Market Opportunity Analysis (Class version).pptx

1. Market Opportunity Analysis

2. - Demosthenes ‘Imagining the future may be more important than analysing the past. I dare say companies today are not resource-bound, they are imagination bound.’ - Prahalad 3 “Small opportunities are often the beginning of great enterprises.”

3. Understand the difference between an industry and a market

4. Domain 1: Market attractiveness at the macro level On both the market and the industry sides, the macro-level analyses are based on business environmental conditions that affect the market or industry as a whole, without regard to a particular business’s strategy or its role in its industry. Assessing market attractiveness requires that important macro-environmental trends be noticed and understood.

5. Market analysis Measure of industry attractiveness Understand dynamics of market or sub-market Emerging key success factors (asset or competency needed to play the game). Trends. Threats, Opportunities. Strategic uncertainties. Basis for future information gathering and analysis. 7

6. Dimensions of Environmental Analysis (Macro-level) Technological Political/legal Economics Sociocultural Demographics/population Ecological/natural 8

7. Demographics: Age Sex Education Family structure Location: rural vs urban Occupation: retirement age Health: covid-19, obesity; cancer; heart; etc. Ageing population may lead to opportunities. Population growth 12

8. Forecasting technologies How can we forecast what technologies will be successful and how will they impact upon our product and service offerings? Digitalization Robot, AI, VR, …… Tactics Use technology to give a perceived benefit to consumers. Make technology easy to use. Make sure it works – make a prototype, learn from processes and improve offering. Understand what consumers want from technology. 14

9. E c on o m i cs General economic influences Rate of inflation. Unemployment (labour availability). Economic growth. Exchange rate influences. Industry growth rates and levels of maturity. 15

10. Cultural influences Culture influences consumer needs, wants & behaviour. Language, ethnicity, beliefs, generation Y and Z (‘me’ generation), preferences and wants. Opportunity for niche marketing and leveraging competencies between different identified segments. Top 10 concerns of Gen-Z in Vietnam (2021) 16

11. Consumer Trends May pose opportunity and/or threat Danger in following “fads”- short lived The “Green Trend” - what are the “real” opportunities? To leverage effectively the business needs to have a relevant offering > not just make claims 17

12. Domain 2: Industry attractiveness at the macro level Porter developed the value chain model to explain interactive and cross-functional activities to create value. Value is added consecutively to raw materials throughout production process to end up as finished goods. There are primary value-adding activities and supporting activities

13. Tool for evaluating the investment value of an industry or market. Can be applied to an industry, market or sub-market

14. Identify challenges relating to macro-level analysis of the market and industry Challenges relating to macro-level analysis of the market and industry are usually found in: Sizing the relevant market. Markets can be measured in various ways. It is informative to measure market size and growth rates in customer numbers and in unit and value terms. On the industry side, there’s the question of how narrowly or broadly to define one’s industry. Finding the right information sources to overcome these challenges is important.

15. The Key Thing is: Constant reviewing of the “real world” Careful assessment of opportunity and danger Nothing is certain >run scenario analyses Trial small & fast: if success > scale fast Failures: ditch and move on OR rework and trial again 30

16. Domain 3: Target segment benefits and attractiveness Develop an understanding of markets and industries at the micro level Opportunities are attractive when market offering meets most/all of the following tests: There is a clearly identified source of customer need , for some clearly identifiable set of target customers, which the product offering satisfies. The offering provides customer benefits that other product solutions do not . The target market segment is likely to grow . There are other segments that the currently targeted product may be able to penetrate

17. Domain 4: Sustainable advantage within an industry Opportunities are attractive when the company itself meets most/all of the following tests: It possesses something proprietary that other companies cannot easily duplicate or imitate. The business has or can develop superior organisational processes, capabilities or resources that others find difficult to imitate or duplicate. The business model is economically viable.

18. Domain 5: Mission, aspirations and propensity for risk These days, every business has a mission statement, and every entrepreneur has a pretty good idea of what they want to do—software, business process outsourcing, running a retail shop or whatever. Similarly, everyone has some idea about what aspiration is deemed attractive. Finally, everyone and every business has views on how much risk is acceptable.

19. Domain 6: Ability to execute critical success factors In most industries, in addition to hard-to-imitate elements that are business-specific, there are also a small number of critical factors that tend to separate the winners from the also-rans. These few factors are that industry’s critical success factors, or CSFs. To identify CSFs there are two key questions to ask: Which few decisions or activities are the ones that, if gotten wrong, will almost always have severely negative effects on business performance? Which decisions or activities, done right, will usually deliver disproportionately positive effects on performance?

