Market Analysis Tools

Class Notes by Ruth Amwayi

Market Analysis Tools

Porter's Five Forces Model, developed by Michael Porter, is a framework used

to analyze the competitive dynamics of an industry. It helps businesses
understand the forces that shape competition within an industry and develop
strategies to enhance their competitive advantage. The model consists of five
key forces:

1. Threat of New Entrants:

 This force assesses the likelihood of new competitors entering the

market.

 Factors influencing this threat include barriers to entry such as high

initial investment, economies of scale, brand loyalty, and government
regulations.

 A high threat of new entrants can reduce industry profitability as it

increases competition.

2. Bargaining Power of Suppliers:

 Suppliers' power refers to their ability to influence the prices of inputs

or raw materials.

 Factors affecting supplier power include the concentration of suppliers,

the uniqueness of their products, and the availability of substitutes.

 When suppliers have high bargaining power, they can demand higher
prices or impose unfavorable terms, thereby reducing industry
profitability.

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Class Notes by Ruth Amwayi

3. Bargaining Power of Buyers:

 Buyers' power refers to their ability to influence prices, demand better

quality, or seek more favorable terms.

 Factors affecting buyer power include the concentration of buyers, the

availability of substitute products, and their sensitivity to price changes.

 When buyers have high bargaining power, they can force prices down,
squeeze margins, or demand higher quality, thereby reducing industry
profitability.

4. Threat of Substitute Products or Services:

 This force evaluates the availability of alternative products or services

that can satisfy the same customer needs.

 Factors influencing the threat of substitutes include the availability of

comparable products, their relative prices, and switching costs.

 When there are many substitutes available, it limits the pricing power of
firms within the industry and reduces profitability.

5. Intensity of Competitive Rivalry:

 Competitive rivalry assesses the degree of competition among existing

firms within the industry.

 Factors affecting competitive rivalry include the number of competitors,

industry growth rate, differentiation among products, and exit barriers.

 High competitive rivalry often leads to price wars, aggressive marketing

tactics, and innovation, which can erode profitability.

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Application of Porter's Five Forces Model:

 Strategic Planning: Businesses can use the model to assess industry

attractiveness and determine their strategic positioning.

 Competitive Analysis: It helps in understanding the competitive

dynamics within an industry and identifying key sources of competition.

 Decision Making: The model aids in making informed decisions

regarding entry into new markets, pricing strategies, supplier
relationships, and product differentiation.

In conclusion, Porter's Five Forces Model provides a structured framework for

analyzing industry competitiveness and guiding strategic decision-making. By
understanding these forces, businesses can develop effective strategies to
mitigate threats, capitalize on opportunities, and maintain a sustainable
competitive advantage.

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Class Notes by Ruth Amwayi

SWOT Analysis

This is a strategic planning tool used to identify and evaluate the internal
strengths and weaknesses of a business, as well as the external opportunities
and threats it faces in its operating environment. The acronym "SWOT" stands
for Strengths, Weaknesses, Opportunities, and Threats.

1. Strengths:

Strengths are internal attributes and resources that provide a competitive

advantage and contribute to the success of the business. These include:

Brand Reputation: Positive perception of the brand in the market.

Unique Selling Proposition (USP): Features or characteristics that set the

company apart from competitors.

Financial Resources: Strong financial performance or access to capital.

Skilled Workforce: Talented and experienced employees.

Technological Advantages: Innovative products or proprietary technology.

Effective Marketing Strategies: Successful marketing campaigns and

customer loyalty programs.

Identifying strengths helps businesses leverage their competitive advantages

and capitalize on opportunities.

2. Weaknesses:

Weaknesses are internal limitations and areas for improvement that may
hinder the business's performance or competitive position. These can include:

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Class Notes by Ruth Amwayi

Limited Financial Resources: Insufficient capital or high debt levels.

Obsolete Technology: Outdated systems or equipment.

Inexperienced Staff: Lack of skilled employees or high employee turnover.

Poor Brand Recognition: Limited brand awareness or negative brand

perception.

Inefficient Processes: Bottlenecks or inefficiencies in operations.

Narrow Product Range: Limited product offerings compared to competitors.

Identifying weaknesses allows businesses to address internal challenges and

mitigate potential risks.

3. Opportunities:

Opportunities are external factors and trends in the business environment

that the company can leverage to its advantage. These can include:

Market Growth: Expansion into new markets or market segments.

Technological Advancements: Adoption of new technologies to improve

operations or develop innovative products.

Changing Consumer Preferences: Emerging trends or shifts in consumer

behavior.

