Analysis

Market opportunity analysiswhere will the business compete?

Learning objectivesWhat is market opportunity analysis?How to identify unmet and/or underserved customer needs?How to identify the most attractive customers?How to assess your competitive advantage?How to assess your resource needs?How to assess the market readiness of technology?How to craft an opportunity story?How to assess the market opportunitys attractiveness?

Market opportunity analysisWhat? A tool to identify and assess the attractiveness of business opportunityWhy? Unique e-commerce environment:Competition across (vs within) industry boundaryCompetition between co-opetitors (vs competitors)Competition on speed of responseNew ways to bring value to customersNew ways to reconfigure value chains & value systems

Market opportunity analysisA value chain: a set of value creating activities within a firmA value system: a set of value creating activities connecting a firm with other firms and customers

Market opportunity analysisConsiderations for value creation:Trapped value: efficiency, accessibility, customer empowermentNew value: personalization, extension, community-building, collaborationHorizontal plays: improve functional operationsVertical plays: improve industry specific business activities

Market opportunity analysisLook at Value System to Discover New Business Opportunities Liberate Trapped ValueIntroduce New-to-the-World ValueCreate More Efficient Markets, e.g., eBayEnable Ease of Access, e.g., GapCustomize Offerings, e.g. MyYahooExtend Reach and Access, e.g., keen.comCreate More Efficient Systems, e.g., FedExDisrupt Current Pricing Power, e.g., PricelineBuild Community, e.g., MyFamily.comEnable Collaboration, e.g., ProjectPointIntroduce New Functionality/Expertise, e.g., C-Mode

Market opportunity analysisQuestions for value creation:Is there a high degree of asymmetric information between buyers & sellers that trap values?Are significant amount of time & resources consumed in bringing people together to make a transaction or complete a task?Do customers view activities as more collapsed than do industry participants?(see pg.81)

Market opportunity analysisHow? Using a market opportunity analysis framework that revolves around four key elements:CustomerAnalysis of the customer environment uncovers unmet or underserved customer needs, as well as the market they occupyTechnologyAnalysis of the technology environment reveals the readiness of the particular technology, as well as any alternative technologies, on which the manager anticipates deploying the firms offeringCompetitionAnalysis of the company environment provides the current state of the companys resourcesCompanyAnalysis of the competition environment reveal the structure of the industry and market, key competitors in the marketplace, and the firms relative advantage to each of the key players

Market opportunity analysisCustomerTechnologyCompetitionCompany

Identify customer needsPostpurchaseSearch for AvailabilityRead ReviewsReview ContentsEvaluationProblem RecognitionInformation GatheringPurchase DecisionSatisfactionPrepurchasePurchaseNeed for Activity/ClassGiftInterested in Author/Subject MatterGood Quality of ContentsArrived on TimeLoyaltyQualityPriceAvailabilityFits NeedsPurchase OnlinePurchase OfflineEasy Buying ExperienceRepeat PurchasesHigh Percentage of Consumers Book PurchasesThe Customer Decision Process framework: analyze and discover customer needs

Identify customer needsQuestions to reveal unmet or underserved needs:What is the ideal customer experience?Is there a gap between customers actual and ideal experience?What are customer beliefs and associations about the buying process?What barriers block some/all potential customers?What are the opportunities to enhance the customers experience?

Identify specific customersMarket segmentation approaches: identify customers (must-haves vs nice to have)

Segmentation Type

Description

Examples - Variables

Geographic

Divides the market into different geographical units

Country / region / city

Demographic

Divides the market on the basis of demographic variables

Age, gender, income

Firmographic

Divides the market on the basis of company-specific variables

Number of employees, company size

Behavioral

Divides the market based on how customers actually buy and use the product

Website loyalty, prior purchases

Occasion (Situational)

Divides the market based on the situation that leads to a product need, purchase, or use

Routine occasion, special occasion

Psychographic

Divides the market based on lifestyle and / or personality

Personality (laid back, type A), lifestyle

Benefits

Divides the market based on benefits or qualities sought from the product

Convenience, economy, quality

Identify specific customersActionable segmentation:easy to identifyreadily reacheddescribed in terms of their growth, size, profile & attractivenessMeaningful segmentation:Customers within a segment behave similarly, while customers across segments behave in different ways.provides some insight into customers motivations.corresponds to the set of barriers customers face when they buy or use a product or service.corresponds with how customers currently (or could) buy or use the product or service.correlates to differences in profitability or cost to serve.differences are large enough to warrant a different set of actions by a company.

