chap.3 mullins - understanding market opportunities
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UNDERSTANDING MARKET OPPORTUNITIES
Anggiasari NPM 1206333723
Rina Muasaroh NPM 1206296734
Christopan Sitinjak NPM 1206333811
Adriani Eka Juniarti Osman NPM 1206333654
Marketing Management
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THE CELLULAR TELEPHONE BUSINESS :
Increasing Competition in a Growing Market
1983
The first
cellphonesystembeganoperations
2005
More than 2
billionworldwidesubsciptions
2007
There were
morecellphonesubscriptionsthan peoplein the worlds
developedcountries
2011
of the
worlds 5billioncellphonesubscriptions
Cell Phones have become A cant do without it tool
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THE CELLULAR TELEPHONE BUSINESScontd
The continuing growth in demand generates numerous opportunities in the
cell phone manufacturing and cell phone service industries, among others.
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CellularTelephoneBusiness
The mobiletelephony
market
Cell phonemanufacturing
Cell phoneservice
providers
NetworkEquipment
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THE CELLULAR TELEPHONE BUSINESS The Mobile Telephony Market
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New features attracted new users and encourage existing users to upgrades
their phones.
Penetration the 3G and 4G has risen sharply, especially in Asia
In developing world, cell phone penetration passed the 50 % in 2006
Conclusion : The market has been and continues to be attractive indeed
Questions : How attractive are the industries that serve this market?
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THE CELLULAR TELEPHONE BUSINESS Cell Phone Manufacturing
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Nokia rocketed to world leadership in cell phones, has global market share grow to
40 % by 2007.
Anybody who tries to get in a handset war with them is going to get hurt
- Neal Mawston (Industry analyst)
Apples touch screen iPhone in 2007 tooks traditional and smartphones competitors
like Nokia, Motorola and RIM by storm.
In 2010, Nokias stock dropped to 8, and their market share fell to 25%. In June2011, its stock slipped below 5.
Apples has 30% share of global operating profits among cell phone makers.
Nokia no longer competitive with Apple, smartphone running Googles Android
operating system, and low-cost Chinese cell phone makers.
A rapidly growing market does not necessarily provide a smooth path to
success. Growing markets are one thing, but turbulent industries serving
those markets are quite another.
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THE CELLULAR TELEPHONE BUSINESS Cell Phone Service Providers
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In 2007, Vodaphone as a market leader service provider in Europe acquiring
67% of Indias 3rdlargest operator, Hutchinson Essar. The prices are 2.5
cent/minute, make 35% margins
In 2009, the price had collapsed to 1 U.S cent/minute.
Newcomer Uninor offer calls as 0.20 rupees/minute.
The fact that Indias cell phone operators installed in one years = Germany
had built in the last 15 years, doesnt make the pressure on prices and
profits was relentless.
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THE CELLULAR TELEPHONE BUSINESS Network Equipment Down, Too
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In 2010, Alcatel-Lucent and Nokia Siemens Networks were both running
losses in the face of waning demand for 3G technology and stiff competition
from Ericson and Chinas Huawei.
While the rapidly growing market for mobile telephone service
has been an attractive one, the industries that serve this market
face significant challenges.
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MARKETING CHALLENGES ADDRESSED IN
To take the opportunity to enter or attempt to increase their share of
growing market (like that for mobile phones), they must examine a host of
other issues, including :
The conditions that are currently prevailing in the industry in which thet would
compete
The likelihood that favorable conditions will prevail in the future
Trends that are influencing market demand
3 crucial questions to the assesment of any market opportunity :
How attractive is the market we serve or propose to serve?
How attractive is the industry in which we would compete?
Are the right resources in terms of people and their capabilities and
connections in place to effectively pursue the opportunity at hand?
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MARKETS and INDUSTRIES : Whats the Difference??
Market
Individuals ororganizations who are
interested in and willingto buy a good or serviceto obtain benefits thatwill satisfy a particularwant or need and have
the resources to engagein such a transaction
Industy
A group of firms thatoffer a product or class
of products that aresimilar and are closesubstitutes for one
another
Thus, markets are compromised of buyers; industries are compromised
of sellers
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THE SEVEN DOMAINS of ATTRACTIVE OPPORTUNITIES
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THE SEVEN DOMAINS of ATTRACTIVE OPPORTUNITIESContd
Macro-level analyses Based on enviromental conditions that affect the market or industry,
respectively, as a whole, without regard to a particular companys
strategy, target market or its role in its industry.
