending on the nature of the market – Providing a CAGR (compound annual growth rate) for the period How can you get that information? Use published data if available – Otherwise.com Questions & feedback? Email me – dave@learnppt. it is important to understand historic and future growth rates Calculating growth rates for a particular market What type of information are you looking for? Historical growth rates: – Per year if possible – Over a 3-10 year period. 47 . learnppt. growth will continue at same rate as last 10 years. or growth will continue at same rate as GDP Understanding why the market is growing or contracting is just as important as determining what the growth is. you can use a similar approach to the market sizing estimates e. top-down or bottom-up assumption driven estimates Projected future growth rates: – Based on assumptions from industry experts with input from yourself/your client – Over a relevant time period – Including a CAGR Use published data if available – Otherwise. use sensible estimates based on trends within the industry / market and/or historic figures and/or macro level figures e.g.
1 ] x 100 = 18.1 ] x 100 Size CAGR [(( 200 100 ) 1/5-1 ) .0% CAGR is a more sophisticated calculation and is used more widely than average annual growth rate.com Questions & feedback? Email me – dave@learnppt. learnppt. 48 .There are two methods to calculate growth – compound annual growth rate and average annual growth rate CAGR formula CAGR formula Year ) .9% Average Annual Growth Rate 1 100 2 110 3 143 4 176 5 200 [(( Last year ) First year 1/n-1 Average annual growth formula ( Last year – first year First year ) / n x 100 ( 200 – 100 100 ) / 5 x 100 = 20.com The diagrams in this pack are to be used by the original buyer only.
4. Company & Competitor Analysis learnppt.com Questions & feedback? Email me – dave@learnppt. 49 .com The diagrams in this pack are to be used by the original buyer only.
at the least. geographical markets. target customer segments – Channel usage: • Percentage through each. productivity – Product portfolio: • Main products • Price brackets – Relationship to industry value chain: • Key suppliers and customers • Distribution channels – Recent actions/moves – ”late breaking news” – Strategic issues and behaviour` Why We Use It • • • • • • • • • Provides a basic understanding of a company and its performance Directs further analysis by highlighting key strengths and capabilities Use of a common template can enable a comparison between players Identify number. include: – Background information: • Date founded • Overview of what the company does • Executive team • Vision statement • Ownership structure – Organisation structure: • Size of subsidiaries’ workforce – Key financials: • Current.Company/competitor analysis – introduction What It Is An assessment of a company’s own (or competitors) performance that should. historical.com Questions & feedback? Email me – firstname.lastname@example.org The diagrams in this pack are to be used by the original buyer only. (see financial analysis) – Market positioning: • Market share. channel usage) Identify strengths and weaknesses of different players in an industry Identify gaps in portfolios and capabilities of client Identify relative strength of client company Understand key competitor moves Strengths & Limitations Strengths: – Gives a clear overview of basic facts about a company: • Necessary to add insight to competitor or market analysis – Provides direction to further analysis – Efficient way to capture vital data on competitors – Gives overview of competitors’ attributes along multiple axes Limitations: – May provide few insights in itself: • Requires benchmarking over time or against competitors – Often complex and difficult to use effectively in presentations: • Need to extract key messages and display using other tools • Requires effort to summarise – Often focuses on the present rather than the future: • Difficult to determine competitors’ strategic shifts learnppt. 50 . names and focus of players Understand strategic positions (product/service offering. and projected.
use SWOT model to help evaluate competitor • Ensure analysis relates to.g. we are trying to answer learnppt. niche vs scale Evaluate Company • Plot competitor field maps • Understand relative competitive positions and rationale: – Product/Service offerings – Channel usage • Depending on what we need to know.Company/competitor analysis – how to do it Acquire a Basic Understanding of the Company/Industry • Read general information about the company on its Internet site • Read introduction to analysts’ company reports • Establish where it fits in the value chain Determine data needed • Ensure all necessary background information is included • Include information related to the strategic issue being examined by the project Gather and analyse data • There are a wide variety of sources available • Analyse data where appropriate: – Use financial analysis techniques – Product/channel analysis • Understand key tradeoffs that competitors in an industry have: – e.com Questions & feedback? Email me – email@example.com The diagrams in this pack are to be used by the original buyer only. or answers the questions. 51 .
instead of strictly Porter’s Model Possible required levels of analysis / examples: Economic: Best-in-Shop examples: Pulp and paper overview Aluminum and steel overview Tourism market viability analysis Creating call centers Industry: Market: Company: Corporate Functions: Products: Individuals: Technology: Other: What economic factors are key lead indicators of industry performance? What is the structure / concentration of this industry? What are distinct customer preferences in different markets? What companies are the major drivers of this industry? In what functions is excellence critical to success in this industry? Which products are the most important to this industry? Which individuals are viewed as industry leaders? Is technological change driving this industry? Legal.Typical overviews focus on the angle your clients are most interested in. etc. environmental.com Questions & feedback? Email me – firstname.lastname@example.org The diagrams in this pack are to be used by the original buyer only. learnppt. 52 .
Profitability Customized detail: Market attractiveness Case studies Company profiles Trends / issues learnppt. 3.Most overviews hit the basics and then go deeper into certain areas depending on the question The basics: Size / growth Players Market share Glaring issues 1.com The diagrams in this pack are to be used by the original buyer only.com Questions & feedback? Email me – dave@learnppt. 53 . 2.
