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MARKET POTAINTIAL

ANALYSIS

Prepared by: JITENDRA M SONI

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Defining Market

Potential Analysis

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Learning Objectives:

Describethegoal ofmarket analysis.

Enumerate andclassify thedifferent

dimensions ofmarket analysis.

Discuss thedimensions ofmarket

analysis and relatethem to personal

experiences and/or observations. Illustratethevaluechain and

experiencecurve.

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Goal ofMarket Analysis

To determinethe attractiveness

ofa market andto understandits evolving opportunities and

threats as they relateto the

strengths and weaknesses ofthefirm.

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Dimensions ofMarket Analysis

(David A. Aaker)

Market size (current andfuture)

Marketgrowth rate Market profitability

Industry cost structure

Distributionchannel Markettrends

Key success factors

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Market Size

The size ofthe marketcan beevaluated based on:

Present sales

Potential sales (ifexpanded)

Someinformation sources for

determining market size:Governmentdata

Trade associations

Financial data from major players

Customer survey

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MarketGrowth Rate

A simple means offorecastingthe

marketgrowth rateis to extrapolate

(infer orestimate) historical data intothefuture. Whilethis method may

provide a first-orderestimate,itdoes

not predictimportantturning points.

A better methodis to study growthdrivers such as demographic

information andsales growthin

complementary products.

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Ultimately,the maturity anddecline stages ofthe product life

cycle will be reached. Some

leadingindicators ofthedeclinephaseinclude:

Price pressurecaused by competition

Decreasein brand loyalty Emergence ofsubstitute products

Market saturation

Lack ofgrowthdrivers

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Market Profitability

Whiledifferentfirms inthe

market will havedifferent levels

ofprofitability,theaverage profit

potential for a marketcan be

used as a guidelinefor knowing

how difficultitis to make moneyinthe market.

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Porters Five Competitive Forces

Rivalry

among

Competitors

Threat of

Substitute

Products

Potential NewEntrants

Bargaining Power

of Buyers

Bargaining Power

of Suppliers

Internettends to increase

bargaining powerof

suppliers

Internet reduces

barriers to entry

Internet blurs differences

among competitors

Internetcreates new

substitutionthreatsInternet shifts greater

powerto end consumers

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Industry Cost Structure

Thecost structureis importantforidentifying key factors for success.To this end,Porters valuechainmodel is useful fordetermining where

valueis added andforisolatingthecosts.

Thecost structure also is helpful for

formulating strategies to develop acompetitive advantage. Forexample,in someenvironments theexperiencecurve effectcan beusedto develop acost advantage overcompetitors.

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Porters Generic Value Chain

Infrastructure

Human Resource Management

Technology Development

Procurement

Elapsed Time - Value added time cost

InboundLogistics

Operations OutboundLogistics

Marketing& Sales

Service

Support

Activities

Primary

Activities

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Primary Value Chain Activities:

Inbound Logistics: the receiving andwarehousing of raw materials, andtheirdistributionto manufacturing as they arerequired.

Operations: the processes oftransforminginputs into finished products and services.

Outbound Logistics: the warehousing anddistribution offinishedgoods.

Marketing and Sales: theidentification ofcustomerneeds andthegeneration ofsales.

Service: the support ofcustomers aftertheproducts and services are soldto them.

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Supports ofthe Primary Activities:

Theinfrastructure ofthefirm:organizational structure,controlsystems,company culture,etc.

Human resource management:employee recruiting,hiring,training,development, andcompensation.

Technology development: technologiesto supportvalue-creating activities.

Procurement: purchasinginputs such asmaterials, supplies, andequipment.

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Experience CurveDiagram

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Distribution Channel

Thefollowing aspects ofthedistributionsystem areuseful in a market analysis:

Existingdistributionchannel can bedescribed by how directthey areto thecustomer.

Trends andemergingchannels

new channels can offerthe opportunity to develop a

competitive advantage.

Channel power structure

forexample,inthecase ofa producthaving littlebrandequity, retailers havenegotiating power overmanufacturers andcancapture more margin.

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Market Trends

Changes inthe market areimportant

becausethey often arethe source of

new opportunities andthreats. Therelevanttrends areindustry-

dependent, but someexamples

includechanges in price sensitivity,

demandforvariety, andlevel ofemphasis on service and support.

Regional trends also may be relevant.

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Key Success Factors

Elements that arenecessary in orderforthefirm to achieveits marketingobjectives.

few examples are:Access to essential unique resources

Ability to achieveeconomies ofscale

Access to distributionchannels

Technological progress

Itis importantto considerthat key successfactors may change overtime,especially as the

product progresses throughits lifecycle.

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Reference

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

Management 6th Ed. by RichardDaft www.prenhall.com/divisions/bp/app/

marakas/sad/1e/ppt/ch03.ppt

foba.lakeheadu.ca/mirabelli/3235/Ch

ap012.ppt

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THE END

Clarifications?

GOODDAY!!!