Chap.3 Mullins - UNDERSTANDING MARKET OPPORTUNITIES

7/27/2019 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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Chap.3 Mullins - UNDERSTANDING MARKET OPPORTUNITIES