com Questions & feedback? Email me – dave@learnppt. •Asian Focu s • • Discreti o nn aryPo rtfo l ioo Man ag emen t: Discretio ary Po rtfo li Man ag emen t: –– Min imu m c o mmis s io n :: Min imu m c o mm is s io n –– An n u alfe e ((re d cc in gss ce )):: l An n u a fe e reu in g c laa du le – – –– –– BofA HSBC HSBC • • Discreti o nn aryan d ad viso ry pp o rtfo lio man ag emen t: Discretio ary an d ad viso ry o rtfo li o man ag emen t: • • A tel ep hh o n ein tervi ew in fo rmatio nn dd i ffered inn : A telep o n e in terview in fo rmatio iffered i : Local Scale Global Scale Min imu m c o mmis s io n : £40 (bo ) th Min imu m c o mm is s io n : £ 4 0 (b o ) th C o mmis s io n noa baa r ga inofof £ 2 5 .0 0 0 iz bo th d is re tio n r a an d ad vis r r ) ) £ 0 .0 0 0 : in –– Min imu m s iz e :: Min imu m s iz e £ 2 5 .0 0 0 : C o mmis s io nnob arg a f f 2 5 .Chart.Company/competitor analysis – illustrative output Company Profile Template (Tailored to Specific Use) CO MPET IT O R PRO F IL ES: HENRY CO O KE L UMSDEN PL C Competitive Field Map Henry Cooke Lumsden plc Target Customers Target Customers •• •• Private cli en ts Pri vate cli en ts Ch arities/ T ru sts Ch arities/ T ru sts Examples of Institutional Customers Examples of Institutio nal Customers • • 150 small l an dd med i u m sized co mp an ies 150 smal an med iu m sized co mp an ies • • Cen ters In tern ati o n al L td Cen tersIn tern atio n al L td • • O xfo rd Mo lecu l ar G ro uu p pp cc O xfo rd Mo lecu l ar G ro p l l • • No rth An gg liaEd u catioo n p lc No rth An li a Ed u cati n p lc Competitive Field map 4: Multi-local vs Global Networked Chase • Seeks Major money • domestic centre focu s./s c 5Feb9 ns -2 - learnppt.0 0 0 : ££ 2 6 7 267 C o mmis s io nnoa b rga in £ 2 5 .0 0 0 : in –– Min imu m c o mmis s io n :: Min imu m c o mm is s io n –– C o mmis s io n nob arg ain oo ££ 2 5 .0 0 0 : C o mmis s io nnob arg a f f 2 5 .4 % BKB Citibank businesses well • erve both local S and cross-b order • • Deali ngg w ith ad vice: Dealin w ith ad vice: Stan.0 0 0 : Min imu m p o rrtfo lio s e ((both dis cc r e tio nry an d ad vis oo yy : :55 0 .0 0 £ 2 5 .0 0 ££ 2 4 1 .0 0 0 ay £ Min imu m p o tfo lio s e iz G Deutsche • erman-centric • Focus: European companies Lead Genera ion tion Lead Genera t •• •• •• •• Referrals Referrals So llicitors So icito rs O th er p ro fessio n al firms O th er p ro fessi o n al firms Acco u n tan ts Acco u n tan ts •• •• •• •• Distribution Channels Distribution Channels Selling Selling TT elep h o n e elep h o n e Main ly face-to -face Main ly face-to -face No dd irectmai li n gg No irect mailin Pro dd u ctivity Pro u cti vity Maintaining Maintaining • • TT el ep h o n eco nn tacts elep h o n e co tacts • • O nn ceaayear co nn tactfo rrnn o n -activeclien ts O ce year co tact fo o n -active cl ien ts • • Reg uu larvalu ati oo n an dd market rep oo rts Reg lar valu ati n an market rep rts ABN AMRO Islands Gemini Consulting Limited • Proprietar and Confidential y Disc /GTS/Ldn 7Rp. relationship s supplement ed with partn banks er •• Pen sio n F u n d s Pen sio n F u n d s •• Co rp o rates Co rp o rates Products/Services Products/Services • • F in an cial pllann i n g an d tax rep o rtin g F in an cial p an ni n g an d tax rep o rti n g • • PEPs PEPs • • Po rtfo lio Man ag emen tt (d iscretio n ary an d ad viso ry) Po rtfo lio Man ag emen (d iscretio n ary an d ad viso ry) • • Co rp o rate F in an ce Co rp o rate F in an ce • • Pen sio n p lan n iin g Pen sio n p lan n n g • • In stitu tio n al research anro ki n g ro In stitu tio n al research bb dkin g an d Examples of Product Pricing Examples of Product Pricing • • Deali ngg oo n y: Dealin n l ly: –– Min imu m c o mmis s io n :: Min imu m c o mm is s io n –– C o mmis s io n nob arg ain oo ££ 2 5 .0 0 £ 2 5 .0 0 £ 2 5 .0 0 2 4 1 .com The diagrams in this pack are to be used by the original buyer only.4 % .0 0 N one N one £25 £ 25 00 .0 0 ££ 2 4 1 .0 0 2 4 1 . 54 .
Is there business for GlobalCon in the pulp and paper industry? Deliverable “Understanding the global pulp and paper industry” Contents of document • Present the key industry elements – Products – Producers – Customers • Highlight key trends and issues – Environmental challenges – Recycling discontinuity – Niche domination learnppt.com Questions & feedback? Email me – email@example.com The diagrams in this pack are to be used by the original buyer only. 55 .
in the world market – Value chain – Market players • The steel industry – U.Is there business for GlobalCon in the aluminum and steel business in the United States? Deliverable “Aluminum and steel: Two opportunities for DI/DS in the metals industry” Contents of document • Objectives • Sources referenced • Introduction to the metals industry • The aluminum industry – U.com The diagrams in this pack are to be used by the original buyer only.com Questions & feedback? Email me – dave@learnppt.S. in the world market – Value chain – Market players learnppt. 56 .S.
– Remember that competitors’ definition of segments often differ – Draft template early in the analysis process: • Use as a framework for data capture and to direct further analysis – Be clear about what information is necessary: • Keep in mind why you are conducting this analysis.Company/competitor analysis – top tips Potential Insights • Provides an overview of what the company is about. and structure and collect data accordingly – Display findings to create an impact: • Use symbols and graphics to display the message • Shade the key findings on the template Don’t: – Give unnecessary excessive detail: • Avoid including irrelevant data – Indulge in “data dumping” – Make template unnecessarily complex – Fail to include all relevant competitors – Take for given what the company says are its strengths: • May not be in reality • May be associated with corollary weaknesses Questions & feedback? Email me – firstname.lastname@example.org 57 .com The diagrams in this pack are to be used by the original buyer only. then fill only critical gaps after that – Gain basic knowledge about the company at a very early stage: • Obtain/produce an overview of the company’s activities • Pay particular attention to revenue – Check with your client if you have not used the client’s own data – Consider ‘outsourcing’ to shop or institute – Focus on major players if the market is highly fragmented. and an indication of success to date: – Directs further analysis – Drives insights when benchmarked against competitors (see competitor’s comparison) • Identifying competitors’ strengths and weaknesses helps us to understand threats and opportunities for our client • Must tie in with KSFs for industry Do: – Use creativity in data gathering if information is not readily available – Ensure you use an 80/20 rule: • You can do much of the analysis very quickly. Hints and Pitfalls learnppt.
case examples.com The diagrams in this pack are to be used by the original buyer only. 58 .Company/competitor analysis – data sources.com Questions & feedback? Email me – dave@learnppt. and related analytics Data Sources • • • • • • • • • • Annual report Analysts’ reports Internet sites On-line searches Internal company data (if available) Interviews Trade associations Industry overview Industry journals Industry experts (internal and external) Related Analytics • Company/competitor analysis is often the centre-piece of strategic position assessment • However. it can be complemented and supplemented by the following analytics: – Financial analysis/ratios analysis – Porter’s five forces – SWOT • Scenario planning/war gaming learnppt.
