Industry Analysis

Industry Analysis:

a tool that facilitates a company's

understanding of its position relative to other companies that produce similar products or services.

Industry Analysis:

Understanding the forces at work

in the overall industry is an important component of effective strategic planning.

Porters 5 Forces Model

Porters 5 Forces Model Porters Model contd.

Five Competitive Forces

1. Threat of New Entrants

threat of new competition entering the industry
If this is high the industry attractiveness is diminished However, in the early stages of market development new entrants can help a market expand, bring additional capacity and resources

Five Competitive Forces contd.

Barriers to Entry factors that would

help reduce threat of new entrants
Economies of scale Product differentiation Capital requirements Switching costs Efficient distribution system

Five Competitive Forces contd.

2. Bargaining Power of Buyers

the amount of influence buyers (consumer or business) have on price
If this is high, it is negatively related to the industry attractiveness

Five Competitive Forces contd.

Bargaining power of buyers is

high when:
Product bought is a large percentage of the buyers costs Product bought is undifferentiated Buyer earns low profits Buyer threatens to backward integrate Substitutes exist

Five Competitive Forces contd.

3. Bargaining Power of Suppliers

the degree of influence suppliers have on
price. High supplier power is not attractive. This is high when:
There are no substitutes for the product supplied Suppliers are highly concentrated. Supplier has differentiated its product or built switching costs. Supply is limited.

Five Competitive Forces contd.

4. Current Category Rivalry -

the amount and intensity of competition in a category. Product categories with intense competition are not attractive. The following are the characteristics of categories with intense rivalry:
Many or balance competition Slow growth High fixed costs Lack of product differentiation Personal rivalries

Five Competitive Forces contd. 5. Pressure from Substitutes

the number of substitutes available in a category.

Categories with larger number of substitutes are lesser attractive than those that deliver unique products.

Business Implications of Five Competitive Forces

High Threat of New Entrants High Bargaining Power of Buyers
Lower prices, higher quality, flexible service, encourage new competition Over capacity, lower prices, new competitive paradigm

High Bargaining Power of

Suppliers High Threat from

Higher prices, lower quality, reduced supply

Limited market potential, price ceilings

Substitutes
High Competitive Intensity
Lower prices, accelerate new product intro, distribution & service critical, customer loyalty needed

Source: Go, Josiah, 53rd Marketing Strategy and Plans (2004)

Porters Five Forces of Competition: Wal-Mart

Potential Competitors: Medium pressure
Grocers could potentially enter into the retail side. Entry barriers are relatively high, as WalMart has an outstanding distribution systems, locations, brand name, and financial capital to fend off competitors. Wal-mart often has an absolute cost advantage over other competitors.

 Rivalry Among Established Companies: Medium Pressure Currently, there are three main incumbent companies that exist in the same market as Wal-Mart: Sears, K Mart, and Target. Target is the strongest of the three in relation to retail. Target has experienced tremendous growth in their domestic markets and have defined their niche quite effectively. Sears and K-Mart seem to be drifting and have not challenged K-Mart in sometime. Mature industry life cycle.

Porters Five Forces of Competition contd.

Porters Five Forces of Competition contd.

The Bargaining Power of Buyers: Low pressure
The individual buyer has little to no pressure on Wal-Mart. Consumer advocate groups have complained about Wal-Marts pricing techniques. Consumer could shop at a competitor who offers comparable products at comparable prices, but the convenience is lost.

 Bargaining Power of Suppliers: Low to Medium pressure Since Wal-Mart holds so much of the market share, they offer a lot of business to manufacturers and wholesalers. This gives Wal-Mart a lot of power because by Wal-Mart threatening to switch to a different supplier would create a scare tactic to the suppliers. Wal-Mart could vertically integrate. Wal-Mart does deal with some large suppliers like Proctor & Gamble, Coca-Cola who have more bargaining power than small suppliers.

Porters Five Forces of Competition contd.

