Market Size – Evaluating the size of the market can be estimated by the present sales, future sales, and expanded sales if the product or products were introduced to a new area (NetMBA, 2007).Government data that provides demographic data – One way to determine the size of the potential market is to evaluate Federal and local data such as a census that provides the average median of a potential target area. This information delivers a quantitative estimate of the population that we can target our products to in accordance with price effectiveness. Financial data retrieved from competitors – Financial data from our competitors can also provide a benchmark for effective pricing. By analyzing the competitors pricing structure and actual sales, we can determine a pricing structure that would benefit the customer as well as the organization.Customer email, phone, and mail surveys – Finally, through customer emails, phone, and mail surveys we can forecast potential sales to a sizeable market as customers advocate additional buying and potential customers express interest in purchasing our products for the first time. Surveys tend to provide more in-depth information as questions are geared toward specific areas of interest. (NetMBA, 2007)Market Growth Rate – The mathematical practice of forecasting the market growth rate by transforming historical data into future data. Being that the historical information is objective rather than subjective, it does not foresee pivotal junctures. A more effective method of determining the growth rate is to examine demographic data in relation to sales growth in equivalent products (NetMBA, 2007). This means that if a competitor’s product is selling in reasonable or above reasonable expectations in a certain area, we can assume that if we target the same area with a similar product that the potential to expand our market is favorable. On the other hand, we can also examine historical sales of similar products in specific regions to help determine if the growth of our products in a particular region would be favorable.
Market Profitability– Estimated profits can be reached by using competitor’s reported profits, then deciding whether to engage in further endeavors. The market profitability can be analyzed by (Porter’s) five forces that evaluate the attractiveness for a market or industry and are examined as a function of utilization and overhead rate and expense ratio (NetMBA, 2007).Buyer Power – If the impact those customers have on the power tool industry is strong, buyers will acquisition a quantitative segment of the production; and therefore controls the market (QuickMBA, 2007).Supplier Power – If the supplier’s power is strong, they can raise the price of the raw materials that it takes to assemble various power tools. In return, this will cause the Able Corporation to either pass the extra expenses on to the customer to leverage the supplier’s costs, or take a loss in profit by selling to customers at reasonable prices (QuickMBA, 2007).Market Entry Barriers – Market entry barriers may arise from successful competitors setting an industry level that makes it difficult to enter the market due to unusual startup costs. Barriers may be existent due to: government regulations or approved monopolies, through patents and proprietary knowledge that prevents a competitor from creating a simulated product, asset specificity that requires special assets in order to operate, and organizational economies of scale where the Minimum Efficient Scale (MES) is at a low enough level for an organization to operate, but high enough to deter smaller organizations from entering due to entry unit costs (QuickMBA, 2007).Threat of Quasi-Products – The threat of quasi-products can also have a negative effect on market pricing and profitability. Duplicated products can provide customers with buying options that will ultimately result in market price deliquesce (QuickMBA, 2007).Heightened Competition – Heightened competition in the industry or industry rivalries can interfere with profitability due to: frequent but temporary changes in pricing, increased product differentiation, enhancing distribution channels, and enterprising with suppliers (QuickMBA, 2007).
Industry Cost Structure – The Able Corporation has to take into account all expenses that are involved when manufacturing power tools. These costs help to identify key factors for success by determining the ratio of fixed costs in relation to variable costs (NetMBA, 2007). Cost structures include: Transaction Costs – These costs are the costs that the Able Corporation accumulates during the purchasing and sale of assets (Transaction Costs, 2009). This can be considered the purchasing of manufacturing machines, and the sales of finished products to the end-customer.Sunk Costs – The costs that the Able Corporation has already involved in business transactions that cannot be recovered despite the change in market or implemented organizational strategies (Sunk Costs, 2009). An example of this would be the molding press that Able purchased for fifty-thousand dollars that has depreciated in value (now worth thirty-five thousand dollars).Marginal Costs – The costs that is associated with one additional unit of production; also known as incremental cost (Marginal Costs, 2009). Fixed Costs – A cost that contains no variances despite market conditions and/or sales performance (Fixed Costs, 2009). Fixed costs are expenditures that the Able Corporation encounters when purchasing a facility, carries unemployment insurance for each employee, and property tax. These are costs that have to be paid in order to operate and gain no return-on-investment. In addition, these costs usually remain the same over the life the company.