5.com Questions & feedback? Email me – dave@learnppt. PEST Analysis learnppt.com The diagrams in this pack are to be used by the original buyer only. 59 .
com The diagrams in this pack are to be used by the original buyer only. what are the industry CSFs – Better as a facilitative tool than analytic learnppt.e.: – Political forces – Economic forces – Socio-demographic forces – Technology forces The PEST framework: – Presents the characteristics of each of these forces (as well as their evolutions). Limitations: – Needs to be seen against how industries create value i. Economic. • Industry financials. Explain ongoing changes in the industry. i. Strengths & Limitations Strengths: – Deals with dimensions such as sociodemographics or policies that may be key to some industries. – Explains how those forces affect: • Competitive environment (as described by Porter through his five forces – see related analytics).e.PEST (Political. Socio-demographic and Technology) analysis – introduction What It Is An analytical framework that assesses the impact of four major forces that shape an industry. • Industry value chain.com Questions & feedback? Email me – dave@learnppt. 60 . Why We Use It Complement other industry analysis frameworks.
e.PEST analysis – top tips Potential Insights • Reveals key trends and issues in the industry.com The diagrams in this pack are to be used by the original buyer only. • Do: – Focus on the most significant aspect if you do not intend to deliver a thorough industry analysis.g. – New rules of the game. • Don’t: – Lose sight of factors that truly influence your clients’ business • • • • Analysts’ reports Industry reports Database searches Industry experts Hints and Pitfalls Data Sources Case Examples Related Analytics • The following documents contain good examples of PEST analysis and output: • Porter’s five forces • Value chain analysis learnppt.com Questions & feedback? Email me – dave@learnppt. 61 .: – Emerging/declining constraints.
com The diagrams in this pack are to be used by the original buyer only.com Questions & feedback? Email me – email@example.com. Industry Attractiveness & Business Strength learnppt. 62 .
The industry attractiveness / business strength matrix allows us to assess how well poised firms are for success What it is – A matrix assessing the relative position of a company for success – A quantitative and qualitative method to calculate a company’s relative industry strength and then understand its position Why we use it – To assess a company’s position and identify strategies for success – Combined with an analysis of a company’s competitiveness in each segment.com The diagrams in this pack are to be used by the original buyer only. it helps decide how best to distribute financial and managerial resources between segments learnppt.com Questions & feedback? Email me – dave@learnppt. 63 .
64 .com Questions & feedback? Email me – dave@learnppt.The industry attractiveness / business strength matrix highlights a firms capacity to grow within its industry High Overall generic outputs Build pre-emptive position Challenge for industry leadership Exploit industry attractiveness High attractiveness: invest grow / capture share Medium attractiveness: manage current earnings Low attractiveness: manage for cash return Industry attractiveness (from industry analysis) Expand selectively Match strength with opportunities Middle Harvest Protect and focus Low Preserve cash flow Divest Low Middle Business strength (from capability assessment) High learnppt.com The diagrams in this pack are to be used by the original buyer only.
2. Isolate business units Gather information affecting industry/business capabilities Market factors Competitive factors Financial and economic factors Technological factors Socio-political factors Determine attractiveness / business strength Qualitative factors (identify method to measure) Quantitative factors (assign weights) Rate each factor (1: unattractive to 5:very attractive) Multiply ratings by weightings Calculate total value for each dimension Plot Business unit / product Forecast trends affecting industry attractiveness Decide on strategy 3. learnppt.com Questions & feedback? Email me – dave@learnppt. 3.com The diagrams in this pack are to be used by the original buyer only. Things to look out for 1. 65 . 5. 6. Take care not to use a checklist regarding industry attractiveness blindly Understanding how to use information/weight data where precise data is lacking – this is not a trivial exercise 4. 4.Creating the industry attractiveness / business strength matrix requires extensive industry information How to create 1. Keeping in mind business units and products are not independent Just using analysis as final conclusion 2.
15 0.com Questions & feedback? Email me – firstname.lastname@example.org learnppt.70 Score 4 5 4 2 4 3 2 5 Value (Factor x Score) 0.10 0.20 0.05 Must be acceptable 1.80 1.15 0.00 Total 3.05 0.05 0.15 0.60 0.20 0.15 0. 66 .00 0.30 0.60 0.An illustration of defining segment attractiveness Segment Evaluation Option A Market Attractiveness Overall market size Predicted customer demand Historical profit margin Competitive intensity Technological requirements Inflationary vulnerability Energy requirements Environmental impact Social / political / legal Factor Weight 0.com The diagrams in this pack are to be used by the original buyer only.
com Questions & feedback? Email me – email@example.com The diagrams in this pack are to be used by the original buyer only. learnppt.The industry maturity / competitive position matrix combines competitive position with the life cycle theory … Generic outputs Marketing: – Develop new products for new markets Go overseas: – Export. license Production rationalisation: – Standardise for lower costs Industry maturity/decline Growth Mature Ageing Efficient management: – Computerised production planning and inventory control Harvest – Extract cash Introduction Embryonic Weak Tenable Favourable Strong Dominant Competitive position … which then can assist in assessing a company’s strategy for success. 67 .
7.com Questions & feedback? Email me – dave@learnppt. 68 . BCG Growth-Share Matrix learnppt.com The diagrams in this pack are to be used by the original buyer only.
i. the growth-share matrix displays graphically in a 2-by-2 matrix the position of each business of a company’s portfolio or compares the position of players in one industry. Understand the competitive position of each business. Strengths & Limitations Strengths: – Coherent and simple framework. Assess trends in the evolution of a company’s portfolio of business (when matrix is drawn for both the current year and past years). – Can also lead to wrong behaviour. The key idea is that business units located in each of the quadrants will be in fundamentally different cash flow positions and should be managed differently. learnppt. – The attractiveness of the segment (growth) The matrix has the following quadrants which have different cash flow characteristics and implications: Quadrant Star Cash cows Dogs Question marks Relative Share High High Low Low Market Growth High Low Low High Why We Use It Provides a framework to suggest the kind of investment strategy to follow for each business. The growth share matrix is based on the use of industry growth and relative market share (RMS) as proxies for: – The competitive position of a firm in its industry (RMS).com 69 . – Very rare that a company’s businesses are truly independent. – Good starting point for thinking about a firm’s portfolio. – Can lead to the interpretation that cash generation is more important than profit generation. Limitations: – May fuel simplistic conclusions: – The matrix assumes that high relative market share automatically results in high cash generation. milking of cash cow when it needs investment (typically when industry changes). possible cash requirements and focus attention on key issues. – This is not true in all industries.e.Growth-share matrix – introduction What It Is Developed by BCG. – May neglect niche strategies. Questions & feedback? Email me – firstname.lastname@example.org The diagrams in this pack are to be used by the original buyer only.
Growth share matrix – how to do it
1. Isolate business by defining the appropriate business segments. 2. For each business, determine:
– Dollar scale. – Market shares of the business and of its biggest competitors. – Growth rate of the market in which the business operates.
3. For each business, calculate its relative market share (RMS): – RMS = Company market share Market share of biggest competitors 4. Draw the matrix, with a log scale on the horizontal axis and a regular scale on the vertical axis:
– Divide into quadrants, with the vertical line at 1.0 relative market share and the horizontal line at nominal GNP growth (12.5% in the example set out below).
5. Place each business in the matrix:
– The centre of the circle is at the intersection of the business’s relative share and its industry growth rate. – The area of the circle is proportional to the business’s size.
6. If you wish to understand any trend, repeat steps 1 to 5 with data from previous years.
Questions & feedback? Email me – email@example.com The diagrams in this pack are to be used by the original buyer only.
