Title: SPACE ANALYSIS ADVANTAGE MATRIX class
1SPACE ANALYSIS ADVANTAGE MATRIXclass
7
2Industry evolution and forecasting
- The evolution of industries through three main
stages - - Emergence
- - Transformation to maturity
- - Decline
3Emerging Industry Structure
- Stages in Market evolution
- Emergence stage
- Latent market people who share a similar need
or want for sth. that does not yet exist. - Diffused-preference market buyer preferences
scatter evenly in a
market. -
4Emerging Industry Structure
- Stages in Industry evolution
- Emergence stage
- Diffused-preference market buyer preferences
scatter evenly in a market. -
5Emerging Industry Structure
- Emergence stage
- Strategies
- 1. A single-niche strategy
- 2. A multiple-niche strategy
- 3. A mass-market strategy
Emergence Stage
Large
Medium
Small
4
9
5
6
7
8
6Emerging Industry Structure
7Mature Industry Structure
Opportunities
Industry Characteristics
refine current products
slowing growth in demand
technology standard exists
improve service
increasing international competition
process innovation
industry-wide profits declining
industry exit is beginning
8Mature Industry Structure
- Market Fragmentation
- Market Consolidation
9Mature Industry Structure
(a) Market-fragmentation stage
C
- Market growth slows down
- Market splits into smaller segments
AB
H
DE
J
XYZ
FG
K
L
M
10Competitive Strategy
- Industry Structure
- Fragmented Industry
- Many small and medium-sized local companies
compete for small shares of total market - Focus strategies predominate
10
11Fragmented Industry Structure
Opportunity
Industry Characteristics
Consolidation
large number of small firms
buy competitors
no dominant firms
build market power
no dominant technology
exploit economies of scale
commodity type products
low barriers to entry
few, if any, economies of scale
12Fragmented Industries
- Low Overall Entry Barriers
- Absence of Economies of Scale or Experience Curve
- High Transportation Costs
- High Inventory Costs or Erratic Sales
Fluctuations - No Advantages of Size in Dealing with Buyer or
suppliers - Diseconomies of Scale in Some Important
- Diverse Market Needs
- High Product Differentiation
- Exit Barriers
- Local Regulation
- Government Prohibition of Concentration
- Newness
13Industry Evolution
(b) Market consolidation stage
(a) Market-fragmentation stage
C
C
H
AB
H
AB
DE
DE
YZ
J
JK
X
XYZ
FG
K
FG
L
M
M
L
- Emerge the new attribute with
- Strong appeal
14Competitive Strategy
- Industry Structure
- Consolidated industry
- Mature industry dominated by a few large
companies - Cost Leadership or Differentiation predominate
14
15Overcoming Fragmentation
- Common approaches to consolidation
- Create Economies of Scale or Experience Curve
- Standardize Diverse Market Needs
- Neutralize or Split Off Aspects Most Responsible
for Fragmentation - Make Acquisition for a Critical Mass
- Recognize Industry Trends Early
16Overcoming Fragmentation
- Common approaches to consolidation
- Create Economies of Scale or Experience Curve
- Technology change leads to economies of scale or
experience curve , then consolidation can occur
Standardize Diverse Market Needs Product or
Marketing innovation can standardize heretofore
diverse market needs
17Overcoming Fragmentation
- Common approaches to consolidation
- Neutralize or Split Off Aspects Most Responsible
for Fragmentation - Separate aspects from the rest of business
- Make Acquisition for a Critical Mass
- Ultimate some advantages to holding a significant
share
18Overcoming Fragmentation
- Common approaches to consolidation
- Recognize Industry Trends Early
- The primary source of fragmentation
- The newness of the industry
- Exogenous industry trends
19Coping with Fragmentation
- Tightly Managed Decentralization
- Formula Facilities
- Increased Value Added
- Specialization by Product Type or Product Segment
- Specialization by Customer Types
- Specialization by Type of Order
- A Focused Geographic Area
- Bare Bones/ No Frills
- Backward Integration
20Coping with Fragmentation
- Tightly Managed Decentralization
- Intense coordination
- Local management orientation
- High personal service
- Close control
- Formula Facilities
- View the key strategic variable in the business
as the building of efficient, low cost facilities
at multiple location
21Coping with Fragmentation
- Increased Value Added
- Enhanced by forward integration from
manufacturing into distribution - Specialization by Product Type or Product Segment
- Specialize on a tightly constrain group of
products. - Specialization by Customer Types
- Specialization on a particular category of
customer in the industry - Customers has least bargaining leverage
22Coping with Fragmentation
- Specialization by Type of Order
- Specialize in a particular type of order to cope
with intense competitive pressure - A Focused Geographic Area
- Blanketing a given geographic area by
concentrating facilities, marketing attention and
sales activity.
