Market Opportunity Analysis: Where Will The Business Compete?

Market opportunity analysis
where will the business compete?
Learning objectives
1. What is market opportunity analysis? 2. How to identify unmet and/or underserved customer needs? 3. How to identify the most attractive customers? 4. How to assess your competitive advantage? 5. How to assess your resource needs? 6. How to assess the market readiness of technology? 7. How to craft an opportunity story? 8. How to assess the market opportunitys attractiveness?
Learning objectives

What? A tool to identify and assess the attractiveness of business opportunity Why? Unique e-commerce environment: Competition across (vs within) industry boundary Competition between co-opetitors (vs competitors) Competition on speed of response New ways to bring value to customers New ways to reconfigure value chains & value systems

A value chain: a set of value creating activities within a firm A value system: a set of value creating activities connecting a firm with other firms and customers

Considerations for value creation: Trapped value: efficiency, accessibility, customer empowerment New value: personalization, extension, community-building, collaboration Horizontal plays: improve functional operations Vertical plays: improve industry specific business activities

Create More Efficient Markets, e.g., eBay Enable Ease of Access, e.g., Gap Create More Efficient Systems, e.g., FedEx Disrupt Current Pricing Power, e.g., Priceline
Liberate Trapped Value Look at Value System to Discover New Business Opportunities Introduce New-tothe-World Value
Customize Offerings, e.g. MyYahoo Extend Reach and Access, e.g., keen.com Build Community, e.g., MyFamily.com
Enable Collaboration, e.g., ProjectPoint Introduce New Functionality/Expertise, e.g., C-Mode

Questions 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)

How? Using a market opportunity analysis framework that revolves
around four key elements:
Customer
Analysis of the customer environment uncovers unmet or underserved customer needs, as well as the market they occupy
Technology
Analysis 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 offering
Company
Analysis of the company environment provides the current state of the companys resources
Competition
Analysis 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

Identify the Unmet and/ or Underserved Customer Need Identify the Unmet and/ or Underserved Customer Need
Customer
Identify the Specific Customers a Company Will Pursue Identify the Specific Customers a Company Will Pursue
Competition
Assess Advantage Relative to Competition Assess Advantage Relative to Competition
Company
Assess the Companys Resources to Deliver the Offering Assess the Companys Resources to Deliver the Offering
Technology
Assess Market Readiness of Technology Assess Market Readiness of Technology
Specify Opportunity in Concrete Terms Specify Opportunity in Concrete Terms Assess Opportunity Attractiveness Assess Opportunity Attractiveness
Learning objectives
Identify customer needs

The Customer Decision Process framework: analyze and discover customer needs
Problem Recognition Gift Interested in Author/Subject Matter Need for Activity/Class Prepurchase
Information Gathering
Read Reviews
Search for Availability
Review Contents
Evaluation
Price
Quality
Availability
Fits Needs
Purchase
Purchase Decision
Purchase Online
Purchase Offline
Postpurchase
Satisfaction
Arrived on Time
Good Quality of Contents
Easy Buying Experience
Loyalty
Repeat Purchases
High Percentage of Consumers Book Purchases
Identify customer needs

Questions 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?
Learning objectives
Identify specific customers

Market segmentation approaches: identify customers (must-haves vs nice to have)
Segmentation Type Geographic
Description
Divides the market into different geographical units Divides the market on the basis of demographic variables Divides the market on the basis of company-specific variables Divides the market based on how customers actually buy and use the product Divides the market based on the situation that leads to a product need, purchase, or use Divides the market based on lifestyle and / or personality Divides the market based on benefits or qualities sought from the product
Examples - Variables
Country / region / city
Demographic
Age, gender, income
Firmographic
Number of employees, company size
Behavioral
Website loyalty, prior purchases
Occasion (Situational) Psychographic
Routine occasion, special occasion
Personality (laid back, type A), lifestyle Convenience, economy, quality
Benefits
Identify specific customers

Actionable segmentation:
easy to identify readily reached described in terms of their growth, size, profile & attractiveness
Meaningful 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.
Learning objectives
Assess competitive advantages

