Market analysis INNOVATION AND NEW PRODUCT DEVELOPMENT

Transcription

1 2017 Market analysis INNOVATION AND NEW PRODUCT DEVELOPMENT KRISTINA ZHELIBA DIANA MOLDOZHANOVA AYAZ AKYUZ ILAYDA VARDAR

2 I.Introduction The main aim of market analysis is to determine the attractiveness of a market and to understand its evolving opportunities and threats as they relate to the strength and weakness of the company. Market analysis help you plan your marketing strategy. You need to understand what customers want and how they behave. You might use consumer research or industry analysis to reach which factors influence purchasing decisions. Researching the competitors area and what they offer can help you identify where the best opportunities are and how you can differentiate your product or service.

3 II.Industrial analysis Industry analysis has two primary objectives: 1. To determine the attractiveness of various markets 2. For better understanding the dynamics of the market so that underlying opportunities and threats can be detected and effective strategies adopted (Aaker 1995) A thorough industry analysis will include the following four components: 1. Major market trends. Events or patterns that are changing in the marketplace (Naisbitt 1982) 2. Key success factors. Those factors that are the building blocks for success in your industry (Thompson and Strickland 2001) 3. Competitive forces. These forces help explain the potential for profit (or lack thereof) in a particular industry, including the threat of entry, supplier and buyer power, the availability of substitutes, and the intensity of rivalry within the industry (Porter 1980) 4. Change forces. these are events outside your organization that shape the way you conduct business, including government regulations, product and marketing innovations, economic issues, consumer trends, and information needs (Lehmann and Winer 1994) A. Dimensions of an industry analysis The nature and content of an analysis of an industry and its relevant product-markets will depend on the context. However, it will often include the following dimensions: 1. Actual and potential industry size. 2. Industry structure. 3. Cost structure. 4. Distribution channels 5. Trend and developments in industry 6. Industry growth and the product life-cycle Each of these dimensions will be discussed in turn. The final dimension, industry growth, has long been a central construct in strategy development. The nominal strategy implication is to invest in growing situations and disinvest in declining ones. Here you can conclude with an examinations of ways to compete successfully in declining situations and an examination of conditions under which growth contexts may not be attractive investment areas

4 B. Actual and potential industry size A knowledge of industry is important because its help you not only to evaluate investment decisions, but also serves to define market share of the various competitors, by considering industry size it can be important to distinguish that portion of the market that is represented by captive buyers. Estimation of industry can be based on government sources or trade associations, also estimation of competitor sales can also be obtained from sources of financial information or by talking to large customers or knowledgeable distributors. When there are many customers and other sources are inadequate, it can be worthwhile to survey customers about their usage and applications project the results to the industry and its submarkets. C. Industry structure The industry structure attractiveness as measured by the long-term return on investment depends in large measure on the industry structure. The industry structure have five components that indicates: competitors, potential competitors, substitute products, customers, and suppliers. Each has a role to play in determining the intensity of competition and in explaining why some industries are historically more profitable than others are. An understanding of the structure can also suggest which key success factors are necessary to cope with the competitive forces. Exhibit 1. Porter s 5 forces scheme. (Porter, 1980) 1. Competitors. Level of competition depend from competitors and their intensity, commitment to the industry, the differentiation of product, existence of high fix cost, exit barriers. If the industry is strategically important to several competitors, their level of commitment will be high and they will tend to compete more vigorously.

5 2. Potential competitors. Whether potential competitors identified or not, actually do enter depends in large part on the size and nature barriers to entry. Thus an analysis of barriers to entry is important in projecting the likely competitive intensity and profitability levels in the future. Entry barriers include: 1. Capital investment required. 2. Economies of scale. 3. Distribution channels. 4. Product differentiation. 3. Substitute products. Substitute products are represented by those sets of competitors that are identified as competing with less intensity than the primary competitors. They are still relevant and influence the profitability of the industry. Thus plastic, glass, fiber-foil products exert pressure on the metal industry. Electronic alarm systems are substitutes for the security guard industry. Particular interest are substitutes that show a steady improvement in relative price and performance and for which the customers cost of switching is minimal. 4. Customer power. When customers have relatively more power than sellers, they can force prices down or demand more services, so that profitability is affected. A customers power will be stronger when its purchase size is a large proportion of the sellers business, when alternative suppliers are available, and when the customer could integrate backward and make all or part of the product. 5. Supplier power. When the supplier industry is concentrated and sells to a variety of customers in diverse industries, it will have relative power that can be used to influence prices. Power also tend to be enhanced when the costs of customers to switch suppliers are high. Thus the oil industry in many contexts is powerful enough to influence profits in customer industries. D. Cost structure. The cost structure of the industry and understanding of it can provide insights into present and future key success factors. A first step is to conduct an analysis to determine where value is added in the product or service. The proportion of value added attributed to one production stage becomes an important indicator that a key success factor is associated with that stage. It may be possible to develop control over a resource or technology, as the OPEC cartel did. Competitors will aim to be the lowest-cost competitor in the highest value-added stage of production. Advantages in lower value-added