Distribution Channel – The path in which goods and services flow in one direction (manufacturer to the end user), and the generated compensation flows in the opposite direction (end user to the manufacturer) (NetMBA, 2007). Moreover, the distribution channel strategy should be devised to maximize the sales of the Able Corporations power tools. This can be achieved by selling through retailers such as Wal-Mart and Lowe’s, or by differentiating our products through unaffiliated industries such as CVS. The main focus is to distribute our products to the end-user through the most effective means that meets product demand, and organizational profitability. An effective distribution channel will control pricing, exploit suppliers, establish customer relationships, and provide customer feedback. E-commerce will also provide customers with buying options that may better fit their need (Marketing Strategy, 2009). Things that may affect the end product or revenue are:Breaks in the distribution channel (vendors, sub-vendors, and/or storefronts).Logistics of shipping products (scheduling and tracking). The economy (rising fuel costs passed on to the customers)Market Trends – Tracking the market changes is vital to identifying new opportunities and threats because over a period of time the market endures sustained movement that either increases opportunities or establishes more threats (NetMBA, 2007). Such trends include: primary trends, secondary trends (short-term), and secular trends (long-term). These trends cause fluctuations in the market that result in a temporary change in pricing to a secular bull market (where the suppliers are significantly smaller than buyers) or bear market (where the buyers are significantly smaller than the suppliers) (Market Trends, 2009). Trends can be experienced in the form of: Distribution channels (competing distribution channels), andDemographics (expanding suburbs).
Success Factors – The key success factors are those elements that are necessary in order for the Able Corporation to achieve its marketing objectives. Access to essential unique resources – provides the Able Corporation with the leverage of producing innovative products. This will allow the Able Corporation the choice of being first-movers or become competitive leaders (Coulter, 2008, p. 143).Retrieving and implementing customer feedback – Black and Decker’s professional tools division (DeWalt) president John Schiech states that their success of creating innovative tools is largely contributed to processing customer feedback and spending time on actual construction sites (Dehoff & Jaruzelski, 2007). In order for Able’s research and development to successfully create a useful product, time has to be spent collecting data to identify the actual and practical needs of our customers. This can be performed by onsite observations, and/or online customer feedback blogs.Competitive distribution channels – Being that the Able Corporation has valuable products to sell, it is critical that we establish competitive distribution channels that will be proficient in keeping our products moving through the market to meet buyers’ demands (Coulter, 2008, p. 77). This will enable the Able Corporation to maintain market control and practice effective pricing.
Phase Iii Gp (Part Ii)
Key Elements of a Market Analysis<br />September 18, 2009<br />Business Strategy<br />MGM465-0903B-02<br />Phase III Group Project<br />Professor: Dr. Jill Starman<br />By: Irvin Fitzgerald<br />
Market Size and Growth Rate <br />How will we obtain the information?<br />Government data that provides demographic data.<br />Financial data retrieved from competitors.<br />Customer email, phone, and mail surveys.<br />Determining the predicted rate of growth.<br />Historical Data + Future Goals = Forecasting<br />
Market Profitability <br />Porter’s Five Forces<br />Buyer power.<br />Supplier power.<br />Market entry barriers.<br />Threat of quasi-products.<br />Heightened competition in the industry.<br />
Distribution Channel & Market Trends <br />Things that may affect the end product or revenue are:<br />Breaks in the distribution channel (vendors, sub-vendors, and/or storefronts).<br />Logistics of shipping products (scheduling and tracking).<br />The economy (rising fuel costs passed on to the customers)<br />Market Trends include:<br />Distribution channels (competing distribution channels) and,<br />Demographics (expanding suburbs).<br />
Success Factors<br />Access to essential unique resources<br />Retrieving and implementing customer feedback<br />Competitive distribution channels.<br />
References<br />Coulter, M. (2008). Strategic Management in Action (Fourth ed.). Upper Saddle River, NJ: Pearson Prentice Hall.<br />Dehoff, K., & Jaruzelski, B. (2007). The Customer Connection:The Global Innovation 1000. Retrieved September 16, 2009, from Strategy and Business: http://www.strategy-business.com/article/07407?gko=a8a10<br />Fixed Costs. (2009). Retrieved September 15, 2009, from Investorwords.com:Definitions: http://www.investorwords.com/1992/fixed_cost.html<br />Marginal Costs. (2009). Retrieved September 15, 2009, from Investorwords.com:Definitions: http://www.investorwords.com/1992/marginal_coct.html<br />Market Trends. (2009). Retrieved September 15, 2009, from Encyclopedia:The free Dictionary: http://encyclopedia.thefreedictionary.com/Market+trend<br />Marketing Strategy. (2009). Distribution and Channel Strategy. Retrieved September 15, 2009, from The Marketing Donut: http://www.marketingdonut.co.uk/marketing/marketing-strategy/distribution-and-channel-strategy<br />
References<br />NetMBA. (2007). Market Analysis. Retrieved September 1, 2009, from NetMBA.com: http://www.netmba.com/marketing/market/analysis/<br />QuickMBA. (2007). Strategic Management:Porter's Five Forces. Retrieved September 15, 2009, from QuickMBA.com: http://www.quickmba.com/strategy/porter.shtml<br />Sunk Costs. (2009). Retrieved September 15, 2009, from Investorwords.com:Definitions: http://www.investorwords.com/1992/sunk_cost.html<br />TaskList. (2009). Course Materials: MGM465-0903B-02 : Business Strategy. Retrieved August 27, 2009, from CTU Online: https://campus.ctuonline.edu/MainFrame.aspx?ContentFrame=/Default.aspx<br />Transaction Costs. (2009). Retrieved September 15, 2009, from Investorwords.com:Definitions: http://www.investorwords.com/1992/transaction_cost.html<br />