Micro-level analyses Based on individuals in that market or industry, that is, specific target
customers and companies themselves.
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MACRO TREND ANALYSIS :A Framework for Assessing Market Attractiveness, Macro Level
The macroenvironmental trends / macro trends can be divided into six major
components:
Macroenvironment
Demographic Sociocultural Economic Regulatory TechnologicalNatural
Environments
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MACRO TREND(1)
The Demographic Environment
The Aging of the worlds population
The effect of the AIDS plague on demography
A rapidly growing middle class in emerging a countries
Increased imigration
Declining marriage rates
The Sociocultural Environment
Business Ethics
Fitness and Nutrition
The Economic Environment
Economic trends often work, to pronounced effect, in concert with other macrotrends.
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MACRO TREND(2)
The Regulatory Environment
Political and legal trends, especially those that result in regulation andderegulation can have powerful impact on market attractiveness.
The Technological Environment
Technology can change how businesses operate, how goods and services as wellas ideas are exchanged, how crops are grown, and how individuals learn andearn as well as interact with one another.
The Natural Environment
Changes in the earths resources and climate can have significant and far-reaching effects.
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Your Market is Attractive : what about your industry?
PORTERS FIVE COMPETITIVE FORCES
Threat of new entrants
Bargaining power of
buyers
Threat of subtitute products
Rivalry among existing
competitors
Bargaining power of
suppliers
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PORTERS FIVE COMPETITIVEFORCES
Rivalvy among
PresentCompetitors
There is high investment intensity; that is, the amount of fixed and workingcapital required to produce a dollar of sales is large.
There are many small firms in an industry or no dominant firms exist.
There is little product differentiation.
Its easy for customers to switch from one sellers products to those of others
Threat of NewEntrants
When strong economies of scale and learning effects are present
If the industry has strong capital requirements at the outset
When strong product differentiation exists among current players
If gaining distribution is particularly difficult.
Bargaining Powerof Suppliers
If the cost of switching suppliers is high
If price of subtitutes are high
If suppliers can realistically threaten forward integration
When the suppliers product is a large part of the buyers value added
Bargaining Powerof Buyers
The extent of buyer concentration
Switching costs that reduce the buyers bargaining power The threat of backward integration
The products importance to the performance of the buyers product
Buyer profitability
Threat ofSubstitute
Products
Subtitutes are alternative product types (not brands) that perform essentially thesame fuctions. Subtitute products put a ceiling on the profitability of an industryby limiting the price that can be charged, especially when supply exceeds
demand.
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A Five Forces Analysis of the European Cell Phone Service Industry in 2011
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Five Forces Score Rationale
Rivalry among present competitorsRivalry is high leading to high customer
churn : unfavourable
Product are differentiated through new features
& services; customer switching costs are low
Threat of new entrantsThreat of new entrants is low :
moderately favorable
While rapid pace of technological change may
bring new entrants based on new technologies,
new service providers must purchase a bandwithlicense by spending billions
Supplier powerSupplier power is high : moderately
unfavourable
Goverments in developed markets have raised
the price of additional bandwith through auctions
Buyer power Buyer power is low : very favourableEven large customers have little power to set
terms & conditions in this industry
Threat of subtitutesThreat of subtitutes is high :
moderately unfavourable
PDAs & laptops using Wi-Fi networks to access
the web could cannibalize sales of 3G wireless
network cellphones
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CHALLENGES IN MACRO-LEVEL MARKET AND INDUSTRY ANALYSIS
Markets can be measured in various ways :
Numbers of qualified potential customers (potentially willing and able to pay)
Unit consumed of a class of goods or services.
Terms of value (customers aggregate spending on a class of goods of services)
How a good way to identify same or different industry?Kinds of key suppliersProcesses by which value is added.
Kinds of buyers
If 2 or all 3 elements are similar same industryi
If 2 or all 3 elements are differentdifferent industry
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INFORMATION SOURCES FOR MACRO-LEVEL ANALYSES
Type information for market and industry analysis in USA that can be found in
website :
1. Trade associations and trade magazines2. Information on specific companies3. U.S. demographic and lifestyle data
4. Demographic data on a specific region or local trade area in United States5. International demographic and world trade6. Macro trends7. E-commerce8. Proprietary providers of research reports9. Markets share information.
