Industry Analysis1(2)

7/28/2019 Industry Analysis1(2)

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Industry Analysis: Definition and Importance

Industry analysis is a tool that facilitates a company'sunderstanding of its position relative to othercompanies that produce similar products or services.

Understanding the forces at work in the overallindustry is an important component of effectivestrategic planning.

Source: http://www.answers.com/topic/industry-analysis


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Porters Model


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Porters Model contd.


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Five Competitive Forces

1. Threat of New Entrants threat ofnew competition entering the industry

If this is high the industry attractiveness is diminished

However, in the early stages of market development newentrants can help a market expand, bring additional capacityand resources


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Five Competitive Forces contd.

Barriers to Entry factors that would helpreduce threat of new entrants Economies of scale

Product differentiation Capital requirements

Switching costs

Efficient distribution system


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2. Bargaining Power of Buyersthe amount of influence buyers (consumer or

business) have on price

If this is high, it is negatively related to the industryattractiveness


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Bargaining power of buyers is highwhen: 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


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3. Bargaining Power of Suppliersthe 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 switchingcosts

Supply is limited


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4. Current Category Rivalry- the amountand intensity of competition in a category. Productcategories with intense competition are not attractive.

The following are the characteristics of categories withintense rivalry: Many or balance competition

Slow growth

High fixed costs

Lack of product differentiation

Personal rivalries


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5. Pressure from Substitutes thenumber of substitutes available in a category.Categories with larger number of substitutes are

lesser attractive than those that deliver uniqueproducts.


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Business Implications of Five Competitive Forces

High Threat of New Entrants

High Competitive Intensity

High Bargaining Power of Buyers

High Bargaining Power ofSuppliers

High Threat from Substitutes

Over capacity, lower prices, newcompetitive paradigm

Lower prices, higher quality,flexible service, encourage newcompetition

Higher prices, lower quality,reduced supply

Limited market potential, priceceilings

Lower prices, accelerate new product intro,distribution & service critical, customer loyaltyneeded

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


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Example

Heineken http://www.slideshare.net/jin88lin/heineken-case-study-analysis-presentation
http://www.slideshare.net/jin88lin/heineken-case-study-analysis-presentationhttp://www.slideshare.net/jin88lin/heineken-case-study-analysis-presentationhttp://www.slideshare.net/jin88lin/heineken-case-study-analysis-presentationhttp://www.slideshare.net/jin88lin/heineken-case-study-analysis-presentationhttp://www.slideshare.net/jin88lin/heineken-case-study-analysis-presentationhttp://www.slideshare.net/jin88lin/heineken-case-study-analysis-presentationhttp://www.slideshare.net/jin88lin/heineken-case-study-analysis-presentationhttp://www.slideshare.net/jin88lin/heineken-case-study-analysis-presentationhttp://www.slideshare.net/jin88lin/heineken-case-study-analysis-presentationhttp://www.slideshare.net/jin88lin/heineken-case-study-analysis-presentation


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Example

Walmart http://classes.bus.oregonstate.edu/.../Industry%20analysis%20example.doc
http://classes.bus.oregonstate.edu/.../Industry%20analysis%20example.dochttp://classes.bus.oregonstate.edu/.../Industry%20analysis%20example.doc


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Porters Five Forces of Competition

Potential Competitors: Medium pressure

Grocers could potentially enter into the retail side.

Entry barriers are relatively high, as Wal-Mart has anoutstanding distribution systems, locations, brand name, and

financial capital to fend off competitors.

Wal-mart often has an absolute cost advantage over othercompetitors.


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Porters Five Forces of Competition contd.

Rivalry Among Established Companies: MediumPressure

Currently, there are three main incumbent companiesthat exist in the same market as Wal-Mart: Sears, K Mart,

and Target. Target is the strongest of the three in relationto retail.

Target has experienced tremendous growth in theirdomestic markets and have defined their niche quiteeffectively.

Sears and K-Mart seem to be drifting and have notchallenged K-Mart in sometime.

Mature industry life cycle.


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The Bargaining Power of Buyers: Lowpressure

The individual buyer has little to no pressure on Wal-Mart.

Consumer advocate groups have complained about Wal-Martspricing techniques.

Consumer could shop at a competitor who offers comparableproducts at comparable prices, but the convenience is lost.


