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3.1 External and Consumer Analysis

Chapter 2 - External and
Customer Analysis
PPT 2-2
The Role of External Analysis
External
Analysis
Strategic Decisions
Where to compete
How to compete
Analysis
Information-need areas
Scenario analysis
Identification
Trends/future events
Threats/opportunities
Strategic uncertainties
Figure 2.1
Chapter 2 - External and
Customer Analysis
PPT 2-3
Strategic Uncertainties
Strategic Uncertainties
Will a major firm enter?
Will a tofu-based dessert
product be accepted?
Will a technology be
replaced?
Will the dollar strengthen
against an off-shore
currency?
Will computer-based
operations be feasible with
current technology?
How sensitive is the market
to price?
Strategic Decisions
Investment in a product market
Investment in a tofu-based product

Investment in a technology

Commitment to off-shore
manufacturing

Investment in a new system

A strategy of maintaining price
parity
Chapter 2 - External and Customer Analysis PPT 2-4
Strategic Uncertainties
What will the
future demand?
Performance improvements?
Competitive technological
developments?
Financial capacity of health care
industry?
Chapter 2 - External and Customer Analysis PPT 2-5
Customer Analysis
Segmentation
Identification of customer groups that respond differently
from other groups to competitive offerings. Thus, a
successful segmentation strategy requires the
conceptualization, development, and evaluation of a
targeted competitive offering.
Who are the biggest customers? The most profitable?
The most attractive potential customers?
Figure 2.2
Chapter 2 - External and
Customer Analysis
PPT 2-6
Examples of Approaches to Defining
Segments
Customer Characteristics
Geographic
Type of organization
Size of firm
Lifestyle
Sex
Age
Occupation
Figure 2.3
Chapter 2 - External and
Customer Analysis
PPT 2-7
Examples of Approaches to Defining
Segments
Product-Related Approaches
User type
Usage
Benefits sought
Price sensitivity
Competitor
Application
Brand loyalty
Figure 2.3
Chapter 2 - External and Customer Analysis PPT 2-8
Segmentation
How should segments be defined?
Benefit Segmentation
Price Sensitivity
Loyalty
Applications
Multiple Segments versus Focus Strategy
Segmentation and Market-Driven
Strategy
SEGMENTS
VALUE
OPPORTUNITIES
CAPABILITIES/
SEGMENT
MATCH
TARGET(S)
POSITIONING
STRATEGY
Identifying the Health and Beauty
Supplies Market Segments
Level of
Competition

Generic



Product
Type


Product
Variant
Product
Definition

Health &
Beauty
Aids

Shaving
Equipment


Electric
Razors
Illustrative
Competitors

Consumer
Product
Companies

Gillette,
Remington, Bic

Braun,
Norelco,
Remington,
Panasonic
Need/Want
Satisfied

Enhancement
of Health & Beauty

Shaving



Electric
Shaving

Market Segmentation Activities and Decisions
Market to be
Segmented
Decide How
to Segment
Form
Segments
Finer
Segmentation
Strategies
Strategic
Analysis
of Segments
Product Variant Segmentation
Product Type Segmentation
Generic Segmentation


Purchase
Behavior
Characteristics
of People/
Organizations
Use
Situation
Buyers Needs/
Preferences
Segmentation Variables
Illustrative Segmentation Variables
Characteristics
of people/
organizations
Consumer
Markets
Industrial/
Organizational
Markets
Age, gender, income,
family size, lifecycle
stage, geographic
location, lifestyle
Type of industry , size,
geographic location,
corporate culture, stage of
development, producer/
intermediary
Use situation Occasion, importance
of purchase, prior
experience with
product, user status
Application,
Purchasing procedure
(new task, modified
rebuy, straight rebuy
Buyers needs/
preferences
Brand loyalty status, brand
preference,
benefits sought,
quality, proneness to make
a deal
Performance requirements,
brand preferences, desired
features, service
requirements
Purchase
behavior
Size of purchase,
frequency of purchase
Volume, frequency
of purchase
Requirements for Segmentation
Segmentation
Requirements
Response
differences
Identifiable
segments
Actionable
segments
Favorable
cost/benefit
Stability
over time
Approaches to Segment Identification
IDENTIFIERS
OF CUSTOMER
GROUPS
CUSTOMER
RESPONSE
PROFILE
Characteristics
of People and
Organizations
Use Situation



