How should a company choose the most attractive target markets?
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Transcript of How should a company choose the most attractive target markets?
Choosing most attractive Target markets
BySanchit Aggarwal
Bits Pilani K.K Birla Goa Campus
Porter’s five forces analysis
Analysis scheme developed by Harvard Business School professor: Michael E. Porter
•It allows business managers to gauge the intrinsic long-run attractiveness of a market segment and thus assess current and potential lines of business.•3 out of 5 forces relate to industry participants•The other 2 relate to the vertical participants: SUPPLIER and CONSUMER
• PORTER’S FIVE FORCES ANAYLSIS
Threat of new entrants
• Analyses the ease of entry for new participants in the market place
• If it is easy- Level of competition is HIGH
Threat of intense segment rivalry
• It evaluates the number and activity of a company's rivals
• Numerous, strong and aggressive competitors: Segment unattractive
Threat of substitute product
• A new good or service coming to the market erodes sales of established products.
Bargaining power of suppliers• Scarcity of supplier
resources can increase competition among manufacturers, thus increasing costs
• Segment is unattractive is bargaining power of suppliers is high
Bargaining power of Buyer• If consumer has
good bargaining position then it can reduce finished good prices and hence reduce profitability
Combining the 2 factorsSegment's
attractiveness
measured using
porter’s analysis
Company’s
objectives and
resources
Most attractive
target market