Porters Five Forces of Competition contd.

Substitute Products: Low pressure When it comes to this market, there are not many substitutes that offer convenience and low pricing. The customer has the choice of going to many specialty stores to get their desired products but are not going to find Wal-Marts low pricing. Online shopping proves another alternative because it is so different and the customer can gain price advantages because the company does not necessarily have to have a brick and mortar store, passing the savings onto the consumer.

Porters Five Forces of Competition contd.

Complementors: Low pressure One complementor that exists for Wal-Mart is Sams Wholesale Clubs. Although the same company owns this, it complements Wal-Mart by offering the same products in wholesale form, making the company more profitable. Suppliers of goods need to have innovative products to attract customers. For the most part, complementors do not affect WalMarts business model

MARKET

Know your target market.

Who is likely to buy your product or service?

Market Analysis

Market Analysis
Five dimensions according to David Aaker 1. Market size (current and future) 2. Market growth rate 3. Market profitability 4. Industry cost structure 5. Distribution channels Market trends Key success factors

Market Size
Actual refers to entire market size; i.e. total market of soft drinks, shampoo, etc. Estimate can be known through customer survey, published sources as government and trade Potential untapped market, new use/user
Small markets

Market Growth
Market size in the future Increasing market means more sales and profit; decreasing means reduced sales and profit

Market Growth contd.

Determine market growth by: 1. Identifying driving forces What are the forces that drive sales (e.g. price, design, convenience, etc.) 2. Forecasting Growth Market sales indicators demographic data (e.g. number of health conscious individuals as indicator of nutritional supplements); sales of related equipment (e.g. presence of call centers is an indicator of 24-hour convenience stores); based on previous experience of same industries (e.g. Krispy Kreme and J Co)

Market Growth contd.

Determine market growth by: 3. Detecting Maturity and Decline Over capacity and lack of differentiation Buyer Knowledge Substitute products or technologies Saturation No growth sources Customer disinterest

Market Growth contd.

Determine market growth by: 4. Growth of submarkets Example: Coffee market Nescafe, Kopiko, Maxwell Coffee submarket Starbucks, Figaro

Market Profitability
There are five factors that influence profitability: Buyer power Supplier power Barriers to entry Threat of substitute products Rivalry among firms in the industry

Industry Cost Structure

Value chain model - useful for determining where value is added and for isolating the costs.
The goal of these activities is to offer the customer a level of value that exceeds the cost of the activities, thereby resulting in a profit margin.

Industry Cost Structure contd.

Industry Cost Structure contd.

The primary value chain activities are: Inbound Logistics: the receiving and warehousing of raw materials, and their distribution to manufacturing as they are required. Operations: the processes of transforming inputs into finished products and services. Outbound Logistics: the warehousing and distribution of finished goods. Marketing & Sales: the identification of customer needs and the generation of sales. Service: the support of customers after the products and services are sold to them.

These primary activities are supported by: The infrastructure of the firm: organizational structure, control systems, company culture, etc. Human resource management: employee recruiting, hiring, training, development, and compensation. Technology development: technologies to support value-creating activities. Procurement: purchasing inputs such as

Industry Cost Structure contd.

Industry Cost Structure contd.

The firm's margin or profit then depends on its effectiveness in performing these activities efficiently, so that the amount that the customer is willing to pay for the products exceeds the cost of the activities in the value chain. It is in these activities that a firm has the opportunity to generate superior value. A competitive advantage may be achieved by reconfiguring the value chain to provide lower

Industry Cost Structure contd.

Applications of Analytics Across the Value Chain

Source: http://ph.images.search.yahoo.com/search/images?_adv_prop=image&fr=yfp-t-711&va=example+of+value+chain+analysis

Distribution Systems
The following aspects of the distribution system are useful in a market analysis: Existing distribution channels - can be described by how direct they are to the customer. (see Kantar World Panel Consumer Index) Trends and emerging channels - new channels can offer the opportunity to develop a competitive advantage. Channel power structure - for example, in the case of a product having little brand equity, retailers have negotiating power over manufacturers and can capture more margin.