Growth share matrix – illustrative output
Example: Northwest Industries
Major Business Area
1980 Revenues $
3-Year Business Growth %
3-Year Industry Growth %
1980 Revenues of Largest Competitor $
Industrial Group: • Tubular steel and ingot moulds – Connecting devices – Lamp Ballasts Chemical Group: Consumer Group: • Manufactured consumer products: – Apparel – Batteries • Beverages 605.0 261.9 454.2 Total 2,876.4 — — — 227.8 147.5 193.2
Industry Growth (%)
20% Tubular Steel Beverages 10% Batteries Connecting Devices 5% Lamp Ballasts Chemicals 4 1.5 1.0 .5 .25
• Component parts: 375.3 4.7 9.2 -1.6 9 5 6 275 125 400 0.83 1.18 0.48
866.9 13.3 7.1 59.7 15 11 14 250 225 500 2.42 1.16 0.91 —
Source: Mac Group Core Practice manual, adapted from Michael M. Kaiser Associates.
Questions & feedback? Email me – firstname.lastname@example.org The diagrams in this pack are to be used by the original buyer only.
Growth share matrix – top tips
Potential Insight The growth share matrix suggests the following strategies for each business unit type: Expected Cash Typical Strategic Typical Strategic Characteristics of Each Prescriptions Movement Prescriptions Quadrant of the Market
“Star” Cash in Balance “Dilemma” Cash Users Build/ hold share Build Market Share selectively
• Do nothing if cash is positive • Invest or turn to a star • Divest if not critical SBU
Rate of market growth
(some + some -)
“Cash cows” Cash generators
“Dogs” Cash in Balance
(some + some -)
Hold share/ harvest
• Use to invest in other units
Withdraw Harvest Share
Relative market share (log scale) Hints and Pitfalls
Strategic movements Cash movements
Do: – Validate your market definition with your client: – It is critical in measuring both relative market share and industry growth rate. Don’t: – Use as the only generic model—use in conjunction with other analytics (e.g. scenario modelling)
Questions & feedback? Email me – email@example.com The diagrams in this pack are to be used by the original buyer only. 72
learnppt. Market share measures. and related analytics Data Sources Publicly available data for market growth (see market sizing) and competitors’ market share. Market-sizing.com The diagrams in this pack are to be used by the original buyer only.com Questions & feedback? Email me – dave@learnppt. Client’s internal data: Sales Market share The following document contains goods examples of growth share analysis and output: Case Examples Related Analytics Segment attractiveness. 73 .Growth share matrix – data source. case examples.
com The diagrams in this pack are to be used by the original buyer only.com Questions & feedback? Email me – dave@learnppt. Key Success Factors learnppt.8. 74 .
for example: – Parts of the marketing mix – Research and development – Low-cost manufacturing Also known as a critical success factor (CSF) Analysis of KSFs is crucial in most studies of competitive strategies: Skill is in identifying appropriate KSFs Index of key success factors: A summary table that scores and ranks each competitor against the KSFs for the business or segment Note: The important insights come from understanding what is key to success in the industry or segment: – The index is simply a device to display the output – Refer to section on industry dynamics Why We Use Them Key success factors: Determines at what companies must excel to be successful in a business or segment They should be the logical outcome (the so what) of PEST. 75 learnppt. Porter etc. analysis Index of key success factors: Evaluate competitors’ strengths and weaknesses in areas that are critical to success To position our client relative to competitors Strengths & Limitations Benefits: – If rigorously applied.com . clarifies what capabilities or skills companies need to compete successfully – Index allows us to quantify competitors’ relative strengths against KSFs – Index provides a structured.Key success factors and index of key success factors – introduction What They Are Key Success Factor (KSF): Any dimension in which excellence is crucial for competitive success. concise technique for comparing competitors Drawbacks: – The KSFs and comparative index are only as good as the business understanding and judgement used to develop them Questions & feedback? Email me – firstname.lastname@example.org The diagrams in this pack are to be used by the original buyer only.
and scoring competitors.e. refining these hypotheses Index of Key Success Factors The purpose of developing an index of KSFs is to understand: – Which ones are most important – How competitors perform relative to each key success factor Ranking KSFs. left) – Give each KSFs a weighting reflecting its relative importance (this is a non-trivial task): • How would you allocate investment resources for a competitor? – Score each competitor against each key success factor: • Document the rationale for each score – Add up the total scores for each competitor – Convert the total for each competitor into a percentage (i. what proportion of the perfect score it achieved?) The resulting percentages indicate the relative performance of each competitor learnppt. Relevant issues in understanding the business or segment are: – How customers buy. and what’s important to them in the purchase decision: • See key purchase criteria – Who’s successful in the business or analytic segment. and why. requires a good understanding of the business or segments Key steps in the process for ranking and weighting KSFs: – Identify KSFs (see box. testing and.com The diagrams in this pack are to be used by the original buyer only.com Questions & feedback? Email me – dave@learnppt. See: • Company analysis • Financial analysis – Trends within the business or segment Other sources of insights into key success factors are: – Client’s executives/staff – Industry analysts or commentators Determining KSFs is an iterative process: initial research. developing draft hypotheses. and therefore draws on several of other analytics in the toolkit.Key success factors and index of key success factors – how to apply them Key Success Factors Determining KSFs requires a thorough understanding of a business or segment. 76 .
learnppt.com The diagrams in this pack are to be used by the original buyer only. Core Practice Manual. 77 .com Questions & feedback? Email me – dave@learnppt. A five-point maximum per factor is convenient because people are used to making five-point scale evaluations.Key success factors and index of key success factors – illustrative output Index of Key Success Factors—Hypothetical Example Relative Importance for National Regional Marketer Marketer 5 4 5 2 2 4 1 2 21 3 3 3 1 3 1 18 As National Marketer Competitor Competitor A B 4 2 5 2 1 4 1 2 19 19/21 = 90% 3 1 1 1 1 2 11 11/21 = 52% As Regional Marketer Competitor Competitor A B 4 3 3 3 3 1 3 1 18 18/18 = 100% 4 2 2 1 3 1 16 16/18 = 89% Effective Distribution Strong Brand Innovative Product Tiered Pricing Multiple Segment Participation Low Cost Manufacturing High R&D spend Total Note: The scale does not matter. Source: MAC Group.
Key success factors & index of key success factors – guidelines Key Success Factors – Identification Techniques Technique I Environmental analysis (e. learnppt.g. how Note firms compete) “CSFs” = Critical Success Factors. offers.com Questions & feedback? Email me – dave@learnppt. Source: Industry Micro • Narrowness of focus – KSF development limited to competitive arena (as opposed to industry structure approach) Leidecker and Bruno. Identifying and using Critical Success Factors. Porter. 1984.com The diagrams in this pack are to be used by the original buyer only. Staff) • Econometric models • Socio-political consulting services Advantages Disadvantages • Future orientation • More difficult to operationalise • Macro orientation: analysis goes into specific industry or firm KSFs • Results may not lend themselves beyond industry-firm focus • Can be linked to threats/ opportunity to incorporate usage in current evaluation timeframe (today’s KSFs) II Analysis of industry Industry structure (e. specific data • Depth of analysis leads to better means of justification • Lack of objectivity often leads to questions in verifying/justifying IV Analysis of competition (focus is limited to the competitive environment. • Outsider familiar with firms formal and analytical approaches in industry • Knowledgeable insiders who work in industry • • • • Staff specialities Line managers Internal consultants External consultants • Narrowness of focus. PEST) Focus Macro Sources • Environment scanning (Corp.g. 78 . Value Macro Chain) • A variety of industry structure frameworks • Specific focus is on industry • Frameworks allow user to understand interrelationships between industry structural components • Can force more macro level focus (beyond industry boundaries) • While excellent source for industry-wide KSFs not so useful in determining firm-specific KSFs III Industry/business experts Industry Micro • Industry association • Means of soliciting “conventional executives wisdom” about industry and firms • Financial analysts • Subjective information often not specialising in industry discovered with more objective. advantage of detailed.
