5C’s and 4 P’s

5 C’s

Exploring
value creation Customers Company Competitors Collaborators Context
opportunities

Choosing the Market S Target market T P

value Segmentation selection Positioning

Creating,
delivering and Product Place / Promotion
communicating Channel
Value
4 P’s
Capturing
Pricing
value

Customer Customer
Sustaining acquisition retention
value
Profits
Evaluating Company
Growth Share Matrix (BCG Matrix)

Classification of SBUs/products into four

cell matrix based on

 Market Attractiveness

Indicator – Industry’s annual growth rate

10% traditional cutoff

 Business Strength

Indicator – Company’s Market Share Relative to Largest
Competitor
 The BCG Growth-Share Matrix
20%-
Market Growth Rate

18%- Stars Question marks

4
16%-
14%-
12%- 5
3
? 2? 1

10%-
Cash cows Dogs
8%- 8
6%-
4%- 7
2%- 6
0
10x 4x 2x 1.5x 1x .5x .4x .3x .2x .1x
Relative Market Share
Strategy Implications BCG

Star – Leader in Expanding Industry

 BUILD - Continue to increase market share – if
necessary at expense of short-term earnings

Cash Cow – Leader in mature or declining

industry
 HOLD - Maintain share and cost leadership until
further investment becomes marginal
 Maximize cash flow
Strategy Implications BCG

Problem Child (Question Marks)– Low market
share in Expanding Industry
 HARVEST if weak, BUILD if strong.
 Assess chances of dominating segment. If good, go
after share. If bad, redefine business or withdraw.

Dogs – Low market share in a mature or

declining industry
 DIVEST Plan an orderly withdrawal so as to maximize
cash flow or concentrate on niches that require limited
effort
Assumptions of Growth /Share Matrix

High market share generates cash revenues ?

High market growth uses more cash resources ?

Evaluating Context and
Competitors
SWOT

Factors affecting an organization can usually be

classified as:

Internal factors
 Strengths (S) Strengths Weaknesses
 Weaknesses (W)

External factors
 Opportunities (O) Opportunities Threats
 Threats (T)
Strengths

A firm's strengths are its resources and
capabilities that can be used for developing a
competitive advantage.

Examples of such strengths include:

Patents

Strong brand names

Good reputation among customers

Cost advantages from proprietary know-how

Exclusive access to natural resources

Good access to distribution networks
Weaknesses

The absence of certain strengths are a
weakness.

For example:

Lack of patent protection

A weak brand name

Poor reputation among customers

High cost structure

Lack of access to best natural resources

Lack of access to key distribution channels

Weaknesses - Continued

In some cases, a weakness may be the flip
side of a strength.

For example, a firm has a large amount of
manufacturing capacity.

While this capacity may be considered a
strength that competitors do not share, it
also may be a considered a weakness if the
large investment in manufacturing capacity
prevents the firm from reacting quickly to
changes in the strategic environment.
Opportunities

The external environmental analysis may reveal

certain new opportunities for profit and growth.
Some examples of such opportunities include:

An unfulfilled customer need

Arrival of new technologies

Loosening of regulations

Removal of international trade barriers
Threats

Changes in the external environmental
also may present threats to the firm.

Some examples of such threats include:

shifts in consumer tastes away from the
firm's products

emergence of substitute products

new regulations

increased trade barriers

SWOT Interactions
 For the external factors
Seriousness of Impact
Low High

Minimum
High
Must
resources if
plan for
any
Probability
of
occurrence Maintain
Low
Forget it flexibility in
plan
 Porter’s Five Forces Model
POTENTIAL
ENTRANTS

Threat of new
3a. entrants

INDUSTRY
Bargaining power COMPETITORS
2a. of suppliers
2b. Bargaining power
of buyers
SUPPLIERS BUYERS

Rivalry among
1. existing firms

3b. Threat of substitute new

products or services

SUBSTITUTES
Three stages in Porters external analysis

1. Analyze industry structure

• How concentrated is it?
• What are the dynamics

2. Analyze the industry's context

• Are there powerful buyers?
• Are there powerful suppliers?

3. Analyze its long term viability

• Will more firms enter?
• Will substitute products or services be found?
Industry Competitors: Summary
Bargaining power Bargaining power
of suppliers Industry of buyers
Suppliers Buyers
competitors

• Is it a concentrated industry?
• 4 firm concentration ratio (what % of total industry output is accounted
for by the 4 largest firms)
• concentrated if > 70%
• fragmented if < 30%
– If fragmented…
• STOP HERE AND PROCEED INTERNAL ANALYSIS
– Otherwise
• Is there non-price competition?
– e.g. around brand, through product innovation
• Are there large economies of scale ?
• Are there high barriers to exit?
• Is the product a commodity?
• Do companies segment the market and differentiate
their products from each another?
 1. Industry Rivalry
Bargaining power Bargaining power
of suppliers of buyers
Industry
Suppliers Buyers
competitors

• Rivalry refers to the extent to which firms compete on the

basis of price alone

– Competing by out spending on advertising is not considered

highly rivalrous

– Competing by out spending on innovation is not considered

highly rivalrous

– Competing by cutting prices is considered highly rivalrous

 Industry competitors:
Cournot’s model of competition
Bargaining power Bargaining power
of suppliers of buyers
Industry
Suppliers Buyers
competitors
Potential price

LRAC

1 2 3 4 5 6
# of firms
 2. Bargaining power
Bargaining power Bargaining power
of suppliers Industry of buyers
Suppliers Buyers
competitors

• Suppliers (2a) • Buyers (2b)

– Are we buying from a monopoly
(or from a highly concentrated
industry)? (bad)
– Does their product represent an
insignificant portion of our
product costs? (?)
– Do we take a small
(insignificant) proportion of their
output (bad)
– Can they forward integrate into
our business? (bad)
– Is it difficult for them to switch
suppliers (good)
– Are we selling to a monopsony,
(or into a highly concentrated
market)? (bad)
– Does our product represent a
significant portion of the buyers
product costs? (bad)
– Do they take a significant
proportion of our output (bad)
– Can they backward integrate
into our business? (bad)
– Can they easily switch suppliers
(bad)
3. Threat of new entry or substitution

• Are there barriers to entry? (3a)

– Economies of scale (good?)
– Significant sunk costs (e.g. brand) to act as a deterrent
– Does regulation restrict entry? (good)

• How likely is it that a substitute product for the needs

the industry currently meets will be found? (3b)

• If no likely substitutes and entry barriers are high,

above normal returns may persist over time.
Entry Deterrence

• Excess capacity

• Product proliferation
– closing any open niches

• Pricing
– Limit pricing (scale)
– Predatory pricing (illegal)
– Price signaling
 PEST Analysis

Political factors

Economic factors

Socio-cultural factors

Technological factors
Thank You