This document discusses assessing market and industry attractiveness by analyzing them at both the macro and micro level. At the macro level, trends in the demographic, sociocultural, economic, regulatory, technological, and natural environments are examined. At the micro level, the market is analyzed to identify customer pain points and benefits provided, while the industry is analyzed based on proprietary capabilities and resources. Seven domains for evaluating opportunities are introduced: market attractiveness, industry attractiveness, mission fit, ability to execute critical success factors, network and connections, risk propensity, and responsiveness to change.

1. Understanding Market Opportunities
PPT4
Prof. S. Venkat

2. Markets and Industries:
What’s The Difference?
• A market is composed of individuals and
organizations who:
– Are interested in and willing to buy a good or
service to obtain benefits that will satisfy a
particular need or
– Who want and have the resources to engage in
such a transaction.

3. Markets and Industries:
What’s The Difference?
• An industry is a group of firms that offer a
product or class of products that are similar
and are close substitutes for one another.
• Markets are comprised of buyers; industries
are comprised of sellers.

4. The Seven Domains of Attractive Opportunities

5. Assessing Market and Industry Attractiveness
• Macro-level
– The analyses are based on environmental
conditions that affect the market or industry,
respectively, as a whole.
• Micro level
– The analyses look not at the market or the
industry overall but at individuals in that market
or industry.

6. Macro Trend Analysis
• The demographic environment
– Aging
– AIDS
– Imbalanced population growth
– Increased Immigration
– Declining Marriage Rates

7. Macro Trend Analysis
• The sociocultural environment
– Sociocultural trends are those that have to do
with the values, attitudes, and behavior of
individuals in a given society.
– Two trends of particular relevance today are:
• Greater interest in ethical behavior by businesses
• Trends toward fitness and nutrition.

8. Macro Trend Analysis
• The economic environment
– Among the most far-reaching of the six macro
trend components.
– Economic trends often work, to pronounced
effect, in concert with other macro trends.
• The regulatory environment
– Political and legal trends, especially those that
result in regulation or deregulation, can have
powerful impact on market attractiveness.

9. Macro Trend Analysis
• The technological environment
– Convergence of the telecommunications,
computing, and entertainment industries.
• The natural environment
– Turning problems into opportunities:
• Finding ways to save energy.
• Finding new energy sources.
• Seeking market solutions.
– Opportunities in developing green products
– Impact of depletion of natural resources

10. Your Market Is Attractive:
What About Your Industry?
• Porter’s Five Competitive Forces
Threat of new
entrants
Bargaining
power
of suppliers
Rivalry among
existing industry
firms
Threat of substitute
products
Bargaining
power
of buyers

11. Challenges In Macro-level Market And Industry
Analysis
• In order to analyze the attractiveness of one’s
market or industry, one must first identify
exactly which market or industry is to be
analyzed.
– On the market side, the challenge often lies in
sizing the relevant market.
– On the industry side, there’s the question of how
narrowly or broadly to define one’s industry.

12. Challenges In Macro-level Market And Industry
Analysis
• Information sources for macro-level analyses
– Trade associations and trade magazines.
– Web sites of local, state, and federal governments.
– Almost all sources of information are now readily
available on the Web.
• The key outputs of a competent macro trend
analysis should include both quantitative and
qualitative data.

13. Understanding Markets at the
Micro Level
• Some tests to be met for the market offering
to be attractive:
– There’s a clearly identified source of customer
pain, for some clearly identifiable set of target
customers, which the offering resolves.
– It provides customer benefits that other solutions
do not.
– The target segment is likely to grow.
– There are other segments for which the currently
targeted segment may provide a springboard for
subsequent entry.

14. Understanding Industries at the
Micro Level
• Opportunities are attractive when the
company itself meets most or all of the
following tests:
– It possesses something proprietary that other
companies cannot easily duplicate or imitate.
– It has or can develop superior organizational
processes, capabilities, or resources that others
would find it difficult to imitate or duplicate.
– It’s business model is economically viable.

15. The Team Domains: The Key to the Pursuit of
Attractive Opportunities
• Some crucial questions:
– Does the opportunity fit what we want to do?
– Do we have the people who can execute on
whatever it takes to be successful in this particular
industry?
– Do we have the right connections?
• These questions address the remaining three
of the seven domains in the opportunity
assessment framework.

16. Mission, Aspirations, and Risk Propensity
• Everyone and every company has views on
how much risk is acceptable.
• A particular opportunity must also measure
up to the expectations of the people who will
pursue it.
• Whatever the tests for a given individual or
company, they must be met if an opportunity
is to be deemed attractive.

17. Ability to Execute on the Industry’s Critical
Success Factors
• Two key questions to ask in identifying one’s
critical success factors, (CSFs):
– Which few decisions or activities are the ones
that, if gotten wrong, will almost always have
severely negative effects on company
performance?
– Which decisions or activities, done right, will
almost always deliver disproportionately positive
effects on performance?

18. It’s Who You Know, Not What You Know
• The people who are the best connected will
be the ones who are best placed to change
strategy before others know the winds have
changed.
• Having a well-connected team in place
enhances the attractiveness of the
opportunity itself.
– The team is more likely to be able to ride out the
inevitable winds of change.

19. Putting the Seven Domains to Work
• If your company chooses to pursue
unattractive opportunities, you’ll face tough
sledding.
• The seven domains are not additive.
• Opportunities don’t just sit there; they change
and may be further developed.

20. Anticipating and Responding to Environmental
Change
• Impact and timing of event
– Opportunity/threat matrix is relatively simple way
to identify, evaluate, and respond to
environmental events that may affect the firm’s
longer-term profitability and position.
– It enables the examination of a large number of
events in such a way that management can focus
on the most important ones.

21. Opportunity/Threat Matrix for a Telecommunications Company in the
U.K. in 2008

22. Swimming Upstream or Downstream: An
Important Strategic Choice
• Trends will always be present, whether
marketing managers like them or not.
• The question is what managers can do about
them.

23. Take-Aways
• Macro trends can and will profoundly
influence the success of any business. Serving
attractive markets, where trends are favorable
is likely to bring more success than serving
markets where trends are unfavorable.
• Competing in structurally attractive industries
is likely to generate higher returns than in less
attractive industries.

24. Take-Aways
• The degree to which a company’s goods or
services resolve genuine customer needs of a
clearly defined target market and the degree
to which its competitive advantage is
sustainable over time are probably even more
crucial to long-term success.

25. Take-Aways
• Understanding market opportunities is about
more than understanding customers,
competitors, and the environmental context.
The capabilities and resources brought by the
company itself are also important and are
often overlooked.

26. Take-Aways
• The seven domains are not additive. Strong
scores, especially at the micro level or on the
team domains, can outweigh the effects of flat
or declining markets or structurally
unattractive industries.