Partnership Opportunities: Collaborations with other businesses or

strategic alliances.

Regulatory Changes: Changes in regulations that create new market

opportunities.
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Global Expansion: Entry into international markets.

Identifying opportunities allows businesses to capitalize on external factors

that can drive growth and success.

4. Threats:

Threats are external factors and challenges in the business environment that
may pose risks or obstacles to the company's success. These can include:

Intense Competition: Competition from existing or new competitors.

Economic Downturn: Economic recession or downturn affecting consumer

spending.

Changing Market Trends: Shifts in consumer preferences or market trends.

Supplier Issues: Dependence on a single supplier or supply chain disruptions.

Technological Disruption: Disruption from new technologies or digital

transformation.

Regulatory Compliance: Compliance challenges or changes in regulations.

Identifying threats helps businesses anticipate and mitigate potential risks to

their operations and profitability.

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Class Notes by Ruth Amwayi

Application of SWOT Analysis:

1. Strategic Planning: SWOT analysis guides strategic planning by helping

businesses identify areas of focus and priority.
2. Decision Making: It supports decision-making processes by providing a
comprehensive understanding of the business's internal and external
environment.
3. Resource Allocation: It assists in allocating resources effectively by
prioritizing initiatives based on their alignment with strengths,
opportunities, and strategic objectives.
4. Risk Management: It helps in identifying and mitigating risks by
addressing weaknesses and threats proactively.

In conclusion, SWOT Analysis is a valuable tool for businesses to assess their

internal strengths and weaknesses, as well as external opportunities and
threats. By understanding these factors, businesses can develop informed
strategies to capitalize on opportunities, address weaknesses, and mitigate
threats, ultimately improving their competitive position and long-term
success.

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Class Notes by Ruth Amwayi

The Boston Consulting Group (BCG) Matrix

This is also known as the Growth-Share Matrix, is a strategic management tool

developed by the Boston Consulting Group in the early 1970s. It is designed to
help businesses analyze their product portfolio and make strategic decisions
regarding resource allocation and investment.

Components of the BCG Matrix:

Market Growth Rate:

This represents the rate at which the market for a particular product or
service is growing.

Markets with high growth rates typically offer more opportunities for
expansion and profit.

Relative Market Share:

This indicates the company's market share relative to its competitors in a

specific market segment.

A higher market share often implies a stronger competitive position and

greater profitability.

Quadrants of the BCG Matrix:

Stars:

Products or business units with high market share in high-growth markets.

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Class Notes by Ruth Amwayi

Stars typically require substantial investment to sustain their growth and

market leadership position.

As market growth slows, stars may transition into cash cows if they maintain
their market share.

Cash Cows:

Products or business units with high market share in low-growth or mature

markets.

Cash cows generate significant cash flow and profits due to their established
market position.

They require minimal investment to maintain their market share and

profitability.

Question Marks (or Problem Children):

Products or business units with low market share in high-growth markets.

Question marks have the potential to become stars if their market share
increases through strategic investments.

However, they also pose risks as they may fail to achieve significant market
share and become dogs if not managed properly.

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Class Notes by Ruth Amwayi

Dogs:

Products or business units with low market share in low-growth markets.

Dogs typically generate low profits or even incur losses.

They may require restructuring, divestment, or discontinuation if they cannot

be turned around or do not fit into the company's strategic objectives.

Application of the BCG Matrix:

 Resource Allocation: The BCG Matrix helps businesses allocate

resources effectively by identifying which products or business units
require more investment and which ones should be divested or phased
out.
 Strategic Planning: It guides strategic planning by providing insights
into the growth potential and competitive position of different products
or business units.
 Portfolio Management: The BCG Matrix assists in managing the product
portfolio by balancing investments across different categories to
maximize overall profitability and growth.
 Risk Management: It helps in managing risk by diversifying the product
portfolio and reducing reliance on products or business units that may
face declining growth or profitability.

In summary, the Boston Consulting Group (BCG) Matrix is a valuable strategic

management tool for businesses to analyze their product portfolio, make
informed decisions about resource allocation and investment, and optimize
their overall performance and competitiveness in the market.

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Class Notes by Ruth Amwayi

The SLEPT and PEST frameworks

To conduct a marketing analysis using the SLEPT and PEST frameworks, we'll
examine various external factors that can impact a business or industry.
SLEPT stands for Social, Legal, Economic, Political, and Technological factors,
while PEST includes Political, Economic, Social, and Technological factors.
Let's break down each component and provide examples for a hypothetical
scenario:

SLEPT Framework

Social Factors:

This involves analyzing demographic trends, cultural shifts, lifestyle changes,

and societal norms.