1 alternative explanations of may assist in co-ordinating success • May limit individual firm’s firm’s specific KSFs strategic response and focus • Thorough functional area screening reveals internal/external strengths and weaknesses that may assist KSF development • Narrow focus of analysis precludes inputs of more macro approaches • Check-list approach can be very time consuming and become data bound • Difficulty in justifying as KSF if only of short term • Important may be overstated.com The diagrams in this pack are to be used by the original buyer only.) Key Success Factors Identification Techniques Technique V • Analysis of dominant firm in the industry Focus • Industry Micro • • • • Sources Staff specialities Line managers Internal consultants External consultants Advantages Disadvantages • Dominant competitor may • Narrow focus may set industry KSFs preclude seeking • Understanding of No. Identifying and using Critical Success Factors. 79 .Key success factors & index of key success factors – guidelines (cont. learnppt.com Questions & feedback? Email me – dave@learnppt. 1984. if in fact a short-lived phenomenon VI • Company assessment (comprehensive firm-specific) • Micro • Internal staff line organisations (detailed analyses by organisation function—checklist approach) VII • Temporal/intuitive • Micro factors (firmspecific) • Internal staff • More subjective and not • Brainstorming limited to functional • CEO/general management analysis approach • Leads to identification of observation important short-run KSFs that may go unnoticed in more formal reviews • Articles on PIMS Project results • Empirically based • Excellent starting point VIII • PIMS results • Industry Micro • General nature • Applicability to your firm or industry • Determination of relative importance Source: Leidecker and Bruno.
Key success factors and index of key success factors – top tips Potential Insights Determining key success factors.com Questions & feedback? Email me – dave@learnppt. and estimate the relative performance of competitors Do: – Focus on drawing up the right key success factors – Choose a simple scale for weighting criteria – Recognize that the index largely involves quantifying judgments: • Where possible. based on a thorough understanding of a business or segment. 80 . try to obtain quantitative data on each competitors performance against each key success factor Hints and Pitfalls learnppt. can highlight areas on which clients should focus: – Strengthen capabilities – Defend capabilities Helps determine which competitors are well positioned to compete successfully.com The diagrams in this pack are to be used by the original buyer only.
databases Team analyses on business or segment.Key success factors and index of key success factors—data sources. industry experts. and related analytics Data Sources Key success factors: Publicly -available data on business or segment.: Investment analysts’ reports. 81 .e. and competitors Interviews with client. and competitors Client’s data on business or segment. and customers The following documents contain a checklist of potential approaches for identifying key success factors: Attach Leidedner & Bruno material Also attached are good examples of key success factor analysis and reports Case Examples Related Analytics Analytics required to develop key success factors: Key purchase criteria Company/competitor analysis Financial analysis/ratios analysis PEST and Porter learnppt.com The diagrams in this pack are to be used by the original buyer only. and competitors.com Questions & feedback? Email me – dave@learnppt. i. case examples. annual reports.
9. Product Lifecycle learnppt.com Questions & feedback? Email me – dave@learnppt. 82 .com The diagrams in this pack are to be used by the original buyer only.
but typically will require greater investment or greater creativity than in less mature categories learnppt. e.g.Product life cycle – introduction What It Is Based on the age of a product category. predicts how sales will develop Distinguishes five stages of development: – Introduction – Growth – Maturity – Saturation – Decline/termination Why We Use It Predict sales growth. and associated customer and competitor behaviours Prescribe appropriate marketing strategy Assess strengths/weaknesses of product portfolio Phases of sales growth Phases of sales decline Strengths & Limitations Strengths: – Most useful as one of several sources of evidence.com The diagrams in this pack are to be used by the original buyer only. 83 .com Questions & feedback? Email me – dave@learnppt. with conjoint analysis Limitations: – Any prediction is tricky – Companies can affect the shape of the growth curve through product innovation and repositioning Length of time in each period varies tremendously: – Some products have very short cycles. others take decades or even centuries to go through the cycle Growth is still possible in mature categories.
g.com The diagrams in this pack are to be used by the original buyer only.Product life cycle – how to use it Establish if the concept is applicable Data required: – Sales figures/timeframe: • • Either actual past/current sales Or forecasted figures Predict how sales will develop It is important to predict the highest level that sales will reach. for a household appliance the simplified formula might be: Annual Sales = (Number of new households) x (percentage who will buy) + (Number of existing owners) x (percentage who replace each year) The uptake percentage must be established using: – Customer surveys – Industry forecasting models where available Predict the timing of future developments Look to the category’s past behaviour and compare with similar products Look out for: – Technology shifts – Lead markets – Substitute products – Telecoms/e-commerce Use statistical/graphical analysis: Plot past category sales data in a spreadsheet. in such a way that a long term pattern is easily shown Use strategic/judgmental analysis: – Use the theoretical curve to evaluate where the category stands Consider use of conjoint analysis learnppt. 84 .com Questions & feedback? Email me – dave@learnppt. e.
5% Early Adopters 13.Product life cycle – illustrative output Household Durables in Early 1970s Introduction Growth Maturity Refrigerators Decline/ Saturation Termination Ranges & Ovens Freezers Automatic Washers Room A/C Saturation/Sales B&W TV Colour TV Adoption Dishwasher Introduction Compactor Wringer Innovators 2.com The diagrams in this pack are to be used by the original buyer only.com Questions & feedback? Email me – dave@learnppt. 85 .5% Time Source: Mac Group Core Practice Manual. Early Majority 34% Late Majority 34% Laggards 16% learnppt.
Competitive Strategy. Some over capacity Optimum capacity Increasing stability of manufacturing process Lower labour skills Long production runs with stable techniques Distribution channels pare down their lines to improve their margins • High physical distribution costs due to broad lines • Mass channels • Substantial over capacity • Mass production • Speciality channels learnppt.Product life cycle – potential insight Typical Insight Provided by Product Life Cycle Analysis (1 of 2) Introduction Buyers and Buyer Behaviour Products and Product Change • High-income purchaser • Buyer inertia • Buyers must be convinced to try the product • Poor quality • Product design and development key • Many different product variations.com Questions & feedback? Email me – dave@learnppt. Porter.E. 159–161. no standards • Frequent design changes • Basic product designs Growth • Widening buyer groups uneven quality • • • • • • • • Maturity Mass market Saturation Repeat buying Choosing among brands is the rule Decline • Customers are sophisticated buyers of the product • Little product differentiation • Spotty product quality • Products have technical and performance differentiation • Reliability key for complex products • Competitive product improvements • Good quality • High advertising. but lower percent of sales than introductory • Most promotion of ethical drugs • Advertising and distribution key for non-technical products • Under capacity • Shift toward mass production • Scramble for distribution • Mass channels Superior quality Less product differentiation Standardisation Less rapid product changes—more minor annual model changes • Trade-ins become significant Marketing • Very high advertising/sales (a/s) • Creaming prices strategy • High marketing costs • • • • • • • • • • • • • Market segmentation Efforts to extend life cycle Broaden line Service and deals more prevalent Packaging important Advertising competition Lower a/s • Low a/s and other marketing Manufacturing and Distribution • • • • • Over capacity Short production runs High skilled-labour content High production costs Specialised channels Source: M.com The diagrams in this pack are to be used by the original buyer only. pp. 1980. 86 .