Distribution Systems contd.

Alternative Distribution Channels
Direct selling Mail orders Own retail stores Distributors

Creation of New Channels

Emerging changes within the distribution channel i.e. home shopping, convenience stores in gas stations, food cart in MRT/LRT stations, exhibits/sales expo

Distribution Systems contd.

Channel Power - who has the power in the channel?
Supermarket up by 8.4% Grocery store sales down by 8.6% Drugstores down by 2% Top 3 retailers are SM, Robinsons and Puregold

Source: Kantar World Panel (2011)

Market Trends
Changes in the market are important because they often are the source of new opportunities and threats The relevant trends are industry-dependent, but some examples include changes in price sensitivity, demand for variety, and level of emphasis on service and support. Examples: Travel Lite

Key Success Factors

The key success factors are those elements that are necessary in order for the firm to achieve its marketing objectives. These are assets and skills that provide the bases for competing successfully. A few examples of such factors include:
Access to essential unique resources Ability to achieve economies of scale Access to distribution channels Technological progress It is important to consider that key success factors may change over time, especially as the product progresses through its life cycle.

CUSTOMER ANALYSIS

Customer Analysis
Identifying customers segments, motivations, and unmet needs. Collection and evaluation of data associated with customer needs and market trends through FGDs, customer satisfaction measurement, field testing, etc.

Demographic profile of Filipinos

Source: National Statistics Board

Average Income and Expenditure of Families by Region, at 2000 Prices: 2009 Average (in thousand PhP) Region
Philippines NCR CAR Ilocos Cagayan Valley Central Luzon Calabarzon Mimaropa Bicol Western Visayas Central Visayas Eastern Visayas Zamboanga Peninsula Northern Mindanao Davao Soccsksargen Caraga ARMM
Income 129 227 136 116 115 139 158 90 95 99 111 98 88 98 99 96 88 62 Average Expenditure 110 197 108 94 90 119 135 77 85 89 92 78 71 83 85 82 74 54

Population by Age Group, by Sex and by Region: 2010

Age Group Philippines Under 5 5-9 10-14 15-19 20-24 Both Sexes 92,097,978 10,231,648 10,317,657 10,168,219 9,676,359 8,370,398 Male 46,459,318 5,291,880 5,329,978 5,230,893 4,914,379 4,229,958 Female 45,638,660 4,939,768 4,987,679 4,937,326 4,761,980 4,140,440

25-29 30-34
35-39 40-44 45-49 50-54 55-59 60-64 65-69

7,390,062 6,744,028
5,990,108 5,450,679 4,664,537 3,883,630 2,980,350 2,224,105 1,495,115

3,719,437 3,419,039
3,037,467 2,761,377 2,354,757 1,945,258 1,470,861 1,061,324 678,782

3,670,625 3,324,989
2,952,641 2,689,302 2,309,780 1,938,372 1,509,489 1,162,781 816,333