Example: In the cosmetics industry, the increasing popularity of cruelty-free

and vegan products reflects a growing societal concern for human.

Legal Factors:

Legal factors encompass laws, regulations, and legal systems that affect
businesses.

Example: Stringent regulations regarding data privacy (such as GDPR in

Europe) impact how companies collect, store, and use customer data for
marketing purposes.

Economic Factors:

Economic factors include macroeconomic conditions, such as inflation rates,

unemployment levels, and GDP growth, as well as microeconomic factors like
consumer income and spending patterns.

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Class Notes by Ruth Amwayi

Example: During periods of economic downturn, consumers may prioritize

essential purchases over discretionary spending, affecting industries like
luxury goods.

Political Factors:

Political factors involve government policies, stability, trade regulations, and

political ideologies.

Example: Trade tariffs imposed by governments can disrupt global supply

chains and affect the cost of imported goods, impacting businesses reliant on
international trade.

Technological Factors:

Technological factors focus on innovations, advancements, and technological

infrastructure that influence industries.

Example: The rise of artificial intelligence (AI) and machine learning has
enabled personalized marketing strategies through data analysis and targeted
advertising.

PEST framework:

Political:

Changes in government regulations regarding product labeling and safety

standards.

Trade agreements affecting import/export tariffs and regulations impacting

supply chains.

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Class Notes by Ruth Amwayi

Economic:

Fluctuations in currency exchange rates affecting the cost of imported raw

materials.

Changes in consumer purchasing power due to shifts in income levels or

economic policies.

Social:

Increasing awareness and demand for sustainable and eco-friendly products.

Shifts in consumer preferences towards healthier lifestyles impacting food

and beverage choices.

Technological:

Advancements in automation and robotics affecting manufacturing processes

and supply chain management.

Growth of e-commerce platforms influencing distribution channels and

consumer purchasing behavior.

By analyzing these factors using the SLEPT and PEST frameworks, businesses
can better understand the external environment and tailor their marketing
strategies to capitalize on opportunities and mitigate potential threats.

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Class Notes by Ruth Amwayi

Case studies and field trips are considered contemporary issues in

marketing management due to several factors:

1. Practical Application: Case studies and field trips provide real-world

examples and experiences that allow students or professionals to apply
theoretical marketing concepts in practical settings. This hands-on
approach enhances learning and helps bridge the gap between academic
knowledge and real-life business situations.
2. Experiential Learning: Engaging in case studies and field trips offers
experiential learning opportunities where individuals can directly
observe market dynamics, consumer behavior, and competitive
strategies in action. This immersive learning experience fosters a deeper
understanding of marketing principles and their application in diverse
contexts.
3. Industry Insights: Field trips to businesses, marketing agencies, or
industry conferences expose participants to current industry trends,
best practices, and innovative strategies adopted by leading companies.
These insights provide valuable knowledge about the latest
developments in the field and help individuals stay updated in a rapidly
evolving marketing landscape.
4. Critical Thinking and Problem-Solving: Case studies present complex
marketing challenges or scenarios that require critical analysis and
strategic decision-making. By dissecting case studies, individuals
develop analytical skills, problem-solving abilities, and decision-making
capabilities essential for effective marketing management roles.
5. Networking Opportunities: Field trips often involve interactions with
industry professionals, experts, and peers from other organizations.

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Class Notes by Ruth Amwayi

These networking opportunities facilitate knowledge exchange,

collaboration, and the sharing of best practices, thereby enriching the
learning experience and expanding professional networks.
6. Global Perspectives: Field trips to international markets or cross-
cultural case studies expose participants to diverse cultural norms,
consumer preferences, and market dynamics across different regions.
Understanding global marketing challenges and opportunities is
increasingly important in today's interconnected business environment.
7. Alignment with Industry Trends: The emphasis on case studies and
field trips aligns with industry trends favoring practical skills and
experiential learning in marketing education and professional
development. Employers often value candidates who have hands-on
experience and a demonstrated ability to apply theoretical knowledge in
real-world scenarios.

Overall, case studies and field trips play a crucial role in contemporary
marketing management by offering practical, experiential, and industry-
relevant learning experiences that prepare individuals for success in dynamic
and competitive marketing environments.

Addressing these contemporary issues in marketing requires strategic

planning, continuous learning, adaptation to market dynamics, and a
customer-centric approach to marketing management. Additionally,
leveraging technology, fostering innovation, and building agile marketing
teams are essential for overcoming the complexities posed by evolving trends
and issues in marketing management.

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