10. Average financial statements by industry
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UNDERSTANDING MARKETS AT THE MICRO LEVEL (1)
In assessing markets opportunities at the micro level, one looks individually
at customerswhether trade customers or end customers or business user-
to understand the attractiveness of the targets segment.
Opportunities are attractive at the micro level on the market side when the
market offering meets most or all of the following tests.
a. Theres a clearly identified sources of customer pain, for some clearly
identifiable set of target customers, which the offering resolves. Thus,
customers need is established.
b. The offering provides customer benefits that other solutions do not. Thus,
customers are likely to buy your solution!.
c. The target segment is likely to grow
d. There are other segments for which the currently targeted segment may
provide a springboard for subsequent entry
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UNDERSTANDING MARKETS AT THE MICRO LEVEL (2)
Opportunities are attractive at the micro level on the industry side when the
company itself meets most or all of the following test :
a. It possesses something proprietary that other companies cannot easilyduplicate or imitate.
b. The business has or can develop superior organizational processes, capabilities
or resources that others would find it difficult to imitate or duplicate.c. The companys business model is economically viable-unlike the many dot-com
business that went bust at the dawn of the millennium!
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THE TEAM DOMAINS : The Key to the Pursuit of Attractive Opportunities
Opportunities are only as good as the people who will pursue them. Thus,
even if some combination of market and industry factors renders anopportunity attractive at first blush, there remain 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? As the saying goes, Its not what you
know, its who you know.
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MISSIONS, ASPIRATIONS, and RISK PROPENSITY
These days, every company has a mission statement and every entrepreneur
has a pretty good idea of what she wants to do.
Notwithstanding the merits of a particular opportunity in market andindustry terms, it must be also measure up to the expectations of the peoplewho will pursue it.
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ABILITY TO EXECUTE ON THE INDUSTRYS CFS
cr i t ical success factors tend to separate the winner from the also-rans
Identify CSF: Which few of decision or activities, if gotten wrong, will almost always
severely negative effect on company performance Which decision or activities, if done right, will almost always deliver
disproportionately positive effects on performance
example:in retailing: CFSsin location, location and location
customer service, while important not CSF
To assess opportunities:
identify the industrys few Critical Success Factors (which generally notinclude money) ask simple question, do we have on our tem (or we can attract) the
competencies and capabilities necessary to deliver our industrysCFSs
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ITS WHO YOU KNOW NOT WHAT YOU KNOW
Reminded considerable uncertainty about just how attractive a particular
opportunity really is: Can we really deliver what promised? Will customer really buy? Will macro trends change course? Will the structural characteristics of the industry change, favorably or otherwise? Will an unanticipated competitor arrive on our doorstep? Will new market suddenly open up?
Having a well conn ected team in p lace enhance the attract iveness o f the
oppo rtunity itsel f because the team is more l ikely to be able to r ide outthe inev i table winds of ch ange
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PUTTING THE SEVEN DOMAINS TO WORK
When management w ith a reputation fo r br i l l iance to take on a bus iness with a
reputation for bad economics, its the reputation of the business that remains intactWarren Buffet
Opportunity dontjust sit therechange and may be further developed
Make checklist of each domain
score each domain sum the scores wont do
opportunitys strength on some domain outweigh
weaknesses on others
Damaging flaws
Mitigated or remedied
Seven domain provide a useful and integrative lens through which the examinethe fundamental health of business.
The opportunities it has chosen to pursue at any stage in its product life cycle
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ANTICIPATING AND RESPONDING TO ENVIROMENTAL CHANGE
Critical change in macro environmental condition
change firmsstrategy
System:
Help identify
Evaluate
Respond to environmental event
firmslong-term profitability and position
Impact and timing of an event followed by the development of an
appropriate response strategy
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IMPACT AND TIMING OF AN EVENT
Management must determine:
the probability of their occurrence the degree of impact
Probability of Occurrence
Level of Impact on
Company
High LowHigh
Low
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SWIMMING UPSTREAM OR DOWNSTREAM
An Important strategic choice
An Important strategic choice trends will always be present, whether marketingmanager like them or not.
The question is what managers can do about them: React and adapt or Favorable moves
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