20. Domain 7: Connections within the value chain 'It's not what you know, it’s who you know' holds true in assessing opportunities. Usually the people with the best connections with other businesses up, down and across the value chain are the ones who will survive. Businesses with such connections are the ones that will first see the winds of change shifting direction. In turn, they’ll be the ones who are best placed to change strategy before others know the winds have changed.

21. Dimensions of a Market Analysis (Micro level) 36 Actual and potential market and submarket size Market growth Market profitability Cost Structures Distribution systems Key success factors

22. 1) Actual & potential market size 37 Need to know total market and sub-market size Total market size may misrepresent situation if sub-market growth is more dynamic. Markets are composed of buyers/Industries are composed of sellers. Estimates based upon Government sources. Trade associations. Published financial sources. Customers. Competitors.

23. 2) Market growth 38 What is going to be the growth rate in the future? Growth means more sales and profitability However, investment in growing markets is not always warranted Declining markets may present opportunity as incumbent competitors may be inclined to disinvest.

24. 3) Market profitability analysis Michael Porter’s Five Factor Model Tool for evaluating the investment value of an industry or market. Can be applied to an industry, market or sub-market 39

25. 4) Cost structure 40 Competitors will aim to be the lowest-cost provider in the highest stage or stages in the value chain (highest margin areas). E.g. Manufacturers may gain an advantage through locating manufacturing plants close to major suppliers.

26. 5) Distribution systems 41 What are the alternative distribution channels? What are the trends? Are some channels growing in importance and why? Who has the power in the channel and will they sustain this position? We also need to consider potential channels of distribution.

27. 6) Key success (assets & competencies) factors 42 Use competitor analysis to identify Key Success Factors now and in the future

28. Example: Vegan Restaurant Market Opportunity Environmental analysis:

29. Case study: Vegan Restaurant Market Market analysis:

30. Case study: Vegan Restaurant Market

31. Principles of making market and segment choices 51 Value of Market Opportunity Inherent Attractiveness Likelihood of Success = x

32. Method o logy 52 Identify the set of market opportunities geographical markets, new product markets, market segments, major customers, … For each opportunity, assess : inherent attractiveness for the company and company’s relative competitiveness with respect to this opportunity Compare across opportunities in terms of both (a) and (b) Target and allocate resources accordingly

33. Attractiveness x Competitiveness Analysis Attractiveness 53 Competitiveness

34. Attractiveness Assessment Define Attractiveness Criteria Determine Relative Importance Rate each Segment on each Criterion 54 Compute Overall Attractiveness Scores

35. Attractiveness Assessment Define Attractiveness Criteria Determine Relative Importance Rate each Segment on each Criterion Compute Overall Attractiveness Scores 55

36. Define Attractiveness Criteria Assuming that we would be competitive , what would make a given market opportunity attractive or unattractive to us given our company’s culture and objectives? 56

37. Common Attractiveness Criteria 57 Current size Potential size Growth rate Expected life cycle Customer willingness to pay Cost of operation Profit margins Lifetime-value of customers Low competitive intensity Potential for differentiation Consistency with identity Financial risk (e.g., inflation, currency) Synergies (e.g., channel) Cross-selling potential Customer loyalty Willingness to commit to long-term contracts Low market volatility

38. Attractiveness Assessment Define Attractiveness Criteria Determine Relative Importance Rate each Segment on each Criterion Compute Overall Attractiveness Scores 58

39. Attractiveness Criteria & Relative Importance What criteria define attractiveness in your company/ division? Attractiveness Criteria Rela tive Wei g hts 100 What is their relative i m portance? 59

40. Attractiveness of Credit Card Customers (South American Bank) 60 Attractiveness Criteria Weight Low credit risk 15 Annual fee revenue potential 15 Loyalty 7 Segment size 7 Typical card usage and spending 10 Use of revolving credit 25 Cross-selling potential 7 Segment growth rate 6 Low account acquisition and maintenance costs 8 100

41. Attractiveness Assessment Define Attractiveness Criteria Determine Relative Importance Rate each Segment on each Criterion Compute Overall Attractiveness Scores 61

42. Segment Opportunities Ratings 62 Rate each segment, criterion by criterion, on a 0 (very poor) to 10 (excellent) scale Criteria Segment 1 Segment 2 Segment 3 Segment 4

