3.1. understanding market opportunities test

1. ][Welcome to
Marketing Strategy
Understanding Market Oportunities

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The Seven Domains of Attractive
Opportunities
Macro
Level
Micro
Level
Market Domains Industry Domains
Mission, Ability to
Aspirations, Execute
Propensity on CSFs
for Risk
Connectedness up
and down Value
Chain
Team
Domains
Market Attractiveness
Target Segment Benefits
and Attractiveness
Industry Attractiveness
Sustainable
Advantage

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Market Industry
A group of individuals or
organizations (i.e., buyers)
having the willingness and
ability to buy goods or
services to satisfy a
particular class of wants or
needs
A group of organizations
(i.e., sellers) offering
goods or services that are
similar and close
substitutes for one
another
The distinction between market and industry is
important because:
•Assessments of market and industry attractiveness
differ, and use different analytical tools
•Companies need to account for sellers from other
industries serving their target market 2-3

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Situation Analysis
• One of the most widely used approaches to the collection and
analysis of marketing information is the situation analysis.
• The purpose of the situation analysis is to describe current and future
issues and key trends as they affect three key environments: the
internal environment, the customer environment, and the external
environment.
• There are many issues to be considered in a situation analysis. When
viewed together, the data collected during the situation analysis gives
the organization a big picture of the issues and trends that affect its
ability to deliver value to stakeholders.
• These efforts drive the development of the organization’s
competitive advantages and strategic focus
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Issues to Be Considered in a Situation
Analysis
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Conducting a Situation Analysis
• Analysis Alone Is Not a Solution
• Data Is Not the Same as Information
• The Benefits of Analysis Must Outweigh the Costs
• Conducting a Situation Analysis Is a Challenging Exercise
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The Internal Environment
• The first aspect of a situation analysis involves the critical evaluation
of the firm’s internal environment with respect to its objectives,
strategy, performance, allocation of resources, structural
characteristics, and political climate.
• Or in short:
- Review of Current Objectives, Strategy, and Performance
- Availability of Resources
- Organizational Culture and Structure
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The Customer Environment
• Who Are Our Current and Potential Customers?
• What Do Customers Do with Our Products?
• Where Do Customers Purchase Our Products?
• When Do Customers Purchase Our Products?
• Why (and How) Do Customers Select Our Products?
• Why Do Potential Customers Not Purchase Our Products?
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The External Environment
• Competition
• Economic Growth and Stability
• Political Trends
• Legal and Regulatory Issues
• Technological Advancements
• Sociocultural Trends
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Competition
1. Brand competitors, which market products with similar features
and benefits to the same customers at similar prices.
2. Product competitors, which compete in the same product class,
but with products that are different in features, benefits, and
price.
3. Generic competitors, which market very different products that
solve the same problem or satisfy the same basic customer need.
4. Total budget competitors, which compete for the limited financial
resources of the same customers.
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Competitive Analysis
1. Identification. Identify all current and potential brand, product,
generic, and total budget competitors.
2. Characteristics. Focus on key competitors by assessing the size,
growth, profitability, objectives, strategies, and target markets of
each one.
3. Assessment. Assess each key competitor’s strengths and
weaknesses, including the major capabilities and vulnerabilities that
each possesses within its functional areas (marketing, research and
development, production, human resources, etc.)
4. Capabilities. Focus the analysis on each key competitor’s marketing
capabilities in terms of its products, distribution, promotion, and
pricing.
5. Response. Estimate each key competitor’s most likely strategies and
responses under different environmental situations, as well as its
reactions to the firm’s own marketing efforts.

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Collecting Marketing Data and
Information
• Secondary Information Sources
- Internal Data Sources
- Government Sources
- Book and Periodical Sources
- Commercial Sources
• Primary Data Collection
- Direct observation
- Focus groups
- Surveys
- Experiments
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SWOT Analysis
• Many consider SWOT analysis to be one of the most effective tools in
the analysis of marketing data and information.
• SWOT analysis is a simple, straightforward framework that provides
direction and serves as a catalyst for the development of viable
marketing plans.
• It fulfills this role by structuring the assessment of the fit between
what a firm can and cannot do (strengths and weaknesses), and the
environmental conditions working for and against the firm
(opportunities and threats).
• When performed correctly, a SWOT analysis not only organizes data
and information, it can be especially useful in uncovering competitive
advantages that can be leveraged in the firm’s marketing strategy.
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SWOT-Driven Strategic Planning
• Strengths and Weaknesses
• Opportunities and Threats
• The SWOT Matrix
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Competitive Advantage
• Developing and Leveraging Competitive Advantages
- Operational Excellence
- Product Leadership.
- Customer Intimacy

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Establishing a Strategic Focus
Using the results of the SWOT analysis as a guide, a firm might
consider four general directions for its strategic efforts:
1. Aggressive (many internal strengths/many external opportunities).
Firms in this enviable position can develop marketing strategies to
aggressively take on multiple opportunities. Expansion and
growth, with new products and new markets, are the keys to an
aggressive approach.
2. Diversification (many internal strengths/many external threats).
Firms in this position have a great deal to offer, but external
factors weaken their ability to pursue aggressive strategies. To help
offset these threats, firms can use marketing strategy to diversify
their portfolio of products, markets, or even business units.

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Establishing a Strategic Focus (cont’d)
3. Turnaround (many internal weaknesses/many external
opportunities). Firms often pursue turnaround strategies because
they find themselves in the situation—often temporary—of having
too many internal problems to consider strategies that will take
advantage of external opportunities. In these cases, firms typically
have to put their own house back in order before looking beyond
their current products or markets.
4. Defensive (many internal weaknesses/many external threats). Firms
take a defensive posture when they become overwhelmed by
internal and external problems simultaneously.

