External Analysis:3. Market Analysis

Industries are not markets industry: a group of organisations or

business units producing close substitutes market: a group of consumers with similar

needs market segment: a relatively homogenous

group of customers who will respond to a marketing mix in a similar way

Market Analysis

Understanding Customers Who are the key customers? Why do they buy the product?

use of product benefits features purchase triggers

Key Market Analysis Questions

What is the growth rate of the market? What size are the key segments? How diverse is the market? Does the market fluctuate? How sensitive to cost variations? What is a viable level of business? What is the buyer decision process? What are the pricing mechanisms?

Making industry analysis more dynamic Current theory aims to better predict the

dynamics of an industry. In simple terms, industries are dynamic because a

strategic change by any player may lead to a strategic response by other players.

E.g. Woolworths supermarkets introduce petrol discounts linked to grocery expenditure and Coles also sells petrol.

Externally, PEST shifts can be used to predict changes in the industry structure.

Predicting the future

PEST analysis (political economic, social, technological)

Leading indicators change. Generation of trends from historical

patterns (e.g. market share over the last three years etc).

Example of a balanced scorecard

Financial Perspective•Shareholder return•Cash flow•Major customer profitability•Profit forecast reliability•Sales backlog

Customer perspective•Relative pricing index•Customer ranking survey•Customer satisfaction index•Market share

Innovation and Learning Perspective•% revenue from new services•Rate of improvement index•Staff attitude survey•No. of employee suggestions

Internal Business Perspective•Hours with customers on new work•Revenue per employee•Returns•Safety incident index•Order-delivery cycle