70-74 75-79
80-84

1,140,951 705,977
393,387

491,491 285,693
145,686

649,460 420,284
247,701

Population by Age Group, by Sex and by Region: 2010

Age Group Both Sexes Male Female

Philippines Under 5 5-9

92,097,978 10,231,648 10,317,657

46,459,318 5,291,880 5,329,978

45,638,660 4,939,768 4,987,679

10-14 15-19
20-24 25-29 30-34 35-39 40-44 45-49

10,168,219 9,676,359
8,370,398 7,390,062 6,744,028 5,990,108 5,450,679 4,664,537

5,230,893 4,914,379
4,229,958 3,719,437 3,419,039 3,037,467 2,761,377 2,354,757

4,937,326 4,761,980
4,140,440 3,670,625 3,324,989 2,952,641 2,689,302 2,309,780

50-54 55-59
60-64 65-69 70-74 75-79 80-84 85 and over

3,883,630 2,980,350
2,224,105 1,495,115 1,140,951 705,977 393,387 270,768

1,945,258 1,470,861
1,061,324 678,782 491,491 285,693 145,686 91,058

1,938,372 1,509,489
1,162,781 816,333 649,460 420,284 247,701 179,710

Population, by Region Census Years 1980, 1990, 1995, 2000, 2007 and 2010
Area 2010 (Aug 1) 2007 (Aug 1) 2000 (May 1) 1995 (Sep 1) 1990 (May 1) 1980 (May 1)

Philippines
National Capital Region Cordillera Administrative Region Ilocos Region Cagayan Valley Central Luzon IVA- Calabarzon IVB- Mimaropa Bicol Region Western Visayas Central Visayas Eastern Visayas Zamboanga Peninzula Northern Mindanao Davao Region SOCCSKSARGEN Caraga Autonomous Region in Muslim Mindanao Filipinos in Philippine Embassies/Consulates and Missions Abroad

92,337,852
11,855,975

88,566,732
11,566,325

76,506,928a
9,932,560 b

68,616,536
9,454,040

60,703,206
7,948,392

48,098,460
5,925,884

1,616,867
4,748,372 3,229,163 10,137,737 12,609,803 2,744,671 5,420,411 7,102,438 6,800,180 4,101,322 3,407,353 4,297,323 4,468,563 4,109,571 2,429,224 3,256,140

1,520,847
4,546,789 3,051,487 9,709,177 11,757,755 2,559,791 5,106,160 6,843,643 6,400,698 3,915,140 3,230,094 3,952,437 4,159,469 3,830,500 2,293,346 4,120,795

1,365,220
4,200,478 2,813,159 8,204,742 9,320,629 2,299,229 4,674,855 6,211,038 5,706,953 3,610,355 2,831,412 3,505,708 3,676,163 3,222,169 2,095,367 2,803,045

1,254,838
3,803,890 2,536,035 7,092,191 7,750,204 2,033,271 4,325,307 5,776,938 5,014,588 3,366,917 2,567,651 3,197,059 3,288,824 2,846,966 1,942,687 2,362,300

1,146,191
3,550,642 2,340,545 6,338,590 6,349,452 1,774,074 3,910,001 5,393,333 4,740,318 3,054,490 2,221,382 2,811,646 2,933,743 2,399,953 1,764,297 2,075,238

914,432
2,922,892 1,919,091 4,909,938 4,603,435 1,408,040 3,476,982 4,525,615 3,886,097 2,799,534 1,771,860 2,226,169 2,198,683 1,722,727 1,371,512 1,560,480

2,739

2,279

2,851

2,830

2,336

Summary of Projected Population by Sex, by Five-Year Interval: Philippines: 2000-2040

Year 2000 2005

Both Sexes 76,946,500 85,261,000

Male 38,748,500 42,887,300

Female 38,198,000 42,373,700

2010
2015 2020 2025

94,013,200
102,965,300 111,784,600 120,224,500

47,263,600
51,733,400 56,123,600 60,311,700

46,749,600
51,231,900 55,661,000 59,912,800

2030
2035 2040

128,110,000
135,301,100 141,669,900

64,203,600
67,741,300 70,871,100

63,906,400
67,559,800 70,798,800

What Filipinos Buy

Top categories include milk products, snacks, fabric cleaning, food seasonings, coffee, canned goods, noodles, hair products, cooking oil and softdrinks.