E.com Questions & feedback? Email me – dave@learnppt. pp.com The diagrams in this pack are to be used by the original buyer only. learnppt.) Typical Insight Provided by Product Life Cycle Analysis (2 of 2) Introduction R&D Foreign Trade Overall Strategy • Changing production • Some exports • Best period to increase market share • R&D engineering are key functions • Significant exports • Few imports • Practical to change price or quality image • Marketing the key function • Falling exports • Significant imports • Bad time to increase market share particularly if low-share company • Having competitive costs becomes key • Bad time to change price image or quality image • “Marketing effectiveness” keys • Price competition • Shakeout • Increase in private brands • Cyclically sets in • No exports • Significant imports • Cost control key Growth Maturity Decline Competition • Few companies • Entry • Many competitors • Lots or mergers and casualties • Risks can be taken here because growth covers them up • • • • High profits Highest profits Fairly high prices Lower prices than introductory phase • Recession resistant • High P/Es • Good acquisition climate • Exits • Fewer competitions Risk • High risk Margins and Profits • High prices and margins • Low profits • Price elasticity to individual seller not as great as in maturity • • • • Falling prices Lower profits/lower margins Lower dealer margins Increased stability of market shares and price structure • Poor acquisition climate: – Tough to sell companies • Lowest prices and margins • Low prices and margins • Falling prices • Prices might rise in late decline Source: M. 1980. 87 .Product life cycle – potential insight (cont. Porter. Competitive Strategy. 159–161.
com Questions & feedback? Email me – dave@learnppt. non-recurring sources of fluctuations: • May be necessary to smooth those fluctuations – Ensure you understand if life cycle of a product has been extended by line extensions/modifications Data Sources Don’t: – Ignore version change Market surveys. Nielsen databases for: – Benchmarks against similar products – Consumer take up – Segment sales Client sales data Key purchase criteria and comb analysis Needs-based segmentation Product portfolio analysis Scenario modeling Related Analytics learnppt. 88 . beware of seasonal.com The diagrams in this pack are to be used by the original buyer only.Product life cycle – top tips Hints and Pitfalls Do: – When creating the curve.
com Questions & feedback? Email me – dave@learnppt. Economies of Scale learnppt.10. 89 .com The diagrams in this pack are to be used by the original buyer only.
we use the concept qualitatively not quantitatively: – To understand the nature of competition in a business market or segment – We are unlikely to quantify economies of scale across an industry 1 It is also possible to have dis-economies of scale.com Questions & feedback? Email me – dave@learnppt. and an estimate of optimum size Limitations: – None Typically.e. it is not cost-effective to compete Determine whether scale acts as a barrier to entry Company B has a much lower unit cost because it produces a much higher value Company A Company Number of Units Produced B Strengths and limitations Strengths: – Fundamental economic concept relevant at both a company and industry level – Helps build understanding of the structural characteristics of an industry – Can provide a quantitative measure of the benefit of scale. 90 .Economies of scale – introduction What it is A company or industry benefits from economies of scale when the unit cost of a product declines as the number of units produced per period increases: Unit Cost A B Why we use it Understand the importance of relative size and relative cost within an industry Highlight the existence of a minimum efficient size: – Below this.com The diagrams in this pack are to be used by the original buyer only. i. as more units are produced. the unit cost increases learnppt.
com The diagrams in this pack are to be used by the original buyer only. 91 learnppt. ROCE. plot: – Average unit cost1 (y axis) over a specified period – Number of units produced over same period (x axis) 1 Given that average unit cost is unlikely to be available for all competitors. you could use average unit price as a substitute for cost Questions & feedback? Email me – dave@learnppt.Economies of scale – how to apply it Two Step Process To Determine Whether Scale is Critical to Success Identify competitors in the market or segment Determine absolute and relative size of competitors. and number of units produced Identify key success factors: – See key success factors Review all of the above to determine: – Whether scale of operation is critical to success in this market or segment – If so. and absolute and relative returns (profit. ROE): – See company analysis and financial analysis Determine absolute and relative share: See market-sizing Identify type of products produced.com . why? – Minimum scale? Quantify Economies of Scale By competitor.
5 1 5 10 Production Costs per Unit in DM / Case In this case.0 5. Core Practice Manual learnppt.0 3.0 6.7 .0 9.6 .Economies of scale – Illustrative output Production Economies of Scale – German Soft Drink Bottlers 10.2 0. economies of scale are present.0 8.0 . but not of major importance: – A doubling of volume.1 . 92 .8 .0 7.com The diagrams in this pack are to be used by the original buyer only.0 2.com Questions & feedback? Email me – email@example.com 4.5 1.9 .1 .3 .0 1.4 . from 1 million leads to only a 2-3% decrease in cost Total Productions (Cases) Millions Source: MAC Group.5 .
Economies of scale – top tips Potential insights Analytic helps determine: – Minimum efficient size – Whether the presence of scale deters market or segment entry by: • Forcing the entrant to produce on a large scale and risk strong reaction. 93 . age of equipment. etc.com The diagrams in this pack are to be used by the original buyer only. Don’t: – Use data from different periods: – Experience effect will distort the data learnppt. such as labour rates.com Questions & feedback? Email me – dave@learnppt. or produce on a small scale and accept a cost disadvantage – Some limits to economies of scale as an entry barrier are as follows: • Large sale business may involve making trade-offs with other potentially valuable barriers to entry such as product differentiation • Technological change may be catastrophic for a large-scale firm if its facilities are more specialised Hints and pitfalls Do: – Make sure you use comparable data when plotting different companies – Examine carefully cause and effect relationships when the number of data points is limited – Ensure the concept is applicable by comparing the individual plants along several dimensions other than scale: – Decreasing costs may be due to factors other than scale.
and related analytics Data sources Industry reports Brokers’ reports Competitors’ financial statements Companies’ internal cost data Database searches The following documents contain goods examples of economy of scale analysis: – – – Case examples Related analytics Experience curve Value chain Economies of scope learnppt. 94 .Economies of scale – data sources.com Questions & feedback? Email me – dave@learnppt. case examples.com The diagrams in this pack are to be used by the original buyer only.
11.com Questions & feedback? Email me – dave@learnppt. 95 .com The diagrams in this pack are to be used by the original buyer only. Adoption Cycle learnppt.