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Bargaining Power of Suppliers: Low to Mediumpressure

Since Wal-Mart holds so much of the market share, theyoffer a lot of business to manufacturers and wholesalers.

This gives Wal-Mart a lot of power because by Wal-Martthreatening to switch to a different supplier would createa scare tactic to the suppliers.

Wal-Mart could vertically integrate.

Wal-Mart does deal with some large suppliers likeProctor & Gamble, Coca-Cola who have more bargainingpower than small suppliers.


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Substitute Products: Low pressure

When it comes to this market, there are not manysubstitutes that offer convenience and low pricing.

The customer has the choice of going to many specialtystores to get their desired products but are not going tofind Wal-Marts low pricing.

Online shopping proves another alternative because it isso different and the customer can gain price advantages

because the company does not necessarily have to have abrick and mortar store, passing the savings onto theconsumer.


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Complementors: Low pressure

One complementor that exists for Wal-Mart is SamsWholesale 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 Wal-Marts

business model


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MARKET ANALYSIS


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Market Analysis

Dimensions according to David Aaker

Market size (current and future)

Market growth rate

Market profitability Industry cost structure

Distribution channels

Market trends Key success factors

Source: http://www.netmba.com/marketing/market/analysis/
http://www.netmba.com/marketing/market/analysis/http://www.netmba.com/marketing/market/analysis/


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Market Size

Actual refers to entire market size; i.e. total marketof 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


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Market Growth

Market size in the future

Increasing market means more sales and profit;decreasing means reduced sales and profit


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Market Growth contd.

Determine market growth by:

Identifying driving forces

What are the forces that drive sales (e.g. price, design,convenience, etc.)

Forecasting Growth

Market sales indicators demographic data (e.g. numberof health conscious individuals as indicator of nutritionalsupplements); sales of related equipment (e.g. presence

of call centers is an indicator of 24-hour conveniencestores); based on previous experience of same industries(e.g. Krispy Kreme and J Co)


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Detecting Maturity and Decline

Over capacity and lack of differentiation

Buyer KnowledgeSubstitute products or technologies

Saturation

No growth sourcesCustomer disinterest



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Growth of submarkets

Example:

Coffee market Nescafe, Kopiko, MaxwellCoffee submarket Starbucks, Figaro



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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


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Industry Cost Structure

Value chain model - useful for determining where value isadded 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.


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Industry Cost Structure contd.


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The primary value chain activities are:

Inbound Logistics: the receiving and warehousing of rawmaterials, and their distribution to manufacturing as theyare required.

Operations: the processes of transforming inputs intofinished products and services.

Outbound Logistics: the warehousing and distribution offinished goods.

Marketing & Sales: the identification of customer needs andthe generation of sales.

Service: the support of customers after the products andservices are sold to them.



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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 materials,

supplies, and equipment.



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The firm's margin or profit then depends on itseffectiveness in performing these activitiesefficiently, so that the amount that the customer is

willing to pay for the products exceeds the cost of theactivities in the value chain.

It is in these activities that a firm has the opportunityto generate superior value. A competitive advantage

may be achieved by reconfiguring the value chain toprovide lower cost or better differentiation.



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

Applications of Analytics Across the Value Chain


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Distribution Systems

The following aspects of the distribution system are usefulin a market analysis:

Existing distribution channels - can be described byhow 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 havenegotiating power over manufacturers and can capturemore margin.


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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


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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)

Distribution Systems contd.


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Market Trends

Changes in the market are important because theyoften 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 serviceand support.

Examples: Travel Lite


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Key Success Factors

The key success factors are those elements that arenecessary in order for the firm to achieve itsmarketing objectives. These are assets and skills thatprovide the bases for competing successfully. A fewexamples 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 overtime, especially as the product progresses through its life cycle.


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CUSTOMER ANALYSIS


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Customer Analysis

Identifying customers segments, motivations, andunmet needs.

Collection and evaluation of data associated with

customer needs and market trends through FGDs,customer satisfaction measurement, field testing,etc.