23Coping with Fragmentation
- Bare Bones/ No Frills
- Maintaining a bare bones and no frills
competitive posture - Low overhead
- Low skilled employees
- Tight cost control
- Attention to detail
- Backward Integration
- Lower costs and put pressure on competitors who
cannot afford such integration
24Potential Strategic Traps
- Seeking Dominance
- Trying to be all things to all people generally
maximizes vulnerability to the competitive forces - Lack of Strategic Discipline
- Undisciplined or opportunistic strategy may work
in the short run - Over centralization
- Counterproductive
- Slow response time
- Lower the incentives
- Drive away skilled individuals necessary to
perform many personal service - Assumption that Competitors Have the Same
Overhead and Objectives - Overreactions to New Products
- Risk of overreacting to new products in ways that
raise costs and overhead
25Declining Industry Structure
Opportunities
Industry Characteristics
industry sales have sustained pattern of
decline
market leadership
niche
some well-established firms have exited
harvest
firms have stopped investing in maintenance
divest
26Market Strategy in a Declining Industry
27Leadership Strategy
- Aggressive behavior
- Acquire more market share
- Buying retiring competitor capacity
- Reduce competitor exit barriers take over
long term contracts, private labels - Signal staying intentions publicly
- Demonstrate clear superior strengths
28Harvest
- Reduce models
- Shrink channels used
- Eliminate small customers
- Erode service
- Repair speed
- Sales service
- Deliveries
29Niche
- Focus strategy
- Select a large pocket of demand within the
declining industry
30Figure 3.8 Industry evolution Source Adapted
from OShaughnessy (1988)
31Table 3.1 Determinants of environmental
turbulence
32Environment stability
- Determinants of environmental turbulence
- Association of high marketing turbulence
- - high of sales spent on marketing
- - novel market entrant
- - very aggressive leading competitor
- - threatening pressure by customer
- - demand outstripping industry capacity
- - emergence, decline or shifting stage of PLC
- - low profitability
- - high product differentiation
- - identification of latent needs a critical
success factor -
33Environment stability
- Determinants of environmental turbulence
- Association of high innovative turbulence
- - high of sales spent on RD
- - frequent new products in the industry
- - short PLC
- - novel technologies emerging
- - many competing technologies
- - emergence, decline or shifting stage of PLC
- - low profitability
- - creativity is a critical success factor
34Figure 3.9 Environmental turbulence Source
Based on Ansoff (1984) Figure 3.4.5, p. 222
35SPACE Analysis
- Analysis extends environmental analysis
beyond the consolidation of turbulence to look at
industry strength and related this to the
competitive advantage and financial strength of a
company
36Table 3.2 SPACE analysis components
37Strategic Posturing Action Evaluation (SPACE)
- A very methodological tool for aiding in
understanding the internal and external
environments. - Assign scores to the factors on a 0
(unfavorable) to 6 (favorable) Scale - Internal
- Financial strength (average)
- Competitive advantage (average - 6)
- External
- Industry attractiveness (average)
- Environmental stability (average - 6)
38Scaling for SPACE Matrix-External
- Environmental Stability
- Technological changes
- Rate of inflation
- Demand variability
- Price range of competition
- Barriers to entry
- Competitive pressure
- Price elasticity
- Other
- Industry Attractiveness
- Growth potential
- Profit potential
- Financial stability
- Technological know-how
- Resource utilization
- Capital intensity
- Ease of market entry
- Productivity, capacity utilization
- Other
39Scaling for SPACE Matrix-Internal
- Competitive Advantage
- Market share
- Product quality
- Product life cycle
- Product replacement cycle
- Customer loyalty
- Competition's capacity utilization
- Technological know-how
- Other
- Financial Strength
- ROI
- Leverage
- Liquidity
- Capital required/available
- Cash flow
- Ease of market exit
- Risk involved in business
- Other
40Strategic Posturing Action Evaluation (SPACE)
Financial Strength
6
Competitive Advantage
Industry Attractiveness
(6)
6
Less of a competitive advantage
More environmental turbulence
(6)
Environmental Stability
41Ex of Factors Determining Competitive Advantage
Average 6 -2.4
42Strategic Posturing Action Evaluation (SPACE)
Financial Strength
6
AGGRESSIVE
CONSERVATIVE
-2.4
Competitive Advantage
Industry Attractiveness
(6)
6
DEFENSIVE
COMPETITIVE
(6)
Environmental Stability
43Figure 3.10 SPACE analysis map Source Based on
Rowe et al. (1989) Exhibit 6.10, p. 145
44SPACE analysis map
Financial Strength
COMPANY DIMENSIONS
Conservative
Aggressive
b
Competitive Disadvantage
a
A
Industry Strength
Strategic postures
B
INDUSTRY DIMENSIONS
Competitive
Defensive
Environmental Stability
Source Based on Rowe et al (1989) Exhibit 6.10,
p145
45SPACE
- Aggressive quadrant
- - enjoying significant advantages yet are likely
to face threats from new competition. - Conservative posture
- - is the typically of companies in mature
markets where the lack of need for investment has
generate financial surpluses.
46SPACE
- Competitive posture
- - typically of a company with a competitive
advantage in an attractive industry - Defensive posture
- - having little residual strength to combat
competition, they need to foster resources by
operating efficiently in order to concentrate on
ones they have a chance of defending
47The advantage matrix
- The quadrants of the advantage matrix show how
relationships between relative size and return on
assets for companies can differ
48Figure 3.11 The Advantage Matrix Source Based
on unpublished material from the Boston
Consulting Group
49The advantage matrix
- The stalemate quadrant
- represents markets with few ways of achieving
advantage and where the potential size advantage
is small. - The volume quadrant
- represents markets where the opportunities for
differentiation remain few yet where potential
size advantages remain great.
50The advantage matrix
- Specialized
- companies within the same market have differing
return on scale - Fragmented
- the markets requirement are less well defined
than the stalemate, volume or specialized cases.
51CUSTOMER ANALYSISself-study
52Figure 4.1 Who is the customer?
53Figure 4.2 Understanding customers the key
questions
54Figure 4.3 Marketing research methods
55Figure 4.4 Uses of qualitative research
56Figure 4.5 Uses of surveys
57Figure 4.6 Uses of experimentation
58Figure 4.7 Stages in a comprehensive marketing
research project
59Figure 4.8 Marketing decision support systems