External Analysis(Aggregate Market Factors)

A simple means of forecasting the market growth rate is to extrapolate historical data into the future. While this method may provide a first-order estimate, it does not predict important turning points. A better method is to study market trends and sales growth in complementary products. Important inflection points in the market growth rate sometimes can be predicted by constructing a product diffusion curve. The shape of the curve can be estimated by studying the characteristics of the adoption rate of a similar product in the past.

Diffusion of Innovations is a theory that seeks to explain how, why, and at what ate new ideas and technology spread through cultures. The diffusion of innovations according to Rogers. With successive groups of consumers adopting the new technology (shown in blue), its market share (yellow) will eventually reach the saturation level. In mathematics the S curve is known as the logistic function. C. Life Cycle Stage During the product development stage of the life cycle, the product is in a pre-sales stage. LAUNCH, market and promote the product; – Researching the target market; – Bring awareness to the product; and – Making plans for marketing campaigns and promotions. Introduction Stage The first stage of the product and marketing life cycle once the product launches is the introduction stage. The primary goal in this stage of the life cycle is to ESTABLISH a target market for market. Growth Stage After consumers become aware of the product and demand increases, the growth stage of the life cycle kicks in.

Product revenues during this stage increase drastically. Marketing efforts during this stage of the life cycle is about brand differentiation. Maturity Stage During the maturity stage of the life cycle, the company selling the products earns he most amount of money in comparison to the other stages of the life cycle. The primary focus of marketing efforts during the maturity stage is to BUILD customer loyalty to the product. Decline Stage If the market of a product becomes SATURATED, then the product hits the decline stage of the life cycle.

Marketing budgets for products in the decline stage are devoted to continuing to reinforce the brand image of the product and maintain the loyalty of existing customers. D. Cyclic Cycles are prevalent in all aspects of life. All markets are cyclical. They go up, peak, go down and then bottom. When one cycle is finished, the next begins. E. Seasonality Most products are seasonal to some extent, but truly seasonal goods tend to generate price wars because there may be few other opportunities to make substantial sales. It answers the questions: – Is there seasonality in the market? Are there any wider environmental issues that suggest or dictate the timing of your market launch, or the timing of subsequent promotions? It’s the right timing. F. Marketing Mix Putting the right product in the right place, at the right price, at the right time. The marketing mix is a business tool used in marketing and by marketing refashions. It is often synonymous with the four AS: Price, Product, Promotion, and Place. The marketer E. Jerome McCarthy proposed a four As classification in 1960, which has since been used by marketers throughout the world.

I Category I Definition Product IA product is seen as an item that satisfies what a consumer needs or wants. It is a tangible I I Good or an intangible service. I Marketers should consider: I How to position the product, how to exploit the brand; I How to exploit the company’s resources; I How to configure the product mix so that each product complements the other; and I Price I Must also consider product development strategies. I The amount a customer pays for the product. The price is very important as it determines the I I I company’s profit and hence, survival.

The marketer should set a price that complements the I I of the marketing mix. I other elements I When setting a price, the marketer must be aware of the customer perceived value for the I I product. I I Promotion of the methods of communication that a marketer may use to provide information to Different parties about the product. Promotion comprises elements such as: I Advertising; I Public relations; I Personal selling; and promotion. I Sales I Advertising covers any communication that is paid for. Public relations is where the I communication is not directly paid for.

Word-of-mouth is any apparently informal I communication about the product by ordinary individuals, satisfied customers or people I electrically engaged to create word of mouth and public relations. I Place I Refers to providing the product at a place which is convenient for consumers to access. I (Distribution) I Various strategies: I Distribution; distribution; distribution; and G. Profits I Selective I Exclusive I Franchising While different organizations in a market will have different levels of profitability, they are all similar to different market conditions.

Michael Porter devised a useful framework for evaluating the attractiveness of an industry or market. This framework, known as Porter five forces analysis, identifies five factors that influence the market profitability. – Buyer power – Supplier power – Barriers to entry – Threat of substitute products – Rivalry among firms in the industry H. Performance Ratio Ratio Analysis is a form of Financial Statement Analysis that is used to obtain a kick indication of a firm’s financial performance in several key areas.

The ratios are categorized as: – Short-term Solvency Ratios; – Debt Management Ratios; – Asset Management Ratios; – Profitability Ratios; and – Market Value Ratios Ratios can be used to compare a firm’s financial performance with industry averages. In addition, ratios can be used in a form of trend analysis to identify areas where performance has IMPROVED OR DETERIORATED over time. Presentation Tips: Porter 5 Forces Analysis This presentation tip is in the category: Secrets in Top Consulting Firms’ Million- Dollar Presentation Back to Home I have personally been using the Porter 5 Forces framework to do industry analysis for over ten years.

The Porter 5 Forces framework was developed by Michael E. Porter of Harvard Business School in 1979. Porter 5 Forces analysis is an excellent framework that could help managers, entrepreneurs and investors to evaluate whether a business is operating in a profitable industry. From the results of this analysis, strategies could be formulated to help companies identify opportunities and avoid threats. Here is a Porter 5 Forces framework: [pick] Source: page 40, Strategic Management An integrated Approach written by Charles W. L. Hill and Garret R.

Jones Each force in this framework could be categorized as strong, medium, or weak. Strong forces are perceived as threats to the enterprise. Strong forces have strong bargaining power thus limit the enterprise’s ability to increase price or lower cost. On the other hand, weak forces are perceived as opportunities. Weak forces have low bargaining power thus the enterprise could increase price or lower cost to sustain more profit. Here is a list of the five forces. Answer the questions on the right-hand column and you will be able identify whether the forces should be categorized as opportunities or threats.

The five forces in this framework include the followings: I Potential Competitors/ Barrier of I How loyal are the end users in this industry? I I Entry (Companies currently not I How troublesome or hard is it for the end users to switch and use another product? I Competing in the industry but have I Does it require a large seed capital to enter this industry? I Lethe necessary resources to do so) I Do entries to this industry regulated by government? To gain access to the distribution channels? I How hard is it I How long does it take for new staff to acquire the necessary skills to do the work?

I Threat of Substitutes (Products in I How many close substitutes are available? I I another industry that satisfy I How price are the substitutes? I Intensity of rivalry among I How many close competitors exist in the industry? I illegalities firms (Direct I What are the sizes of your close competitors? I Competitors competing for market That is the industry structure? Is it a fragmented, consolidated, oligopoly or monopoly industry? I I share) I What is the current industry growth rate? I How high are the exit barriers? Do your competitors have a high committed fixed cost thus they have to I I elaborate even at a loss?

I How diversified are your competitors? I How extensively do your direct competitors advertise? I Bargaining power of buyers I How large are your buyers’ company? I I(Customers) choose from? Buying a huge volume? I How many companies are there for the buyer to I Are the buyers I Do you depend only on a few buyers to sustain your sales? I How hard is it for the buyers to switch and use a competing product? From you as well as your competitors? Rare the buyers purchasing I Do the buyers have the capacity to enter your business and produce the goods themselves? I Bargaining power of suppliers Rare there substitutes for your suppliers’ products?