Assess competitive advantagesDirect competitorsFirms offering products or services that are close substituteRivals in the same industryIndirect competitorsSubstitute ProducersFirms that, though they reside in different industries, offer products and services that perform the same functionAdjacent CompetitorsFirms that have the potential to provide products or services that are substitutes

Assess competitive advantages

Assess competitive advantagesCompetitor mappingAssess competition intensityIdentify underserved and most competitive areas;Identify current competitors strengthsIdentify collaboratorsAssess competitive hurdles

Assess competitive advantagesHigh performance levelMedium performance levelLow performance level Competitor mapping:

Target Segments

Kodak

Canon

Snapfish

Cost-Conscious

Disposable cameras

Low-end film and digital cameras

No deals on developing

Limited low-end cameras

No services

Deals on services

No products

Middle-Income Families with Children

Mid-line cameras

Film

Photo services; developing, sharing

Mid-range cameras

No services

Servicesdeveloping, sharing, gift cards

High Income/Tech Savvy

High-quality accessories (film, paper, CDs)

Products are less sophisticated

High-tech products

Software

Printersconsumers dont need to process

Services, though limited

Assess resource needsResource characteristics:central to delivering new benefits or unlocking trapped value.Hold the promise for winning against current and prospective competitors.

Assess resource needsThree types of resources:Customer-facing: brand name, a well trained sales force, and multiple distribution channels.Internal: technology, product development, economies of scale, and experienced staff.Upstream: suppliers relationships.

Assess resource needsPartnership: close resource gapsComplementary: Intel & Microsoft.Capability: AOL & Associated Press.

Assess technologys market readinessA high-level judgment on:Technology vulnerabilityWhat are the technology trends?How vulnerable is the opportunity to these trends?Technology adoptionWhat is the customers technology penetration rate?What penetration is necessary to make the offering financially viable? When is the minimum penetration likely to be met? Is there an introductory version that could be upgraded as technology penetration increases?

Assess technologys market readinessA high-level judgment on:Technological impactsWhat new technologies could radically alter the economics of delivering an offering or require adjustment of the actual features and functionality of an offering? How likely is it that your target population or competitors will use these technologies?

Assess technologys market readinessMoores Lawthe processing power of successive generations of microchips will double every 1.5 years

Gilders Lawtotal bandwidth of communications systems will triple every 12 months

Assess technologys market readinessSource: The Net Effect

Craft an opportunity storyDescribe the target segment(s) within the selected value systemArticulate the high-level value propositionSpell out the expected elements of customer benefits Identify the critical capabilities and resources needed to deliver the customer benefitsLay out the critical reasons to believe that the identified capabilities and resources will be a source of relative advantage over the competitionCategorize the critical capabilities (and supporting resources) as inhouse, build, buy, or collaborateDescribe how the company will capture some portion of the value that it creates for its customersProvide an initial sense of the magnitude of the financial opportunity for the company

Assess opportunity's attractivenessWhat? Attractiveness = f(long-term profitability, relative competitiveness)How? Determine the magnitude & character of the opportunity:Level of unmet need and the magnitude of unconstrained opportunityLevel of interaction between major customer segmentsLikely rate of growthSize/volume of the marketLevel of profitability

Assess opportunity's attractivenessFive attractiveness factors:Unconstrained opportunity, e.g., eBaySegment interaction, e.g., Zoomerang.comGrowth rate: 30-50% annual growth of customer marketMarket size, e.g., pet food and supplies market generates $23 billion of salesProfitability, e.g., profit margin at eBays auction market is 80%

Assess opportunity's attractivenessPriceline.coms overall opportunity assessment:

Marketwatch.comProcess StepsView Current Business and Financial NewsPlan Investment StrategyPlace Stock Order*Track Portfolio PerformanceTax ReportingNews constantly updated around the clockReal-time quotesComprehensive chart dataStory behind the numbers from experienced staffPersonalized investment toolsComprehensive portfolio trackingUnmet and Underserved NeedsLearn About InvestingRead Analysis / CommentaryEducation on investing options and strategiesStep 1: Identify unmet and underserved needs

Marketwatch.comStep 1: Identify unmet and underserved needs

Marketwatch.comStep 2: Identify specific customers

Marketwatch.comStep 3: Assess competitive advantage

Marketwatch.comCustomer-facing resource: brand name and CBS associationsInternal asset: in-house writersUpstream resources: access to CBS news outlets & reporting resources; existing relationships with financial institution clientsStep 4: Assess resource needs

Marketwatch.comConsumers: low-bandwidth services streaming video and broadband friendly services have to waitAdvertisers: receptive to alternative online advertising placements make technology investment accordinglyLicensees: seamlessly integrate modularized content into their sites ensure scalability of its technology to meet increasing licensing demandsStep 5: Assess technologys market readiness:

Marketwatch.comStep 6: Craft an opportunity story:

Marketwatch.comNeutral FactorPositive FactorNegative FactorStep 7: Assess opportunitys attractiveness:

Analysis

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