43. Attractiveness of Credit Card Customers (South American Bank) 63 Attractiveness Criteria Sub-prime Mi d dle Class Travel Premium Low credit risk 3 5 6 8 Annual fee revenue potential 2 4 6 10 Loyalty 7 6 5 4 Segment size 8 7 3 1 Typical card usage and spending 2 4 5 7 Use of revolving credit 7 6 5 4 Cross-selling potential 7 7 6 5 Segment growth potential 8 6 3 1 Low account acquisition and maintenance costs 8 6 5 3

44. Attractiveness Assessment Define Attractiveness Criteria Determine Relative Importance Rate each Segment on each Criterion Compute Overall Attractiveness Scores 64

45. Attractiveness of Credit Card Customer Segments (South American Bank) 65 Attractiveness Criteria Weight Sub- p rime M i ddl e Class Travel Premium Low credit risk 15 3 5 6 8 Annual fee revenue potential 15 2 4 6 10 Loyalty 7 7 6 5 4 Segment size 7 8 7 3 1 Typical card usage and spending 10 2 4 5 7 Use of revolving credit 25 7 6 5 4 Cross-selling potential 7 7 7 6 5 Segment growth potential 6 8 6 3 1 Low account acquisition and maintenance costs 8 8 6 5 3 Attractiveness scores: 536 549 511 540

46. Competitiveness Assessment 66 Do not pursue a market opportunity only because it seems attractive Take also into account your likelihood of being successful in competing for this market opportunity

47. Competitiveness Assessment Identify Success Factors Segment by Segment Determine Relative Importance Comparatively Rate Yourself on each Factor 67 Compute Competitiveness Estimates

48. Competitivenes S s e Es g ti m ma e t n es t : Es g ti m ma e t n es t : 68 Success factors I m portance Weight Relative score Weighted score 100 Competitiveness estimate:

49. Competitiveness Assessment Identify Success Factors Segment by Segment Determine Relative Importance Comparatively Rate Yourself on each Factor Compute Competitiveness Estimates 69

50. Identify Success Factors For this particular opportunity (set of customers, product, market), what would make anyone in our industry more competitive (i.e., more likely to be successful)? What would the ideal marketer need to have to compete successfully for this opportunity? 70

51. Common Success Factors 71 Marketing excellence Strong fit between product features & benefits sought by customers Brand awareness Brand credibility Strong sales force Access to distribution channels Strong customer and field service Low price Innovative design skills Low barriers to entry for us High barriers to entry for competitors Proprietary technology Patent protection Low production costs Low labor costs Production capacity Production flexibility Product certification Access to capital Financial resources Government support

52. Competitiveness Assessment Identify Success Factors Segment by Segment Determine Relative Importance Comparatively Rate Yourself on each Factor Compute Competitiveness Estimates 72

53. Competitiveness Estimate for Bangkok Bank 73 Segment : Sub-prime credit card customers Success Factors Impor t a n ce Weight Low annual fee 12 Low interest rates 5 Low documentation requirements 18 Sales representatives 15 Department store relationship 7 Telemarketing 15 Brand reputation of the bank 8 Breadth of branch distribution 20 100

54. Segment : Middle class credit card customers Success Factors Impor t a n ce Weight Reward programs 12 Telemarketing 20 Sales representatives 8 Low annual fee 15 Promotions 11 Merchant relationship 7 Large business scale 9 Electronic services 6 Bank brand reputation 8 Electronic marketing 4 100 Competitiveness Estimate for Bangkok Bank

55. Competitiveness Assessment Identify Success Factors Segment by Segment Determine Relative Importance Comparatively Rate Yourself on each Factor Compute Competitiveness Estimates 75

56. Comparative Scoring 76 Relative strength on this factor Score “We are among the worst” 2 points “We are about average” 4 points “We are well above average” 6 points “We are almost the best” 8 points “We are by far the best” 10 points

57. Segment : 77 Sub-prime credit card customers Success Factors Impor t a n ce Weight Relat i ve Score Low annual fee 12 4 Low interest rates 5 6 Low documentation requirements 18 7 Sales representatives 15 8 Department store relationship 7 9 Telemarketing 15 5 Brand reputation of the bank 8 7 Breadth of branch distribution 20 8 100 Competitiveness Estimate for Bangkok Bank

58. Competitiveness Estimate for Bangkok Bank Segment : Middle class credit card customers 78 Success Factors Impor t a n ce Weight Rela tive Score Reward programs 12 Telemarketing 20 4 Sales representatives 8 6 Low annual fee 15 4 Promotions 11 3 Merchant relationship 7 3 Large business scale 9 4 Electronic services 6 Bank brand reputation 8 7 Electronic marketing 4 100