Buyers Needs
and Preferences


Purchase
Behavior and
Loyalty
Segment Dimensions for Hotel Lodging
Services
illustrative Example: Gasoline Buyers
Road
Warriors
True
Blues
Generation
F3 (Fuel,
Food & Fast)
Homebodies
Price
Shoppers
Higher-income, middle-aged men, drive 25-50000 miles a
year buy premium with a credit card purchase
sandwiches and drinks from the convenience store
will sometimes use carwash
16% of
buyers
Men and women with moderate to high incomes, loyal to
a brand and sometimes a particular station
frequently buy premium, pay in cash
16% of
buyers
Upwardly mobile men and women - half under 25 years of
age - constantly on the go drive a lot snack heavily
from the convenience store
27% of
buyers
Usually housewives who shuttle children around during
the day and use whatever gas station is based on
town or on route of travel
21% of
buyers
Not loyal to brand or station and rarely buy premium
frequently ontight budgets.
20% of
buyers
Illustrative Consumer Perception Map
Low
Quality
High
Quality
Expensive
Inexpensive
GROUP
I
GROUP
V
GROUP
III
GROUP
II
GROUP
IV
Brand E
Brand D
Brand C
Brand B
Brand A
Finer Segmentation Strategies
Logic of finer segments
customized offerings
diverse customer base
close customer relationships
Finer segmentation strategies
Micro-segmentation
mass customization
variety-seeking strategy
SELECTING THE SEGMENTATION STRATEGY
Deciding how to segment
Strategic analysis of market segments
Customer analysis
Competitor analysis
Positioning analysis
Estimating segment attractiveness
Segmentation fit and implementation
Customer
Analysis
Positioning
Analysis


Financial and
Market
Attractiveness
Competitor
Analysis
Strategic Analysis of Market Segments
Segment Financial and Market Attractiveness
Estimated
($ million)
Segment
X Y Z
Sales* 10 16 5

Variable costs* 4 9 3

Contribution margin* 6 7 2

Market share ~ 60% 30% 10%

Total segment sales 17 53 50

Segment position:

Business strength High Medium Low

Attractiveness # Medium Low High

*For a two-year period.
~Percent of total sales in the segment.
#Based upon a five-year projection.
Segmentation Fit for Implementation
Segment Attractiveness
and Internal Compatibility
Internal Compatibility
Market Segment
Attractiveness
High Low
High
Low
Attractive segments
that match with
company
capabilities
Attractive segments
but with poor match
with company
capabilities
Unattractive segments
that do not match with
company capabilities
Unattractive segments
but with match to
company
capabilities
Chapter 2 - External and
Customer Analysis
PPT 2-25
The Brand Loyalty Matrix: Priorities
Low
Loyalty
Moderate
Loyalty
Loyal

Customer
Non-customer
Medium
Low
to
Medium
High
Highest
Zero
High
Figure 3.4
Chapter 2 - External and Customer Analysis PPT 2-26
Customer Analysis
Customer Motivations
What elements of the product/service do customers value most?
What are the customers objectives? What are they really buying?
How do segments differ in their motivation priorities?
What changes are occurring in customer motivation? In customer
priorities?
Figure 3.2
Chapter 2 - External and
Customer Analysis
PPT 2-27
Customer Motivation Analysis
Identify
Motivations
Group and
Structure
Motivations
Assess
Motivation
Importance
Assign Strategic
Roles to Motivations
Figure 2.6
Chapter 2 - External and Customer Analysis PPT 2-28
The Customer as Active Partner
Encourage Active Dialogue