Direct competitors
Firms offering products or services that are close substitute Rivals in the same industry
Indirect competitors
Substitute Producers
Firms that, though they reside in different industries, offer products and services that perform the same function
Adjacent Competitors
Firms that have the potential to provide products or services that are substitutes

Competitor mapping
Assess competition intensity
Identify underserved and most competitive areas; Identify current competitors strengths Identify collaborators
Assess competitive hurdles

Competitor mapping:
Target Segments
Kodak
Disposable cameras Low-end film and digital cameras No deals on developing

Canon
Snapfish
Cost-Conscious
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
High performance level
Medium performance level
Low performance level
Learning objectives
Assess resource needs

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

Three 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.

Partnership: close resource gaps
Complementary: Intel & Microsoft. Capability: AOL & Associated Press.
Learning objectives
Assess technologys market readiness

A high-level judgment on:
Technology vulnerability
What are the technology trends? How vulnerable is the opportunity to these trends?
Technology adoption
What 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?

A high-level judgment on:
Technological impacts What 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?

Moores Law
the processing power of successive generations of microchips will double every 1.5 years
Gilders Law
total bandwidth of communications systems will triple every 12 months
Source: The Net Effect
Learning objectives
Craft an opportunity story

Describe the target segment(s) within the selected value system Articulate the high-level value proposition Spell out the expected elements of customer benefits Identify the critical capabilities and resources needed to deliver the customer benefits Lay out the critical reasons to believe that the identified capabilities and resources will be a source of relative advantage over the competition Categorize the critical capabilities (and supporting resources) as inhouse, build, buy, or collaborate Describe how the company will capture some portion of the value that it creates for its customers Provide an initial sense of the magnitude of the financial opportunity for the company
Learning objectives
Assess opportunity's attractiveness

What? Attractiveness = f(long-term profitability, relative competitiveness) How? Determine the magnitude & character of the opportunity:
Level of unmet need and the magnitude of unconstrained opportunity Level of interaction between major customer segments Likely rate of growth Size/volume of the market Level of profitability

Five attractiveness factors:
1. Unconstrained opportunity, e.g., eBay 2. Segment interaction, e.g., Zoomerang.com 3. Growth rate: 30-50% annual growth of customer market 4. Market size, e.g., pet food and supplies market generates $23 billion of sales 5. Profitability, e.g., profit margin at eBays auction market is 80%

Priceline.coms overall opportunity assessment:
Marketwatch.com
Step 1: Identify unmet and underserved needs
Process Steps View Current Business and Financial News
Unmet and Underserved Needs
News constantly updated around the clock Real-time quotes Comprehensive chart data
Story behind the numbers from experienced staff Education on investing options and strategies
Read Analysis / Commentary
Learn About Investing
Plan Investment Strategy
Personalized investment tools
Place Stock Order*
Track Portfolio Performance
Comprehensive portfolio tracking
Tax Reporting
Marketwatch.com
Step 1: Identify unmet and underserved needs
Marketwatch.com
Step 2: Identify specific customers
Marketwatch.com
Step 3: Assess competitive advantage
Marketwatch.com
Step 4: Assess resource needs
Customer-facing resource: brand name and CBS associations Internal asset: in-house writers Upstream resources: access to CBS news outlets & reporting resources; existing relationships with financial institution clients
Marketwatch.com
Step 5: Assess technologys market readiness:
Consumers: low-bandwidth services streaming video and broadband friendly services have to wait Advertisers: receptive to alternative online advertising placements make technology investment accordingly Licensees: seamlessly integrate modularized content into their sites ensure scalability of its technology to meet increasing licensing demands
Marketwatch.com
Step 6: Craft an opportunity story:
Marketwatch.com
Step 7: Assess opportunitys attractiveness:
Positive Factor
Neutral Factor
Negative Factor
Competitive Vulnerability
Magnitude of Unmet Needs
Interaction Between Segments
Likely Role of Growth
Technology Vulnerability
Market Size
Level of Profitability

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Market opportunity analysis

where will the business compete?