59. Competitiveness Assessment Identify Success Factors Segment by Segment Determine Relative Weights Comparatively Rate Division on each Factor Compute Competitiveness Estimates 79

60. Segment : Sub-prime credit card customers 80 Success Factors Importance Weight Relative Score Weighted Score Low annual fee 12 4 48 Low interest rates 5 6 30 Low documentation requirements 18 7 126 Sales representatives 15 8 120 Department store relationship 7 9 63 Telemarketing 15 5 75 Brand reputation of the bank 8 7 56 Breadth of branch distribution 20 8 160 100 C o mpetit i ve n ess estimate: 678 Competitiveness Estimate for Bangkok Bank

61. 81 Segment : Competitiveness Esti M m id a d t l e e c fo la r ss B c a r n ed g i k t c o a k rd B c a u n st k omers Success Factors Impor t a n ce Weight Relat i ve Score We i ghted Score Reward programs 12 Telemarketing 20 4 80 Sales representatives 8 6 48 Low annual fee 15 4 60 Promotions 11 3 33 Merchant relationship 7 3 21 Large business scale 9 4 36 Electronic services 6 Bank brand reputation 8 7 56 Electronic marketing 4 100 Competitiveness estimate: 334

62. Summary: Attractiveness x Competitiveness 82 Define Attractiveness Criteria Determine Relative Importance Rate each Segment on each Criterion Identify Success Factors Segment by Segment Determine Relative Importance Comparatively Rate Yourself on each Factor Compute Overall Attractiveness Scores Compute Competitiveness Estimates

63. Attractiveness/Competitiveness Matrix 333 666 1000 Attractiveness Score Possibilities Se c o nd a ry targets Prime targets Avoid Possibilities Se c o nd a ry targets Strongly Avoid Avoid Possibilities Competitiveness Estimate 1000 666 333

64. Attractiveness/Competitiveness Matrix Attractiveness Score Competitiveness Estimate 1000 666 333 Sub- p r ime m Tr a v e l Mi d dle 333 666 1000 Premiu Class

65. General Principle: Allocate resources across segments/ opportunities as a function of expected ROI Attractiveness Competitiveness 1000 666 333 $$ $ $$ $$ $ 333 666 1000 x

66. Principle 1: Focus on opportunities that rate high on both attractiveness and competitiveness Attractiveness Competitiveness 1000 666 333 333 666 1000

67. Principle 2: Consider divesting from or “milking” segments that score low on both attractiveness Attract i veness and likelihood of success Competitiveness 1000 666 333 333 666 1000

68. Principle 3: Attractiveness Keep a balance of (a) secure cash-generating options and (b) promising cash-absorbing opportunities such that (a) support (b) Competitiveness 1000 666 333 B B A A 333 666 1000

69. Principle 4: Try to increase your competitiveness for the most attractive opportunities Attractiveness Competitiveness 1000 666 333 333 666 1000

70. Improving Competitiveness for Flower Company Segment : Corporate decoration 100 --> 4? --> 120 Competitiveness estimate: 170 -> 440 30 Local branches 30 --> 180 1--> 6? 30 Onsite support/ consultation 45 3 15 Corporate relationships 45 3 15 Timing of deliveries 50 5 10 Variety of arrangements We i ghted Score Relat i ve Score Impor t a n ce Weight Success Factors

71. Principle 5: Attractiveness may sometimes be increased through refined segmentation 91 Attractiveness Competitiveness 1000 333 666 1000 666 333

72. Market analysis should assess the attractiveness of a market, as well as its structure and dynamics. Market growth can be forecast by looking at driving forces, leading indicators, and analogous industries. Market profitability will depend on five factors – existing competitors, supplier power, customer power, substitute products, and potential entrants. Cost structure can be analyzed by looking at the value added at each production stage 92 Key Learnings

73. Distribution channels and trends will often affect who wins. Market trends will affect both the profitability of strategies and key success factors. Key success factors are the skills and competencies needed to compete in a market. Growth market challenges involve the threat of competitors, market changes, and firm limitations. 93 Key Learnings

74. Use multiple criteria to assess market segment attractiveness Take into account competitiveness (likelihood of success) and be explicit and realistic about success factors Use Attractiveness x Competitiveness Matrix to prioritize and allocate resources across segment opportunities 94 Key Learnings