6 stages will simply result in less leverage. Thus in the metal can business transportation costs are relatively high and a competitor that can locate plants near customers will have a significant cost advantage. Of considerable importance, especially in fast-moving growth industries, is the ability to anticipate changes in the key success factors. For example, the cement industry, when restricted to rail or truck transportation, was very regional. However, with the development of specialized ships and production scale. E. Distribution Systems An Analysis of the distribution systems should include 3 questions: 1. What are the alternative distribution channels? 2. What are the trends? What channels are growing in importance? What new channels have emerged or are likely to? 3. Who has the power in the channel and how is that likely to shift?(aaker, 1995) Companies use different types of channels accordingly to the industry and what service and product they provide to customers. One of the channel characteristics is degree of directness. Firms like Amway, Oriflame, Avon use their own forces for distributing their products; firms like Nivea, Colgate, and many other distribute their goods through plenties of retailers. The firms that are the closest to the end user will have the greatest control over the marketing effort but will also usually assume the great risk. Distribution channels include wholesalers, e-commerce websites, catalog sales, consultants, a direct sales force who sell over the phone, in person or both, dealers, home shopping networks and retailers. The distribution channel or channels selected can dictate what the rest of the marketing strategy would be, as they influence the buyer directly. While doing industry channels analysis, it is useful to consider not only existing channels but potential ones. F. Industry Trends and Developments An industry analysis to be most useful should be forward looking, projecting industry attractiveness and its key success factors in the future. What are the emerging trends or events that could suggest new growth directions or change the assessment of the key success factors? All of the marketing efforts should be performed accordingly to trends and innovation in the industry. That's why research is always very important for growth of sales and brand. For example, in skin-care industry new trends are: naturality of components used and ease-of-use. If company tries to compete in an industry with rapidly changing trends without being aware of these trends, this can be disastrous.

7 G. Industry Growth and The Product Life Cycle It is generally assumed that a growth industry, all else being equal, will have greater opportunity and potential payoff than an industry in decline. Key success factors often change as the industry goes along its life cycle. (Aaker, 1995) a. The product life-cycle concept. Life cycle has 4 stages, they are: introduction, growth, maturity and decline. There are different marketing strategies that firms force for renewing the industry. While analyzing industry lifecycle it is important to remember that none of the periods of industry are exact. For example, maturity may be increasing, when distribution channels become saturated, stable, when market penetration is achieved and product is well recognized, and decreasing, when substitute products are becoming part of the market. (Aaker, 1995) b. Detecting Maturity and Decline. Detecting when life cycle entering new stage is crucial for developing the strategy, it can be identified by sales and profits. Often, it is not easy to forecast or even determine the stage; thus, the analysis should be based on class of product, its form, its application, its brand. Even if stage is certainly identified, it does not mean that strategy is obvious. II. Competitive analysis A. Definition of Competition The term competition can be understood differently by the view of competition held by different groups varies. Most accurate way to define competition is to analyse in different titles. Competition is the race that businesses have made to other businesses to sustain their assets and capture success. Competition is best understood by separating "natural" and "strategic" competition from each other. According to the natural competition, the strongest in the current environment remains. The ability of businesses to sustain their assets depends on how they will provide different advantages over other businesses. Natural competition is, in other words, competition in which low-risk trial and error movements are found and applications that are deemed useful are placed over time. It is universal in this state. But strategic competition is evolutionary, and pursues major changes that will change the competitive relationships required by its structure. For this reason, nothing in strategic competition is left to chance. Natural competition is evolutionary. Strategic competition is revolutionary.

8 B. Classifying Competitors Different industries aims to meet different customer needs and demands; existing, latent and incipient. Existing demand is that people that already satisfied with your product or service, whether it is from you or a competitor. According to Jain, S.C. (2000), latent demand refers to a situation where a particular need has been recognized, but no products have yet been offered to satisfy the need. Incipient demand occurs when certain trends lead to the emergence of a need of which customer is not yet aware. (Jain, S.T., 2000) Product lines are grouped into three categories; a me-too product, an improved product, or a breakthrough product. Me-too product is a product introduced by a company after it has been successfully introduced by other companies, and already have a significant market share. An improved product is generally outstanding to many existing brands while not unique. Breakthrough products are better than existing products with their technology. Seeking Competitive Advantage Porter s Five Forces Your ability to make a good profit in your business depends on the strength of your position in the market. For instance are there any competitors offering similar products? Is it easy for other organizations to enter your market if they see you are making a profit? On the other hand, can customers force you to lower your prices? If you do not think about your position carefully, you can easily find that you are working hard and still struggling to stay afloat. This is where to like