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Demographic profile of Filipinos

Source: National Statistics Board


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Average Income and Expenditure of Families by Region, at 2000 Prices: 2009

(in thousand PhP)

Region Average

IncomeAverage

ExpenditurePhilippines 129 110

NCR 227 197CAR 136 108Ilocos 116 94

Cagayan Valley 115 90Central Luzon 139 119

Calabarzon 158 135Mimaropa 90 77

Bicol 95 85Western Visayas 99 89Central Visayas 111 92Eastern Visayas 98 78

Zamboanga Peninsula 88 71Northern Mindanao 98 83

Davao 99 85Soccsksargen 96 82

Caraga 88 74ARMM 62 54


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

Age Group Both Sexes Male FemalePhilippines 92,097,978 46,459,318 45,638,660Under 5 10,231,648 5,291,880 4,939,7685-9 10,317,657 5,329,978 4,987,67910-14 10,168,219 5,230,893 4,937,32615-19 9,676,359 4,914,379 4,761,98020-24 8,370,398 4,229,958 4,140,44025-29 7,390,062 3,719,437 3,670,62530-34 6,744,028 3,419,039 3,324,98935-39 5,990,108 3,037,467 2,952,64140-44 5,450,679 2,761,377 2,689,30245-49 4,664,537 2,354,757 2,309,78050-54 3,883,630 1,945,258 1,938,37255-59 2,980,350 1,470,861 1,509,48960-64 2,224,105 1,061,324 1,162,78165-69 1,495,115 678,782 816,33370-74 1,140,951 491,491 649,46075-79 705,977 285,693 420,28480-84 393,387 145,686 247,701


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

Age Group Both Sexes Male FemalePhilippines 92,097,978 46,459,318 45,638,660Under 5 10,231,648 5,291,880 4,939,7685-9 10,317,657 5,329,978 4,987,67910-14 10,168,219 5,230,893 4,937,32615-19 9,676,359 4,914,379 4,761,98020-24 8,370,398 4,229,958 4,140,44025-29 7,390,062 3,719,437 3,670,62530-34 6,744,028 3,419,039 3,324,98935-39 5,990,108 3,037,467 2,952,64140-44 5,450,679 2,761,377 2,689,30245-49 4,664,537 2,354,757 2,309,78050-54 3,883,630 1,945,258 1,938,37255-59 2,980,350 1,470,861 1,509,48960-64 2,224,105 1,061,324 1,162,78165-69 1,495,115 678,782 816,33370-74 1,140,951 491,491 649,46075-79 705,977 285,693 420,28480-84 393,387 145,686 247,70185 and over 270 768 91 058 179 710


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S f P j t d P l ti


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

Year Both Sexes Male Female2000 76,946,500 38,748,500 38,198,0002005 85,261,000 42,887,300 42,373,7002010 94,013,200 47,263,600 46,749,6002015 102,965,300 51,733,400 51,231,9002020 111,784,600 56,123,600 55,661,0002025 120,224,500 60,311,700 59,912,8002030 128,110,000 64,203,600 63,906,4002035 135,301,100 67,741,300 67,559,8002040 141,669,900 70,871,100 70,798,800


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What Filipinos Buy

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

Source: Osorio (2012) Article in Philippine Star


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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


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Sample Customer Questionnaire Format

Name: ____________________________ [Name of the customer]

Address: __________________________ [Home Address of the customer]

Gender: _____________________ [Gender of the customer (M/F)]

Age: ___________________ [Age of the customer]

Home Phone: ________________________ [Phone number of the customer]

Email: ______________________________ [Email Address of the customer]

First Question: [The First Question should revolve around the customers relationship with the company, product, or

services. How long has the customer been with the company? What type of products does the customer buy? These

are some of the questions to set the ball rolling and will throw light on the customers loyalty towards the company orany product or service.]

Second Question: [The second Question should focus on the various services of the company that the customer is

satisfied with or unsatisfied. Questions can be created to derive a yes/no reply like: are you satisfied with the product

range or are you satisfied with our current services. Such questions will bring to the forefront a customers level of

satisfaction with the company.]

Third Question: [The third category of questions should focus on the various attributes of the companys products

and services as well as the usefulness in the customers life or their role in his/her lifestyle. Questions should

include: Is the abc product perfect for your household or does the xyz service fulfill all your requirements?]

Fourth Question: [The fourth category of questions needs to be created to enhance customer faith in the company

and its products or services. This question needs to ask the customer how willing they are to try new products of the

company and what they would like to suggest to the company for improvement in product or service quality. ]

Source: http://www.samplequestionnaire.com/customer-questionnaire-format.html
http://www.samplequestionnaire.com/customer-questionnaire-format.htmlhttp://www.samplequestionnaire.com/customer-questionnaire-format.htmlhttp://www.samplequestionnaire.com/customer-questionnaire-format.htmlhttp://www.samplequestionnaire.com/customer-questionnaire-format.htmlhttp://www.samplequestionnaire.com/customer-questionnaire-format.htmlhttp://www.samplequestionnaire.com/customer-questionnaire-format.html


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Customer Analysis Template

Competitor As

product

Competitor Bs

product

Competitor Cs

product

Your Product

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 do they respond to

marketing programs?