Average Income and Expenditures

Urban P24,000/month Rural P15,000/month Average total monthly household expenses between 13,500 and 15,500 Food expenses pegged at 6,500-7,500/month

Sample Questionnaire Format

Industry analysis\Sample Customer Questionnaire Format.doc

Customer Analysis Template

Industry analysis\4th Lecture Annex C Customer Analysis Template.doc

Customer Analysis Illustration: Energy Bars Who the Customers are:

63.7 percent of volume is from households with greater than $40,000 income 32.4 percent of volume is from households with greater than $60,000 income 72.8 percent of volume is from households with no kids 65.8 percent of volume is from households where the Head has some college education 39.4 percent of volume is from households with the Head under 35 years old

Customer Analysis Illustration: Energy Bars

Percent Who Have Eaten Energy Bars in the Last Six Months

Female

20%

Male
65 and over

18%
12%

55-65
45-54

10%
20%

36-44
25-34

21%
21%

18-24

27%

Customer Analysis Illustration: Energy Bars

Customer Segments:
Hard-core Athletes Musclemen Dieters Health Purists Health Conscious and On-the-Go Sports Enthusiasts Specialty Segments Nutrition-seeking Families

Customer Analysis Illustration: Energy Bars

What They Buy:

Convenience Taste Texture Health Benefits Performance/Energy Hunger Satisfaction Price (expect to pay $1.00 to $1.50 per bar) Packaging/Buy In Bulk Availability

Customer Analysis Illustration: Energy Bars

What Use For:
Meal Replacements Snacks Athletic Energy Booster

Customer Analysis Illustration: Energy Bars

Where They Buy:
Health Food Stores Outdoor Retailers (e.g., REI) Grocery Stores Drug Stores Convenience Stores Mass Merchandisers Club Stores

COMPETITOR ANALYSIS

Competitor Analysis
is an assessment of the strengths and weaknesses of current and potential competitors. This analysis provides both an offensive and defensive strategic context to identify opportunities and threats. Profiling together all of the relevant sources of competitor analysis into one framework in the support of efficient and effective strategy formulation, implementation, monitoring and adjustment.

Competitor Analysis System

Secondary data Primary data

Key questions: Who are they? What are the competing product features? What do they want? What is their current strategy?

Differential competitor advantage analysis i.e. Who has the competitive product advantage?

What are they going to do?

Competitor Analysis Who are your competitors?

Beers Ice cream

Tea

Regular colas
Diet-Rite cola Diet Pepsi Diet Coke

Diet lemon limes Product form competition: Diet colas

Wine

Fast food
Fruit flavored colas

Juices

Bottled water

Lemon limes

Product category competition: Soft drinks

Video rentals

Baseball cards

Coffee

Generic competition: Beverages Budget competition: Food and entertainment

Competitor Analysis What are the competing product features?

Competitor Analysis Product Feature Analysis Example

Product feature Chamyto Bear Brand 4 billion live good bacteria Lactobacillus Fortis Enhances natural resistance to intestinal infection
78 ml

Yakult 8 billion live good bacteria Lactobacilli Shirota Strain Aids in digestion

Good Bacteria 4 billion live good bacteria Type of Bacteria Benefits Lactobacillus Fortis Enhances natural resistance to intestinal infection
78 ml

Product volume

80 ml

Competitor Analysis What are their strategies?

Target market selection Core strategy (Positioning) Supporting Marketing Mix (Pricing, Promotion, Distribution, Product/Service Capabilities)

Differential Advantage Analysis

Competitor analysis sample template

Industry analysis\3rd Lecture Annex B Competitor Analysis Template.doc

Strategic Marketing Plan Format Part I

I. Executive Stummary II. Companys Background Mission, Objectives, Products/Services I. Situation Analysis A. SWOT/TOWS Analysis B. PEST C. Industry Analysis a. Threat of New Entrants
b. Bargaining Power of Buyers c. Bargaining Power of Suppliers

Strategic Marketing Plan Format Part I

D. Market Analysis a. Market size (current and future) b. Market growth rate c. Market profitability d. Industry cost structure e. Distribution channels f. Market trends g. Key success factors

Strategic Marketing Plan Format Part I

E. Customer Analysis a. Survey (Please refer to sample/guide) b. Profile (who are the customers, what do they buy and how do they use it, where do they buy, when do they buy, how do they choose, why they prefer a product, how they respond to marketing programs?)