9 Porter s Five Forces is useful. It helps you discover who has the most power in a given situation. It can also show you if a product or service is likely to be profitable. The tool assumes that five forces that determine competitive power in a business situation. These forces are supplier power, buyer power, and competitive rivalry, threat of substitution and threat of new entry. Any of them can work for or against you so it is important to understand them. To use porter s five forces as an analysis tool you need to look at each one individually. For example, with supplier power you examine how easy it is going to be for your suppliers to drive up prices. If you have several to choose from you can switch to a cheaper alternative if prices are too high. However, you have fewer options if your choice is limited, which means that individual suppliers hold more power over you. Next thing is a buyer power. How easy is it for your customers to drive down prices, if there are only a handful of them in your market they have more control. If there are many more your power increases. Then consider competitive rivalry. How many competitors do you have? Are their products or services as good as yours are? If so, how can you establish a strong advantage over them? There is the threat of substation. How easy is it for your customers to find another way to get what you are offering? The easier it is, the less power you have. Finally, identify how likely it is for competitors to enter the market. The easier it is for them to swoop in, the harder it is for you to make a profit. Once you have completed a five forces analysis, you will be able to see clearly, where you are at risk, so you can overcome any obstacles. In addition, if you are thinking about entering a new market, you can see at a glance how profitable you are likely to be. III. Customer Profiling A. What is customer profiling? Customer profiling defined as customers characteristics including demographics, socioeconomic, personality and psychographics and values. Similar types of customers are grouped and targeted based on who they are and what they are interested in. Marketers use customer profiling to identify the best customers for defining their target markets. This study help marketers will asist to make informed targeting decisions based on customer profiling analysis by providing an overview of key characteristics and needs. Marketers will be able to decide on the right strategies and tactics to meet the needs according to customer profiling. True defining customer profile one of major step to marketing analysis. The most obvious and popular basis for describing consumers is their general characteristics; demographic,socioeconomic,personality,psychographics and values.(lehmann and Winer,2002).When we analyzed in detail demographics are the statistical data of target group. It included age, sex, customers location and stage in the family life cycle stage. That are provided

10 to identify markets also help to identify who your customers are and how likely they are to purchase the product you are selling.secondly socioeconomic variables are factors of a social and economic resources which indicate a person's status within a community including income, degree of education, occupation and social class. As a personality, demographic and socioeconomic variables are not enough criteria for create customer profile so marketers need to analyze customers personality. Psychographics and values basically represent an evolution from general personality variables to attitudes and behaviors more closely related to consumption of goods and services. (Lehmann and Winer,2002) and this category analyzed three major part: activities, interest and opinions. B. How collect customer data? Collecting and storing information about customers is provide your customer service program and create customer profile but there are legal requirements regarding what you can do with the information you have collected. Collecting information about customers, there are some specific important points. For example, what your customers are buying, why they are buying, and how often they are buying also potential customers be encouraged to participate this process to the most accurate customer profiles. Customer data collecting provides to create private and quality customer service. There are many way to collect customer information: order forms, surveys, complaints, customer satisfaction surveys, feedback cards, and your website. Order forms provides to learn customers previous order a specific product or service that your business is unable to supply immediately. Surveys is good business practice to record the details of any customer surveys so you can follow them up. It is one of the known methods can be given various awards to encourage the customers. Recording complaints customer complaints as a way to collect customer information because evaluating the complaints will show you what you lack and you will find the contribution to your development and help you to solve problems. Customer satisfaction surveys collect information on customer satisfaction; you could use survey cards where customers rate, for example, aspects of your service out of five also back of this survey can be used for customers' personal information.

11 Feedback cards can also be used to collect information like customer satisfaction surveys you can ask for feedback on specific aspects of your business or leave it open-ended, like a suggestion box. Again, the back of the card can request personal details. Your website you can use a business website to collect customer information through a 'contact us' form for general enquiries, or by allowing customers to sign up to a mailing list (if you have regular news or updates). IV. Summary In market analysis, it is extremely important to understand the competitive nature, the competitive nature, the composition of operational costs, the pricing practices and other competitive activities, and the factors influencing the over-all operation of the industry. In our work, we considered three components of market analysis: industry analysis, competitive analysis, customer profiling. In industry analysis we explained six dimensions, they are: 1. Actual and potential industry size 2. Industry structure 3. Cost structure 4. Distribution channels 5. Trend and developments in industry 6. Industry growth and the product life-cycle. Competitive analysis gives firms the best opportunity for higher profitability and sustainability in business environment. The most useful tool to seek competitive advantage is Porter s Five Forces, that helps firms to discover who is the most powerful force in the industry in given situation.

12 V. References 1. Aaker, David A, Structured Analysis of Industry. Developing business strategy. New York : John Willey, 1998, 5 th edition. 2. Lehmann Donald R.&Winer Russell S. Analysis for Marketing Planning New York:McGraw-Hill/Irwin Series in Marketing,2002, 5 th edition. edition. 3.Jain,C.Subhash Marketing Planning & Strategy.United States of America,1999,6 th 4.Porter,E.Michael Techniques for Analyzing Industries and Competitors Boston,1980, 7 th edition.