Market and Marketing Analysis

(part 1)
Nur Aini Masruroh

http://aini.staff.ugm.ac.id/ ; Email: aini@ugm.ac.id;

n_masruroh@yahoo.com

1.
2.
3.

Produknya ap..?
Market
Target

Overview
Usually

performed for new businesses

Carried out before financial assessment

Pre-evaluation study

Analysis

is focused on:

Market conditions
Competitors
Impacts of external factors to the market

Outlines

Identifying alternatives
Competitor analysis
Market analysis
Industry structure
Demand forecasting

Identifying alternatives

Unsatisfied demand?

No supply
Supply < demand

Competitive

Design
Cost

If the product is

Has a prospective market

Has a potential demand
Competitive in production and distribution
cost
Low risk in relation with demand, price, and
cost

Then the proposed product is potential to be

successful

Corporate market survey

Define problem and set objective of the survey

Whats the customers need?

Product market price

Strengths and weaknesses of current solution
Perceived risk

Product attributes (quality, model, types)

Packaging
Brand
Customer service

Pricing strategy

Factors to be considered:

Production cost
Price of competitors and substitution goods
Uniqueness

Competitor analysis

To help management understand their

competitive advantages/disadvantages relative
to competitors
To generate understanding of competitors past,
present (and most importantly) future strategies
To provide an informed basis to develop
strategies to achieve competitive advantage in
the future
To help forecast the returns that may be made
from future investments (e.g. how will
competitors respond to a new product or pricing
strategy?)

Competitor analysis

Competitors:

Similar existing product

Substitution
Imported product
Planned typical product (produced by other
company)

Which is your market?

Sources of information for

competitor analysis (Davidson,1997)
Recorded Data

Observable Data

Opportunistic Data

Annual report &

accounts

Pricing / price lists

Meetings with suppliers

Press releases

Advertising campaigns Trade shows

Newspaper articles

Promotions

Sales force meetings

Analysts reports

Tenders

Seminars / conferences

Regulatory reports

Patent applications

Recruiting ex-employees

Government reports

Discussion with shared

distributors

Presentations / speeches

Social contacts with

competitors

What businesses would really like to

know about competitors?

Sales and profits by product

Relative costs
Customer satisfaction and service levels
Customer retention levels
Distribution costs
New product strategies
Size and quality of customer databases
Advertising effectiveness
Future investment strategy
Contractual terms with key suppliers
Terms of strategic partnerships

Shape of Growth
Sales ($)
Declining industry
Declining absolute
growth
Declining relative
growth

Mature industry

Growth

Constant absolute
growth
Declining relative
industrygrowth

Increasing absolute
growth
Constant relative growth

Which industry are you in?

Time

Market analysis

Market sizing

Market share

Market sizing
Trying to establish

Total market size

Your company revenues (mkt. share)

Your company profits

by market analysis.

Current Market Size

Market Size = Your sales + sales of all competitors

Geographic

Narrow
Broad

Product/Service

Primary

Current
competitors,
who actually
compete
today for your
customers
Current
competitors,
who compete
for part of your
market
nearly your product

Secondary

Current competitors,
who could but dont

actively compete in
your market

NOT RELEVANT

A competitor is defined from the customers

perspective

Market share

Based on your relevant market

Your competition from the customers

perspective

Your geographic area

The market you can and plan to serve

You can refer to total market for establishing

market share in percentage terms

Market Position

Market Niche small part of an existing market

Market Leader maintain dominant position in the
market?
Market Follower Follow the lead of the market
leader pricing, product development, etc.
Market Challenger Seek to adopt strategies to
challenge market leaders position

Potential Market Share Strategies

Price leader No. 1 in market share (market leader)

Economies of scale

First mover?