Adoption cycle – Introduction
What It Is
Adoption is an individual’s decision to become a regular user of a product or service The adoption cycle accounts for the process through which a potential consumer passes from first hearing about product/brand to final adoption That process can be divided into 4 stages: – Awareness: the consumer becomes aware of the product/brand but lacks information about it – Qualification: the consumer is informed and considers whether to try the product/brand – Trial: the consumer tries the product/brand to improve his estimate of its value – Adoption: the consumer decides to make full and regular use of the innovation Often used in conjunction with conjoint analysis
Why We Use It
We generally use it qualitatively to help build an effective strategy for early market penetration: – The new product/brand marketer should induce consumer transition from one stage to the next
Strengths & Limitations
Strengths: – Supplements segmentation to help further focus marketing efforts Limitations: – n/a
Adoption cycle – how to apply it
Establish at which stage of a cycle your market stands
Work on the basis of market researchers asking a significant sample of consumers the following questions: – “Are you aware of product/brand X?” – “Would you bury product/brand X?” – “Have you tried product/brand X?” – “Have you purchased product/brand X within the last month?” – Etc. – Note that the first group necessary “Aware but have not tried” is derived by singling out those respondents who answered yes to the first question and no to the second. The same procedure is followed for the subsequent groups. Record findings in a spreadsheet and present average results graphically Analyze against theoretical curve
Predict future developments
Determine likely timing through benchmarking with similar products/services categories Develop marketing scenarios and test impact on adoption cycle with customer focus groups: – Objective being to identify the most efficient scenario to speed up adoption
Adoption cycle – top tips
Key factors to manage at each stage include: Awareness Qualification Trial Adoption Advertising volume Brand image (produced by advertising and packaging) Product characteristics, packaging and distribution efforts such as merchandising Similar to selection, plus after-sales services, etc.
Hints & Pitfalls
To determine potential problem areas, it is useful to study the client’s relative position in each of these stages
Do: – Define the groups—to avoid double counting, as the consumers who “drop out” of each stage: – Thus each group consist of those customers who are at a certain stage, e.g. “Aware”, but not at the next, e.g. “Have tried” (see below) – Check the methodology of the market research for typical errors: – Poor sampling procedure – Vague questions or questions that are difficult to interpret Don’t: – Few market research surveys segment the categories as neatly as “Aware” , “Qualify”, etc.: – A good substitute is level of consumption (“Aware”, “Have tried”, “Buy occasionally”, “Buy frequently”)
Adoption cycle – data sources. case examples and related analytics Data Sources To estimate where your target market falls you can refer to: – Market surveys – usually client driven – Nielsen data Related Analytics Key purchase criteria Segmentation Product life cycle learnppt. 99 .com Questions & feedback? Email me – firstname.lastname@example.org The diagrams in this pack are to be used by the original buyer only.
com The diagrams in this pack are to be used by the original buyer only.com Questions & feedback? Email me – dave@learnppt. Value Chain learnppt. 100 .12.
com The diagrams in this pack are to be used by the original buyer only. • Limitations: – Users do not apply the analytic fully. – Determine whether there is any backward or forward integration in an industry.g.com Questions & feedback? Email me – dave@learnppt. 1 In his book “Competitive Advantage”. Strengths & Limitations • Strengths: – Clarifies key stages in an industry or company. i. e.1 • A value chain should show where value is being created within an industry or company: – Should be quantitative.Value chain – Introduction What It Is • A description of the key activities performed either across an industry or across a company: – Usually shown as a linear flow of activities. systems support. – Should show the value of costs and revenues at each stage in the value chain. 101 . 2 Forward = purchasing supplier. – A company value chain. also shows the support activities performed. Why We Use It • Primary objective is to determine where and how value is created in an industry or company • Value chains are also used to: – Understand the key activities within an industry or company.e. backward = purchasing customer learnppt. and do not determine where value is created. they stop at describing key activities. not qualitative. and can demonstrate key shifts along the value chain. Free Press. showing where value is created.2 – Map key players at each stage of an industry’s value chain. • Michael Porter codified the value chain concept in 1985.
returns and players across the value chain where applicable. map costs. Distinguish between primary and support activities. Assign the value activities to the categories (or functions) that best represent their contribution to a firm’s competitive advantage.Value chain – how to apply it There are three steps in developing a value chain: 1. 2. 3. learnppt. 102 . Once the activities are detailed in the value chain. Order the activities. broadly following the process flow: • Determine the links between activities. Identify individual value activities: • • The appropriate degree of disaggregation depends on the economics of the activities and the purposes for which the value chain is being analyzed.com The diagrams in this pack are to be used by the original buyer only.com Questions & feedback? Email me – dave@learnppt.
Competitive Advantage. Free Press 1985. Source: Adapted from M.com Questions & feedback? Email me – dave@learnppt. learnppt. a. 1985. Free Press. E. Competitors can also be mapped along the value chain. Competitive Advantage.com The diagrams in this pack are to be used by the original buyer only.1 Value chain – Illustrative output Generic manufacturing company value chain Distribution of operations Costs in flow control values Primary Activity 67 Primary Activities Links with suppliers Operations/ Manufacturing Logistics Marketing and Sales After-sales Support Infrastructure Support Activities Human Resources Margins Support Activities 9 1 2 9 8 1 6 1 R&D Margin 1% Procurement Procurement HR Management Infrastructure R&D Inbound logistics Operationsa Outbound logistics Marketing and sales Service Source: M. 40% = Purchased operating inputs. 103 . 27% = HR costs. Porter. E. Porter.
com Questions & feedback? Email me – email@example.com The diagrams in this pack are to be used by the original buyer only. 104 .This resource provides useful background context Hints and Pitfalls learnppt.Value chain – top tips Potential Insights • Analytic helps determine: – Key shifts within an industry (backwards or forwards along the value chain) – Why competitors may be targeting specific sections of the value chain – Whether the industry value chain is changing • Do: – Quantify the cost at each stage in an industry or company value chain – Understand the dynamics of a value chain—what’s changed? why? – Read Porter’s book on the roles of the value chain analytic in assessing competitive position: .
Value Chain – data sources.com The diagrams in this pack are to be used by the original buyer only. case examples and related analytics Data Sources Previous project work/quals (providing value chain output from previous projects) Questioning clients and/or industry experts Piecing together the activities via secondary data sources: – Annual reports – Broker reports – Industry reports – Database searches Related Analytics Internal cost data (client management accounts) Developing an industry and company value chain is typically a critical step in defining a client’s business (see introduction of this section): One of several of analytical steps in defining a business Used to map out a customer’s experience of our client company: See Customer Experience HBR May/June 1998—“Profit Pools—a fresh look at strategy” learnppt.com Questions & feedback? Email me – dave@learnppt. 105 .