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Developing Marketing Goals
• Attainability
• Consistency
• Comprehensiveness
• Intangibility

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Developing Marketing Objectives
• Attainability
• Continuity
• Time Frame
• Assignment of Responsibility

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Macroenvironmental Trends Analysis
• Unfavorable macro trends that negatively influence market demand can have a
devastating effect on the performance of firms serving that market. Similarly,
favorable trends exert positive forces that make it easier for firms to perform
well. Thus, the influence of macroenvironmental trends can be pervasive and
powerful.
• Implications of macro trends:
•Demographic trends can result in rapidly growing markets or on the flip side, can
make markets less attractive than they once were.
•Sociocultural trends can result in changes of consumer tastes and behavior.
•Economic trends influence the level of demand in most markets, but they are
particularly important in capital goods markets, real estate, and other markets
where sensitivity to interest rates and the level of household or corporate
income can be extreme.
•Regulation and deregulation in the political/legal environment can change the
attractiveness of a market.
•Technological trends often create attractive new markets or change existing
markets.
•Trends in the natural environment can affect market attractiveness. 2-31

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Macro Trend Analysis:
Demographic environment
Sociocultural environment
Economic environment
Regulatory environment
Technological environment
Natural environment

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How Macro Trends Can Affect Businesses
• Demographic trend examples/businesses affected:
•Graying of the population/nursing homes, hospitals
•Increase in ethnic population/food, clothing industries
• Sociocultural trend examples/businesses affected
•Evolution of the family structure (less traditional structure)/food,
women’s apparel (business attire)
•Exercise for both genders is in/exercise clothing, sports
beverages
• Economic trend examples/businesses affected
•Increase or decrease of interest rates/capital goods, real estate
•Free trade agreements/goods and services
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How Macro Trends Can Affect Businesses
• Regulatory trend examples/businesses affected
•Government regulation/food, drug
•Government deregulation/airlines, trucking, railroads,
telecommunications, and banking
• Technological trend examples/businesses affected
•Development of fiber-optic cables/telecommunications,
computers
•Production of more disease-resistant livestock and
plants/farming and ranching, food
• Physical trend examples/businesses affected
•Global warming/ ski resorts, winter tourism 2-34

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Macro Trends and the Industry
• Macro trends may be favorable or unfavorable to the
industry
• How attractive is a market or an industry, now and in
the future?
• Specific trends worth strategic attention, so we can:
- Take advantage: Do trends suggest customer
needs that are poorly served?
- Mitigate its effects
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Industry Attractiveness
It makes sense to play in a game with more winners!
• Average firm profitability varies from industry to industry.
• In some industries (e.g., pharmaceuticals) most firms are
highly profitable. In others (e.g., restaurants) the failure
rate is high and average returns on equity are low.
• It’s easier to raise capital and acquire other resources in
attractive industries .

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Porter’s Five Forces: A Tool for Assessing
Industry Attractiveness
Rivalry among
existing industry
firms
Threat of substitute
products
Bargaining
power
of buyers
Bargaining
power
of suppliers
Source: Adapted from Michael E. Porter, “Industry Structure and Competitive Strategy: Keys to Profitability,” Financial Analysts Journal, July-August
1980, p. 33.
Threat of new
entrants
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Example
Five Forces Analysis of the Attractiveness of Worldwide Cell Phone Service
Industry In Early 2004
• Rivalry is high leading to high customer churn: unfavorable
• Products are differentiated through new features and services, customer
switching costs are low.
• Threat of new entrants is low: moderately favorable
• While rapid pace of technological change may bring new entrants based on
new technologies (i.e.packet switching, satellites) new service providers
must purchase a bandwidth licence by spending billions.
• Supplier power is high: moderately unfavorable
• Governments have raised the price of additional bandwidth through
auctions.
• Buyer power is low: very favorable
• Even large customers have little power to set terms and conditions in this
oligopolistic industry.
• Threat of substitutes is high: moderately unfavorable
• PDAs or new multimedia devices could replace cell phones.
• Overall conclusion: only 2 out of 5 forces are favorable. Thus the cellular
phone industry is not particularly attractive at this time. 2-38

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Info sources for information about
macro trends
• Trade associations
• Trade magazines
• General business and popular press
• The Internet
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Macro Level Analysis Micro Level Analysis
The macro level of analysis The micro level of analysis
looks at aggregate markets looks at customers
individually
– it takes the overall
perspective on markets:
their size; growth rates in
terms of customer
numbers and in value
terms; etc.
– whether trade
customers, or end
consumers or business
users – to understand the
attractiveness of the
particular market
segments.
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Markets at the Micro
Level
Industries at the Micro
Level
•Involves looking individually at
customers to understand the
attractiveness of the target
segment
•Involves looking at the
company and whether it has a
sustainable competitive
advantage
Key questions:
- Is there a clearly identified
source of customer pain?
- Does the provide offering
provide customer benefits
that other solutions do not?
- Is the target segment likely to
grow? Is it a springboard to
other segments?
Key question:
- What is the basis of
competitive advantage?
• Proprietary technology,
brand, etc
• Superior organizational
processes, capabilities or
resources
• Economically viable
business model
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The Team Domains
• Opportunities are only as good as the people
who will pursue them
Key questions:
• What are the Missions, Aspirations and Risk
Propensity of the team?
• Does the team have the Ability to Execute on
the Industry’s Success Factors
• Is the team well Connected up and down the
Value Chain

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 Thank You 
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