Chapter 2

Question 1

Why do we need to analyze markets?

Answer 1

1. We may be paying more than we need to
2. We may be missing out on new sources of supply
3. We may not be aware of new products
4. We may not be aware that I suppliers having difficulties that may disrupt continuity of supply

Question 2

Strategies for competing in an industry

Answer 2

1. Cost leadership
2. Differentiation
3. Focus on a narrow niche segment

Michael Porter

Question 3

Industry classification

Answer 3

1. Primary activities
2. Secondary activities (manufacturing)
3. Tertiary activities (services)

Coding system SIC (20 Industry sectors, 99 sub sectors…)

Industry is a market in with similar products or services are sold to buyers. A group of products or services that provide a specific but different value for their buyers is called a segment.

Question 4

How are segments created?

Answer 4

1. If product or service differences alter just one of the areas of competition: price levels, features, design, packaging, performance, new vs replacement
2. If there are differences between buyers: buyer’s strategy, buyer’s size, ownership, financial strength, order patterns
3. Use of different distribution channels to reach buyers: direct sale vs distributors, direct marketing vs retail, exclusive vs non exclusive
4. Location of the buyers: region, weather, country groupings

Question 5

Specific markets and factors to be considered to analyze them

Answer 5

• manufacturing
• construction
• retail
• finance
• agriculture
• services

Factors to consider when analyzing markets:

• objectives
• drivers
• governance
• ownership
• commodity or non-commodity

Question 6

Manufacturing market data

Answer 6

+20 subdivision in the standard industry classification

• requires investment in machinery and access to skilled workforce
• capital cost can be high
• profitability of the industry tends to be low
• there are no immediate substitutes available
• Switching cars can be high in the short term