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Product analysis:

category/competitor/customer/d
emand
J.Chandra Mohan

Industry AnalysisCategory

Industry background
Potential growth
Competitive pressures

Porter's Five Forces

Describe with low, moderate or high. Industry


competitiveness can be broken down into
current and potential competitive forces.
Threat of entry
Intensity of rivalry
Substitute products
Bargaining power of buyers
Bargaining power of suppliers

The threat of entry.

Economies of scale e.g. the benefits associated with bulk


purchasing.
The high or low cost of entry e.g. how much will it cost for the
latest technology?
Ease of access to distribution channels e.g. Do our competitors
have the distribution channels sewn up?
Cost advantages not related to the size of the company e.g.
personal contacts or knowledge that larger companies do not
own or learning curve effects.
Will competitors retaliate?
Government action e.g. will new laws be introduced that will
weaken our competitive position?
How important is differentiation? e.g. The Champagne brand
cannot be copied. This desensitizes the influence of the
environment.

The power of buyers.

This is high where there a few, large players


in a market e.g. the large grocery chains.
If there are a large number of
undifferentiated, small suppliers e.g. small
farming businesses supplying the large
grocery chains.
The cost of switching between suppliers is
low e.g. from one fleet supplier of trucks to
another.

The power of suppliers.

The power of suppliers tends to be a reversal of the


power of buyers.
Where the switching costs are high e.g. Switching
from one software supplier to another.
Power is high where the brand is powerful e.g.
Cadillac, Pizza Hut, Microsoft.
There is a possibility of the supplier integrating
forward e.g. Brewers buying bars.
Customers are fragmented (not in clusters) so that
they have little bargaining power e.g. Gas/Petrol
stations in remote places.

The threat of substitutes

Where there is product-for-product


substitution e.g. email for fax Where there is
substitution of need e.g. better toothpaste
reduces the need for dentists.
Where there is generic substitution
(competing for the currency in your pocket)
e.g. Video suppliers compete with travel
companies.
We could always do without e.g. cigarettes.

Competitive Rivalry

This is most likely to be high where entry is


likely; there is the threat of substitute
products, and suppliers and buyers in the
market attempt to control. This is why it is
always seen in the center of the diagram.

Organization Analysis

Mission statement
Values, goals and objectives
Organizational structure
Organization history
SWOT analysis

Strengths

Proprietary products
Market leader
Financial resources
Management depth
Supply chain processes
Economies of scale

Weaknesses

Bad reputation
Strategic direction not clear
No economies of scale
Weakness in marketing, finance...

Opportunities

New markets
Niches
Vertical or horizontal integration
Increased market growth
Increasing power with suppliers

Threats

Competitors (foreign, domestic)


Low barriers of entry
Technology factor
New business models (ie Dell)
Substitute products
Buyers gaining power

Senior management strategy


Core competencies, capabilities, assets
Competitive advantage, core competencies,
distinct capabilities

Problem Analysis

Derive the problem by asking how, what, when, where, why, and
who.
State the problem/situation
Understand where the problem comes from
People (Training, skills, performance)
Equipment (Capacity, learning curve, age)
Supplies/Materials (Quality, timely delivery, correct quantities,
damages)
Location (Proximity to market, proximity to suppliers, proximity to
labor force)
Internal organization (Culture, community involvement)
Processes (Design, measurements, layout)
External (Suppliers, climate)

Financial Analysis

Past, present and future financials


Benchmark data of industry
Activity, leverage, profitability, liquidity ratios
Cash Flow

Process Analysis

"As Is" analysis (flowchart)


"Should Be" analysis (flow chart)
Metrics
Goals
Constraints
Recommendations

Critical Success Factors

What must the company do to be successful


What is the competition doing
How can the company differentiate itself

Alternatives

Status quo
Partnership, joint venture
Cost leader, innovator
Niche player
Be careful of straddling the fence

Recommendations

Analysis of recommendation
NPV and break-even
Sensitivity analysis
Company reaction and risks
Industry (competitors) reaction

Implementation

Management buy-in
Time-tables
Capital expenditures
Follow up

Product Analysis

Product lifecycle (Intro,Growth,Maturity & Decline)


Product (Brand name, quality, services, packaging)
Place (Number of distribution channels, warehouse
locations)
Promotion (Marketing budget, promotion channels,
sales force, advertising media used)
Price (supply, demand, price objective, competitive
factors)
Market share

Location Analysis

Proximity to markets
Wages
Taxes
Utilities such as sewers, water, gas and electricity
Access to vendors and materials
Access to customers
Labor supply
Climate
City Ordinances
Attitudes within the community
Incentives from the community
Land available
Proximity to freeway/railroad/ocean/airport
Location tools

Supply Chain Analysis

Collaboration efforts
Operational costs
Capacity to meet market demands
Supplier Management
Effective asset utilization
Effective use of outsourcing
Effective use of vertical integration
Strategic locations of facilities

Supplier Analysis
( Cost Analysis)

Can a less expensive material/component be used while maintaining


quality?
Are the costs reasonable?
Is a standard item in the market a suitable substitute?
Can the weight of the item be reduced?
Can the packaging be redesigned to reduce costs?
Are the correct costs being allocated to the project?
Have the correct activity based costing methods been used?
Is the product over engineered? Could a lower quality product be
substituted?
Are other suppliers making a comparable product?
Which costs are necessary?
Could the product be shipped at a lower cost?
What type of inventory management strategy does the company have?
What are the trends in the industry?

Negotiation Analysis

Price
Transportation
Service
Quality

Analyzing e-Procurement
Benefits

Consolidate supplier base - allows a company to work with fewer


suppliers leveraging its ability to aggregate spend.

Improves communication - reduces variability in the supply chain.

Free buyers to work on strategic tasks - buyer's spend less time on


tactical buys and more time on strategic issues.

Decrease cycle times - especially important for companies in the


technology industry.

Lower transaction and processing costs - automating the purchasing


process will decrease the amount of non-value added activities

Reduce maverick spending - maverick spending is said to be 10%-20%


higher than purchasing from companies with negotiated contracts.

Enhanced reporting and auditing tools - an eprocurement system will track all costs allowing a
company to determine the spend to each supplier.
Decreased prices
Improve compliance with approved suppliers
increasing bargaining leverage
Better Approval Controls
Head count reduction
Better utilization of assets
Increase inventory turnover
Quicker ramp up for new employees
Faster response times

Contingency Planning

Natural disasters (earthquakes, floods, hurricanes,


disease...)
Civil unrest (riots, fire, political...)
Logistical accidents (highway closures, train
derailment, container lost at sea...)
International problems (Economic issues, trade
embargoes, politics, war...)
Labor issues (strikes, walk-outs...)
Changes in supply and/or demand
Power outages, fire

Risk Assessment

Do strategic products have back up suppliers


in case of capacity restraints?
Is there a Business Continuity Plan in case of
natural disaster so that the company can
continue operations elsewhere.