Mobilize Customer Communities

Manage Customer Diversity

Co-creating Personalized Experiences
Chapter 2 - External and Customer Analysis PPT 2-29
Customer Analysis
Unmet Needs
Why are some customers dissatisfied? Why are some
changing brands or suppliers?
What are the severity and incidence of consumer problems?
What are the unmet needs that customers can identify? Are
there some of which consumers are unaware?
Do these unmet needs represent leverage points for
competitors?
Chapter 2 - External and Customer Analysis PPT 2-30
Key Learnings
External analysis should influence strategy by identifying opportunities,
threats, trends, and strategic uncertainties. The ultimate goal is to improve
strategic choices decisions as to where and how to compete.
Segmentation (identifying customer groups that can support different
competitive strategies) can be based on a variety of customer
characteristics, such as benefits sought, customer loyalty, and applications.
Customer motivation analysis can provide insights into what assets and
competencies are needed to compete, as well as indicate possible SCAs.
Unmet needs that represent opportunities (or threats) can be identified by
projecting technologies, by accessing lead users, by ethnographic
research, and by interacting with customers.
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Chapter 2 - External and Customer Analysis PPT 2-31
Ancillary Slides
Chapter 2 - External and Customer Analysis PPT 2-32
Chance favors the prepared mind.
- Louis Pasteur
Chapter 2 - External and Customer Analysis PPT 2-33
Far better an approximate answer to
the right question, which is often
vague, than an exact answer to the
wrong question, which can always be
made precise.
- J ohn Tukey,
Statistician
Chapter 2 - External and Customer Analysis PPT 2-34
If you dont know where you are
going, you might end up
somewhere else.
- Casey Stengel
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3.2 Competitor Analysis
Chapter 3 - Competitor Analysis PPT 3-36
Competitor Identification
Customer-Based Approaches
Customer choices What brand would you buy if
your favorite was unavailable?

Application associations What applications?
What brands for each application?

What product substitutes?
Chapter 3 - Competitor Analysis PPT 3-37
Competitor Identification
Strategic Groups
Pursue similar competitive strategies
Have similar characteristics
Have similar assets and competencies
Chapter 3 - Competitor Analysis PPT 3-38
Competitor Analysis
Potential Competitors:
Market expansion
Product expansion
Backward integration
Forward integration
Export assets or competencies
Retaliatory or defensive strategies
Chapter 3 - Competitor Analysis PPT 3-39
Understanding the Competitors
Objectives and
Commitment
Image and
Positioning
Size, Growth
& Profitability
Current and
Past Strategies
Strengths and
Weaknesses
Cost Structure
Exit Barriers
Organization
and Culture
Competitor
Actions
Figure 3.2
Chapter 3 - Competitor Analysis PPT 3-40
Relevant Assets and Competencies
1) -What businesses have been successful over
time?
-What assets or competencies contributed
to their success?
-What businesses have had chronically low
performance?
-Why?
-What assets or competencies do they lack?
Chapter 3 - Competitor Analysis PPT 3-41
2) -What are the key customer motivations?
-What is needed to be preferred?
-What is needed to be considered?
-What is really important to the customer?

3) What assets and competencies represent
industry mobility (entry and exit) barriers?
Relevant Assets and Competencies
Chapter 3 - Competitor Analysis PPT 3-42
4) -What are the significant value added
components in the value chain?

-Do any provide the potential to generate
a competitive advantage?
Relevant Assets and Competencies
Chapter 3 - Competitor Analysis PPT 3-43
Key Learnings
Competitors can be identified by customer choice (the set from which customers
select) or by clustering them into strategic groups (firms that pursue similar
strategies and have similar assets, competencies, and other characteristics). In
either case, competitors will vary in terms of how intensely they compete.
Competitors should be analyzed along several dimensions, including their size,
growth and profitability, image, objectives, business strategies, organizational
culture, cost structure, exit barriers, and strengths and weaknesses.
Potential strengths and weaknesses can be identified by considering the
characteristics of successful and unsuccessful businesses, key customer
motivations, mobility barriers, and value-added components.
The competitive strength grid, which arrays competitors or strategic groups on
each of the relevant assets and competencies, provides a compact summary of
key strategic information.
Chapter 3 - Competitor
Analysis
PPT 3-44
Ancillary Slides
Chapter 3 - Competitor Analysis PPT 3-45
Induce your competitors not to
invest in those products, markets
and services where you expect to
invest the most that is the
fundamental role of strategy.
- Bruce Henderson
Founder of BCG
Chapter 3 - Competitor Analysis PPT 3-46
There is nothing more
exhilarating than to be shot at
without result.
- Winston Churchill
Chapter 3 - Competitor Analysis PPT 3-47
The best and fastest way to learn
a sport is to watch and imitate a
champion.
- J ean-Claude Killy,
Skier
Chapter 3 - Competitor Analysis PPT 3-48
There is one rule for industrialists
and that is: Make the best quality of
goods possible at the lowest cost
possible, paying the highest wages
possible.
- Henry Ford
Chapter 3 - Competitor Analysis PPT 3-49
We often give our enemies the
means for our own destruction.
- Aesop
Chapter 3 - Competitor Analysis PPT 3-50
In business, the competition will
bite you if you keep running, if you
stand still, they will swallow you.
- William Knudsen
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THE END