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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


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Percent Who Have Eaten Energy Barsin the Last Six Months

Female 20%

Male 18%

65 and over 12%

55-65 10%

45-54 20%

36-44 21%

25-34 21%

18-24 27%



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Customer Segments: Hard-core Athletes

Musclemen

Dieters

Health Purists

Health Conscious and On-the-Go

Sports Enthusiasts

Specialty Segments

Nutrition-seeking Families


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What Use For: Meal Replacements

Snacks

Athletic Energy Booster



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Where They Buy: Health Food Stores

Outdoor Retailers (e.g., REI)

Grocery Stores

Drug Stores

Convenience Stores

Mass Merchandisers

Club Stores



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COMPETITOR ANALYSIS


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Competitor Analysis

Competitor analysis in marketing and strategicmanagement is an assessment of the strengths andweaknesses of current and potential competitors.

This analysis provides both an offensive and defensive

strategic context to identify opportunities and threats. Profiling coalesces all of the relevant sources of competitor

analysis into one framework in the support of efficient andeffective strategy formulation, implementation, monitoring

and adjustment.[1]
http://en.wikipedia.org/wiki/Marketinghttp://en.wikipedia.org/wiki/Managementhttp://en.wikipedia.org/wiki/Competition_%28economics%29http://en.wikipedia.org/wiki/Competitor_analysishttp://en.wikipedia.org/wiki/Competitor_analysishttp://en.wikipedia.org/wiki/Competition_%28economics%29http://en.wikipedia.org/wiki/Managementhttp://en.wikipedia.org/wiki/Marketing


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Competitor Analysis System

What are they going to do?

Differential competitor advantage analysis i.e.

Who has the competitive product advantage?

Key questions:

- Who are they?

- What are the competing product features?- What do they want?

- What is their current strategy?

Primary dataSecondary data

Competitor Analysis


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p yWho are your competitors?

Diet

lemon

limes

Baseball

cards

Fruit

flavored

colas

Coffee

Diet

Coke

Diet

Pepsi

Diet-Rite

cola

Bottledwater Lemonlimes

Regular

colas

Beers

Juices

Wine

Fast food

Tea

Video

rentals

Ice

cream

Product form

competition: Diet

colas

Product category

competition: Softdrinks

Generic

competition:

BeveragesBudget

competition: Food

and entertainment

Competitor Analysis


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p yWhat are the competing product features?

Competitor Analysis


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p yProduct Feature Analysis Example

Productfeature Chamyto BearBrand Yakult

GoodBacteria

4 billion livegoodbacteria



Type ofBacteria

LactobacillusFortis

LactobacillusFortis

LactobacilliShirotaStrain

Benefits Enhancesnaturalresistance to

intestinalinfection

Enhancesnaturalresistance to

intestinalinfection

Aids indigestion

Productvolume

78 ml 78 ml 80 ml

Competitor Analysis


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p yWhat are their strategies?

Target market selection Core strategy (Positioning)

Supporting Marketing Mix (Pricing, Promotion,

Distribution, Product/Service Capabilities)


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Strategic Marketing Plan Format Part I


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I. Situation AnalysisA. SWOT/TOWS Analysis

B. PEST

C. Industry Analysisa. Threat of New Entrants

b. Bargaining Power of Buyers

c. Bargaining Power of Suppliers

d. Rivalry

e. Substitutes



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D. Market Analysisa. Market size (current and future)

b. Market growth rate

c. Market profitabilityd. Industry cost structure

e. Distribution channels

f. Market trends

g. Key success factors



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E. Customer Analysisa. 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 theyprefer a product, how they respond to marketingprograms?)



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F. Competitor Analysis

a. Competitor Profile company profile, mission/vision,founder/management team

b. Competing product features

c. Target market selectiond. Positioning strategy

e. Marketing Mix Strategies

d. Differential advantage analysis - survey using key

industry success factors extensive distribution,customer focus, economies of scale, and productinnovation

Industry Analysis1(2)

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