Strategic Marketing Plan Format Part I

F. Competitor Analysis a. Competitor Profile company profile, mission/vision, founder/management team b. Competing product features c. Target market selection d. Positioning strategy e. Marketing Mix Strategies d. Differential advantage analysis - survey using key industry success factors extensive distribution, customer focus, economies of scale, and product innovation

STRATEGIES FOR REACHING TARGET MARKETS

1. UNDIFFERENTIATED

--Focuses on producing a single product and marketing it to all customers; also

called mass marketing.

2. DIFFERENTIATED
--focuses on producing several products and pricing, promoting, and distributing them with different marketing mixes designed to satisfy smaller segments.

3. CONCENTRATED /NICHE -- Focusing marketing efforts on satisfying a single market segment;

4. MICROMARKETING

--a firm targets potential customers at a very basic level (such as by zip code, specific occupation, or lifestyle)

Undifferentiated Marketing
strategy that focuses on producing a single product and marketing it to all customers; also called mass marketing. More common in the past than today.

Example:
--a fast-food chain might offer the

same hamburger promotion at all of

its franchises The disadvantage of mass marketing is its Consumers dont all think alike, so what works well in one geographic region or for one demographic might not work well for others.

limited appeal.

T-shirts

Differentiated Marketing
Strategy that focuses on producing several products and pricing, promoting, and distributing them with different marketing mixes designed to satisfy smaller segments. Generally raises production and promotion costs but also can increase satisfaction among individual segments Example: a fast-food chain might offer the hamburger promotion to franchises in college towns while marketing a more health-conscious product -- to franchises in well-off suburbs.

Sports goods

CONCENTRATED MARKETING
Focusing marketing efforts on satisfying a single market segment; also called niche marketing. Approach can appeal to small firms or to firms that offer highly specialized goods and services.

Example: Peanut Butter & Co., which appeals to peanut butter lovers.
a product specifically designed for newlyweds.

Doll salons/kids salon

MICROMARKETING a firm targets potential customers at very narrow, basic levels, such as by ZIP code, specific occupation, or lifestylepossibly even individuals themselves.

Internet makes micromarketing more effective.

Example: A hair salon that caters to women of a specific age group in a specific place.

Sari-sari store

SELECTING & EXECUTING A STRATEGY

Basic determinants of marketing strategy:

1. 2. Company resources. Product homogeneity.

3. 4.

Stage in the product lifestyle. Competitors strategies.

Positioning

--Placing a product at a certain point or

location within a market in the minds of prospective buyers.

Distinguishes firms offerings from its competitors.

May develop a positioning map and reposition product as necessary.

Positioning a product may be based on the

following categories:

Attributes Price/quality Competitors Application Product user Product class

Positioning
Reasons for positioning a product:

To emphasize a products unique advantages To differentiate it from competitors options

e. A positioning map is a tool that graphically illustrates consumers perceptions of competing products within an industry by presenting two characteristics (such as price and quality) to show differing views of a product, service, or retailer

Differentiated business markets

Market Trends
What factors seem to be changing the market or changing the business? What developing trends can make a difference? Market trends could be changes in demographics, changes in customer needs, a new sense of style or fashion, or something else. It depends on what business you are in.

Market Trends
For example, a building supply store might note the trend toward remodeling older homes instead of buying new homes, or a trend toward more rooms in larger houses, despite smaller families, because of home offices, dens, and exercise rooms.

Market Trends
A grocery store might note a trend toward Asian foods or spicier foods, or toward fresher, healthier foods, or development of a new shopping area in a different part of town.

Market Trends A medical supplies store might note demographic trends, as baby boomers age, leading toward more need for estate planning and retirement planning. Look to market trends as a way to get ahead of the market, to know where it is going before it gets there.