Tag: Attractive Market Segment

The Business Environmental Factors of an Attractive Market Segment

Posted on by The University Marketing Blog

Every market operates within a larger environment. This is the breakdown of factors to consider when evaluating how attractive a market segment is when considering entry.

Economic Factors

How susceptible to significant change is the economy of the market is the main consideration. The common example that is also used by Hooley (et al. 2017) is the New Zealand wool export in the 1920s following Australia’s decision, NZ had to reduce their floor price by 20% which had the obvious significant impact on the market.

Legal and Political Factors

A market vulnerable to political or legal factors are generally less attractive. This can be very situational and can, in fact, create an attractive market in the right situation.

Regulation

Regulation can often limit innovation and make a segment less attractive to new entrants. Regulation can also play a strong role in protecting a new entrant once they have made it into the market from other new competitors.

Social Responsibility

A growing trend over the last decade is the concern for being environmentally friendly. This may create an attractive market opportunity if you are able to enter a market with the only ‘green’ approach, allowing you to differentiate. It can also make a market less attractive if you are entering the cosmetics for example and competing against The Body Shop who have a strong sustainability program in place already.

References:

Hooley, G, Piercy, N, Nicoulaud, B & Rudd, J 2017, Marketing Strategy & Competitive Positioning, 6th Ed., Pearson, Harlow, UK.

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The Competitive Factors of an Attractive Market Segment

Posted on by The University Marketing Blog

For a market segment to be evaluated, the competitors in the market are a factor you cannot go past. This aspect of the analysis has various components to consider.

Intensity

The number of competitors you will face in the new market must be assessed carefully. If there are large competitors set in place, to enter this market you must bring a competitive advantage that can allow you to gain some of their market shares.

In the situation you are entering a market with many smaller competitors with similar products, the differentiation often comes down to price. To enter a segment like this you must be able to create a cost advantage that is superior to the competitors.

There can sometimes be a very attractive segment of a market where some major players are not able to follow a change in their consumers and leave an underserved gap. This situation becomes very attractive for a new entrant to serve this market segment.

Quality

A company that aims to constantly serve the market well and has the potential to adapt to changing market demands can be identified as a good competitor. This becomes a deterrent to entering a market segment with this type of competition. Over-ambitious competitors who ignore the consumer and focus on profit alone a would constitute a bad competitor and leave gaps in serving a market which is an opportunity for new entrants.

Threat of Substitution

A market becomes a lot more attractive if the threat of a substitute is reduced, this limits the risk of investing to enter a market only to have your product be made redundant by a new solution to a customer’s problem.
This same situation can also create the opportunity for your company to be that substitute in the market that gains the competitive edge over all other competitors.

Differentiation

If there is an opportunity for differentiation in a market this can create the opportunity for a company that can achieve the differentiation to dominate a market. If this is not possible the market is less attracted due to the inevitable race to the bottom of competitors with the same product.

References:

Hooley, G, Piercy, N, Nicoulaud, B & Rudd, J 2017, Marketing Strategy & Competitive Positioning, 6th Ed., Pearson, Harlow, UK.

The Economic and Technological Factors of an Attractive Market Segment

Posted on by The University Marketing Blog

Market attractiveness must be evaluated based on the economic and technological setting in which it exists. This category can be broken down into 6 factors.

Barriers to Entry

This factor can make a market very attractive to organisations that already operate within the market as they have a protective barrier to the threat of new entrants. It is, however, a strong deterrent for new organisations who aspire to enter the market segment as it will mean a very difficult or expensive entry before seeing any return on investment.

Barriers to Exit

Markets that are hard for companies to exit become unattractive as they have a similar effect to a lock-in contract. In most situations, an exit strategy should be planned but if this exit is made to be a difficult process, it becomes an unattractive aspect of entering that market.

Power of Suppliers

A market where there are many suppliers of goods such as raw material becomes very attractive as their bargaining power is immediately reduced. If a supplier has control over the entirety of a resource, this monopoly can negatively impact the potential profit margins that you can produce when operating in the market segment.

Technology in the Market

Seemingly logical, for organisations that utilise technological advances and that would allow them to operate using existing technologies they have developed a market can become very attractive. If the market has a high technological demand and the organisation lacks this asset, it becomes a deterrent and somewhat of a barrier to entry.

Investment

Greater initial investment increases the risk of entering the market, for a segment that may have high initial outlay, it can become an unattractive market segment aspect for smaller organisations especially.

Profit Margins

For markets with a greater profit margin potential, it becomes increasingly attractive. This can be negatively impacted due to the suppliers bargaining power and saturation of competitors in the market to impact the profit margin potential and make the segment unattractive.

References:

Hooley, G, Piercy, N, Nicoulaud, B & Rudd, J 2017, Marketing Strategy & Competitive Positioning, 6th Ed., Pearson, Harlow, UK.


The Market Factors of an Attractive Market Segment

Posted on by The University Marketing Blog

When evaluating how attractive a segment of a market might be before entering, one of the categories of factors to assess is the market factors.

Size

It seems obvious but the size of the segment is important if the aim is to enter the market and increase operations to a larger scale to increase profits.

Growth Rate

Markets that are experiencing growth are far more attractive than potentially entering a declining market that has continually reduced room for success.

Stage of Industry Evolution

Mature markets may see more immediate profit but the reduced future potential must be evaluated. Early stages of evolution, however, commonly have reduced competition and far more future potential for future success.

Predictability

A volatile market with no predictability is a strong deterrent when it’s existence isn’t guaranteed for long enough to see a return on investment. A stable market that can be measured and have predicted value is far more appealing.

Price Elasticity and Sensitivity

In a price sensitive market where you don’t contain the efficiency superiority, there is a greater risk to attempt entry. Attractive markets have low price sensitivity with a low price elasticity of demand.

Bargaining Power of Customers

The more power a buyer has in price negotiation leads to a less attractive option than if the supplier were to have more of an impact.

Demand Cycles

Seasonal demand cycles might deter an organisation from entering a new segment with the same cycle. It can, however, have the opposite effect and become very attractive for a business who wishes to enter a market that has a counter-seasonal demand to their current market.

References:

Hooley, G, Piercy, N, Nicoulaud, B & Rudd, J 2017, Marketing Strategy & Competitive Positioning, 6th Ed., Pearson, Harlow, UK.