SWOT Analysis learnppt. 106 .13.com The diagrams in this pack are to be used by the original buyer only.com Questions & feedback? Email me – dave@learnppt.
what are the industry CSFs – Better as a facilitative tool than analytic – Client has often already done this analysis learnppt.SWOT analysis – introduction What It Is The SWOT (Strengths-Weaknesses/ Opportunities and Threats) analysis is one of the earliest strategy frameworks: – Developed in the 1960s at Harvard Business School by Learned. 107 . – Gives basic directions for structuring strategic analysis.com Questions & feedback? Email me – dave@learnppt. Limitations: – Needs to be compared to how industries create value i. Strengths & Limitations Strengths: – Provides a good summary.e. and Guth. – Efficient for expository purpose.com The diagrams in this pack are to be used by the original buyer only. Andrews. The underlying theory is that assessment of competitive position should combine both an external and an internal analysis: Internal Assessment – Weaknesses – Strengths Strategic Choices External Assessment – Opportunities – Threats Why We Use It Derives insight into a company’s competitive position. Christensen.
Most important weaknesses and threats.com Questions & feedback? Email me – dave@learnppt.SWOT analysis – how to apply it Relying on findings from related analytics. Prioritize each element after validation with JTMs and industry experts: Greatest strengths and opportunities. 108 .com The diagrams in this pack are to be used by the original buyer only. learnppt. focusing in particular on: – Competitors moves (past/current/forecasted). regarding in particular: – Value chain – Financials – Organisation – Capabilities – Portfolio Opportunities/threats in the industry. produce an overview of: The company’s strengths and weaknesses.
com The diagrams in this pack are to be used by the original buyer only.SWOT analysis – Illustrative output Company: A Strengths • 2 strong products • Dynamic management team Weaknesses • High production costs • Geographical position Opportunities • Growing Asian markets • Diversification into service – Increasing demand for service Threats • Competition in ex-USSR learnppt. 109 .com Questions & feedback? Email me – dave@learnppt.
Client’s market research data.com Questions & feedback? Email me – dave@learnppt.SWOT analysis – top tips Potential Insights • Analytic key to obtain a quick grasp of the company’s position in its industry: – Highlight areas for development. Market research firms. Focused market interviews. Porter’s five forces PEST Competitors comparison Capabilities analysis Value chain Financial/ratio analysis Break-even analysis Scenario modeling Hints and Pitfalls Data Sources Related Analytics learnppt. 110 . • Do: – Start by defining the market and boundaries. – Focus on trends (what's changing? why?) – Limit the number of elements in each section (max 5) • • • • • • • • • • • • • Competitors analysis sources.com The diagrams in this pack are to be used by the original buyer only. – Access all client data. Database searches. – Call market research firms for free contents pages of their reports.
com The diagrams in this pack are to be used by the original buyer only. 111 .com Questions & feedback? Email me – dave@learnppt. SWOT Strategies learnppt.14.
112 .com The diagrams in this pack are to be used by the original buyer only.com Questions & feedback? Email me – dave@learnppt.SWOT strategies 1 Identification of company-internal strengths and weaknesses 2 Identification of company-external chances and risks 3 Mapping of a combined portfolio 4 Derivation of norm strategies learnppt.
– Perception of opportunities using the strengths – Expansions/ investments
– Leverage strengths to neutralise or reduce environmental threats – Use of relationships to influence environmental conditions
– Use of trends via existing resources
– Reduction of company weaknesses to use opportunities
– Reduce weaknesses to mitigate threats – Disinvestment strategies
– For example, reduction of own bureaucracy (weakness) to be more responsive and use market opportunities
– … – … – …
– … – … – …
– … – … – …
– … – … – …
15. Balanced Scorecard
116 .com The diagrams in this pack are to be used by the original buyer only.com Questions & feedback? Email me – dave@learnppt.Balanced scorecard 1 2 3 4 5 6 7 Determine perspectives Derive strategic objectives within the respective perspectives from the strategy Set up cause/ effect relationships Select measures Determine target values Determine activities and state responsibilities Ensure consistent commitment and incorporate it in daily work learnppt.
Balanced scorecard Finance St r KP a te Ta I gic ta r rg Aget et ct iv i ty What do we want to achieve in finance? Learning & Development How can we remain flexible and able to improve? Customers How can we satisfy our customers’ needs? St r KP at.com The diagrams in this pack are to be used by the original buyer only.com Questions & feedback? Email me – dave@learnppt. Ta I targ r et Ac get ti v i ty St r KP ate Ta I gic ta r rg Ac get et ti v i ty Strategy and Vision Internal Processes St r KP a te I gic ta rg Ac T et tiv arg i ty e t In which processes do we need to excel? learnppt. 117 .
com Questions & feedback? Email me – firstname.lastname@example.org The diagrams in this pack are to be used by the original buyer only. 118 .Balanced scorecard Finance Perspective How do the investors appraise our present position? … Customer Perspective How do our customers appraise our performance? … … Learning and Development Perspective How can we ensure that our customers’ needs are satisfied also in future and what are the critical success factors of the future? … … … Internal Process Perspective How well do we satisfy our customers’ needs? … … learnppt.
Balanced scorecard Strategic Objective Finance What do we want to achieve in finance? • • • … … … KPI • • • … … … Target • • • … … … Customers How can we satisfy our customers’ needs? • • • … … … • • • … … … • • • … … … Internal Processes In which processes do we need to excel? • • • … … … • • • … … … • • • … … … Learning and Development How can we remain flexible and able to improve? • • • … … … • • • … … … • • • … … … learnppt.com The diagrams in this pack are to be used by the original buyer only.com Questions & feedback? Email me – dave@learnppt. 119 .
120 .com Questions & feedback? Email me – dave@learnppt.Balanced scorecard Strategic Objective KPIs Frequency of Evaluation … Responsibility for Data Maintenance … Recipient of Reports … … … … … … … … … … … … … … … … … … … learnppt.com The diagrams in this pack are to be used by the original buyer only.
.. in % of Target Ongoing in % of Target Finance … … . … … … … … … …% …% Internal processes … … . Year Pres. of Survey Year 2004 Pres. … … … … … … …% …% Customers … … ..Balanced scorecard Perspective Strategic Objective KPI Weighting Frequency Comp. Year 2005 2005 2005 ExTarget Ongoing trapolated 2006 Target Extrapol. 121 .. … … … … … … …% …% Learning and … development Total y yearly hy twice a year q quarterly m monthly … . … … … … … … …% …% 100% …% Target achievement …% learnppt...com The diagrams in this pack are to be used by the original buyer only.com Questions & feedback? Email me – dave@learnppt...
how do out shareholders know? … … Customer Perspective • • … How should I see the customer to achieve the vision? … Internal Perspective • • … Which processes do I need to optimize to satisfy the customers? … Learning and Development • • … How should I enhance my organization to achieve the vision? … learnppt.com Questions & feedback? Email me – email@example.com The diagrams in this pack are to be used by the original buyer only.Balanced scorecard Vision Financial Perspective • • … If we are successful. 122 .
com/powerpoint Join our mailing list and receive the Basic Toolkit for free! http://learnppt. 123 .com The diagrams in this pack are to be used by the original buyer only.com Questions & feedback? Email me – firstname.lastname@example.org/ Browse our catalog of PowerPoint Diagram Packs http://learnppt.Read our eBook – How to Become a PowerPoint Guru http://learnppt.com/mailinglist learnppt.
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