Chapter 2

Markets and Competitive Space

 1. Markets and Strategies are Interlinked

• Market changes often require altering business

and marketing strategies.
• Managers who do not understand their markets
and how they will change in the future may find
their strategies inadequate as buyers’ value
requirements change and new products become
available which better satisfy buyers’
requirements.
 2. Strategies for Matching Needs with Product Benefits

DEFINING AND ANALYZING MARKETS

Define Product-Market Boundaries and Structures

Forming Product-Markets

Identify and Describe End-Users

Analyze Competition/
Evaluate Key Competitors

Forecast Market Size

and Growth Trends
a. Determining Product – Market Boundaries and
Structure:
1.Start with the generic need satisfied by the product
category of interest to management
2.Identify the product categories (types) that can satisfy
the generic need
3.Form the specific product – markets within the generic
product – market
b. Forming Product-Markets:
•Purpose of Analysis
•Changing composition of markets
•Extent of market complexity
c. Describing and Analyzing End Users
Identifying and
Describing Buyers

DESCRIBING How
Building AND Buyers
Customer Make
Profiles ANALYZING Choices
END-USERS

Environmental
Influences
 d. ANALYZING COMPETITION
1. Define Industry
Structure and
Characteristics

5. Identify 2. Identify
New PRODUCT- and
Competitors Describe
MARKET
Key
STRUCTURE
Competitors
AND
MARKET
SEGMENTS
4. Anticipate 3. Evaluate
Actions by Key
Competitors Competitors
Defining Industry Structure and Characteristics
SUPPLIERS
Industry Form
Industry
PRODUCERS
Environment
Competitive
Forces WHOLESALERS/
DISTRIBUTORS
Value
RETAILERS/ Added
DEALERS Chain

CONSUMER/
ORGANIZATIONAL
END USERS
 Examples of Levels of Competition
Baseball
cards
Bottle
water Video
Fast Games
Regular
Food
colas
Diet lemon
Beer Fruit limes
flavored Ice
colas Cream
Wine
Diet
Diet
Pepsi
Coke
Product from Lemon
limes
Juices competition:
diet colas Coffee

Product category
competition:
soft drinks
Generic competition:
beverages
Budget competition:
food & entertainment
 Competitive Forces
1. Rivalry among existing firms.

2. Threat of new entrants.

3. Threat of substitute products.

4. Bargaining power of suppliers.

5. Bargaining power of buyers.

Source: Michael E. Porter, Competitive Advantage, Free Press, 1985, 5.
 Key Competitor Analysis
• Business scope and objectives
• Management experience, capabilities, and
weaknesses
• Market position and trends
• Market target(s) and customer base
• Marketing program positioning strategy
• Financial, technical, and operating capabilities
• Key competitive advantages (e.g., access to
resources, patents)
 Extent of
Market Coverage

Customer
Current Competitor Satisfaction
Capabilities Evaluation

Past
Performance
e. MARKET SIZE ESTIMATION/ FORECAST MARKET SIZE AND
GROWTH TRENDS
Product-Market Forecast Relationships Market Potential
(area denotes sales in $’s) Estimate

Unrealized
Potential

Company Sales Forecast Industry Sales Forecast

Product-Market Forecast Relationships for Industrial
Painting Units
Sales (in 1000s
of units)
900
Market
800 Potentia
l
700
600 Sales
Forecast
500
400
300
Company XYZ
200 Sales Forecast

100
0
2011 2012 2013 2014 2015 2016 2017 2018
End of Chapter Two