Quality leader

Superior product/technology (superior R&D)

Strong organization (good management)

Middle of pack

Good technology

Reasonable price

Loyal customer

Minor player

Niche market

Good understanding of a specific market

Industry Structure

Market share depends on industry structure

Geography
National, regional, or global

Concentration
Significant economies of scale

Production, sales, advertising, purchasing, financing, R&D,

distribution, brand awareness/credibility

More typical in mature industries

Fragmentation
Customer stickiness
High switching costs
Low economies of scale, low scalability

Analysing competitive industry

structure

Michael Porter's Five

Forces Model

The threat of entry of

new competitors (new
entrants)
The threat of
substitutes
The bargaining power
of buyers
The bargaining power
of suppliers
The degree of rivalry
between existing
competitors

Threat of new entrance

Depends of key barriers:
Economies of scale
Capital / investment requirements
Customer switching costs
Access to industry distribution channels
The likelihood of retaliation from existing
industry players

Threat of Substitutes
The threat of substitute products depends on:
Buyers' willingness to substitute
The relative price and performance of
substitutes
The costs of switching to substitutes

Bargaining Power of Suppliers

If suppliers have high bargaining power over a
company, then in theory the company's industry
is less attractive. The bargaining power of
suppliers will be high when:

There are many buyers and few dominant suppliers

There are undifferentiated, highly valued products
Suppliers threaten to integrate forward into the
industry (e.g. brand manufacturers threatening to set
up their own retail outlets)
Buyers do not threaten to integrate backwards into
supply
The industry is not a key customer group to the
suppliers

Bargaining Power of Buyers

Buyers are the people / organizations who

create demand in an industry
The bargaining power of buyers is greater when

There are few dominant buyers and many sellers in

the industry
Products are standardized
Buyers threaten to integrate backward into the
industry
Suppliers do not threaten to integrate forward into
the buyer's industry
The industry is not a key supplying group for buyers

Intensity of Rivalry
The intensity of rivalry between competitors in an
industry will depend on:

The structure of competition - for example,

rivalry is more intense where there are many small or
equally sized competitors; rivalry is less when an
industry has a clear market leader
The structure of industry costs - for example,
industries with high fixed costs encourage
competitors to fill unused capacity by price cutting
Degree of differentiation - industries where
products are commodities (e.g. steel, coal) have
greater rivalry; industries where competitors can
differentiate their products have less rivalry

Intensity of Rivalry

Switching costs - rivalry is reduced where buyers

have high switching costs - i.e. there is a significant
cost associated with the decision to buy a product
from an alternative supplier
Strategic objectives - when competitors are
pursuing aggressive growth strategies, rivalry is
more intense. Where competitors are "milking"
profits in a mature industry, the degree of rivalry is
less
Exit barriers - when barriers to leaving an industry
are high (e.g. the cost of closing down factories) then competitors tend to exhibit greater rivalry.

Some Structural Advantages

Employee
compensation
structure

Credibility

Geographic coverage

Unions

Mix of products

Regulation

Decision-making
process

Cost structure

Brand positioning

Distribution channel

Skill set

Capital

Production equipment

Ownership
Corporate culture

Predicting demand

Research on current demand and potential

market

Potential market: customers who are probably

interested in our product
Secondary or primary data

Demand forecasting
Risk analysis (to be focused later)

Demand forecasting

Some methods (not all!)

Extrapolation based on the trend of historical data

Linear, polynomial

Product usage coefficient

Import substitution
Countries comparison

Demand

Lineal and polynomial trend

Year

Product usage coefficient

Commonly used to predict industrial goods (raw

material, plant supplies, etc)

D = P.i + E
D = demand
P = production plan user
i = usage coefficient
E = export estimation

Product usage coefficient: example

Paper industry

Usage coefficient

Industry

Product unit

i/ unit product

Cement

Ton

26.6 kg

Fertilizer

Ton

26.6 kg

Garment

1000 unit

100 kg

Canned food

1000 unit

100 kg

Shoes

1000 unit

100 kg

If we know the production rate of the user, we can predict

the demand of our product based on that.

Import substitution

Based on import data on respective product

Consider:

Quality
Image
Non-technical aspects

Country comparison

KONSUMSI
BAJA PER
KAPITA,
Kg/orang

Skala
Log

Skala Log
PENDAPATAN PERKAPITA, $/orang

External factors analysis

National economic growth and international

financial condition
Population growth
Changing in technology
Government regulation
Public infrastructure
Product life cycle