To put it simply, these risks occur when the promise of a strategy does not deliver as it is planned prior to implementation. McDonald (et al. 2014) categorises the major concern into five areas.
Target Market Risk
This can be caused as a result of poor research or poor segmentation and increases in the likelihood of occurring if the target market is not homogenous or doesn’t have a key common characteristic.
The risk is that the target market is wrongly identified and understood and the offering wither doesn’t reach this segment or is not offered the product/service correctly.
This is the risk of your offering not being purchased due to being poorly communicated or being a service/product with little to no demand.
This risk can be reduced by offering a differentiated product to different segments as opposed to one mass offering that may come across as too generic for a consumer to proceed to purchase.
This is an analysis tool that identifies the companies Strengths and Weaknesses as well as the external Opportunities and Threats. If this is done poorly, the risk is that the company may offer a product that doesn’t utilise a strength or it may miss an opportunity.
A thorough analysis can reduce the risk of a strategy by correctly seeing the best area to enter a market by utilising organisational strengths.
Similar to proposition risk, but if the strategy is similar to a direct competitor, there is an increase risk of failure or reduced profit margin. This applies to the product as well, there must be some differentiating factor to make the product stand out from the rest to minimise the risk of strategy not being as successful.
The risk that your strategy fails to take into account the trends in the market. While it can be impossible to predict the future trends to 100% accuracy, research can allow a strategy to identify potential risks and opportunities that may arise and allow room to adapt to these. This can be the key to gaining and sustainable competitive advantage.
McDonald, Malcolm, Peter Mouncey & Stan Maklan (2014) Marketing Value Metrics: A new metrics model to measure marketing effectiveness. Kogan Page: London.