Chapter 4
Understanding Market Opportunities
I. “The Cellular Telephone Business: Increasing Competition in a Growing Market”
discusses how despite the continuing growth in demand for mobile telephone services and the
opportunities that it generates, potential entrants and current players should consider the
attractiveness of these markets and industries.
II. Strategic Challenges Addressed in Chapter 4
This chapter addresses the 4Cs that were identified as the analytical foundation of the
marketing management process.
The chapter provides a framework to help managers, entrepreneurs, and investors
comprehensively assess the attractiveness of opportunities they encounter, in terms of :
oThe company and its people
oThe environmental context in which it operates
oThe competition it faces
oThe wants and needs of the customer it seeks to serve
The chapters addresses the three questions crucial to the assessment of any market
opportunity:
oHow attractive is the market we serve or propose to serve?
oHow attractive is the industry in which we would compete?
oAre the right resources—in terms of people and their capabilities and connections—
in place to effectively pursue the opportunity at hand?
III. Markets and Industries: What’s the Difference?
A market is defined as being composed of individuals or organizations who are interested
in and willing to buy a good or service to obtain benefits that will satisfy a particular want
or need and have the resources to engage in such a transaction.
An industry is a group of firms that offer a product or class of products that are similar and
are close substitutes for one another.
Markets are composed of buyers; industries are composed of sellers.
IV. Assessing Market and Industry Attractiveness
On both the market and industry sides, the macro-level analyses are based on
environmental conditions that affect the market or industry, respectively, as a whole,
without regard to a particular company’s strategy, target market, or its role in its industry.
At the micro-level, analyses look not at the market or the industry overall but at
individuals in that market or industry, that is, specific target customers and companies
themselves, respectively.
V. Macro Trend Analysis: A Framework for Assessing Market Attractiveness, Macro Level
Assessing market attractiveness requires that important macroenvironmental trends—or
macro trends for short—be noticed and understood.
The macroenvironment can be divided into six major components:
oDemographic
oSociocultural
oEconomic
oRegulatory
oTechnological
oNatural arenas
The key question marketing managers and strategists must ask in each arena is what trends
are out there that are influencing demand in the market of interest, whether favorably or
unfavorably.
A. The Demographic Environment
While the number of specific demographic trends that might influence one marketer
or another is without limit, there are currently four major global demographic
trends that are likely to influence fortunes of many companies, for better or worse:
oThe aging of the world’s population
oThe effect of the AIDS plague on demography
oA rapidly growing middle class in emerging a countries
oIncreased levels of immigration
Aging
oProviders of health care, vacation homes, life insurance, and other goods and
services have taken note of the graying of the world’s population and are
taking steps to develop marketing strategies to serve this fast-growing market.
AIDS
oPharmaceutical companies and world health organizations are struggling to
develop strategies to deal with the AIDS challenge, one that presents a huge
and rapidly growing market, but one in which there is little ability to pay for
the advanced drug therapies that offer hope to AIDS victims.
Growing middle class
oIn the emerging economies of Asia and Latin America, the pace of economic
development in recent years has led to a rapid increase in the number of
consumers deemed by demographers to be middle class.
oMarketers can no longer view emerging economies as consisting of a few,
rich people, alongside huddling masses of the poor.
Increased immigration
oIn the United States, many years of immigration from Mexico and Latin
America have made the Sun Belt a bilingual region, and many now view
Miami as the crossroads of Latin America.
oThe implications for marketers seeking to gain market share among Hispanic
Americans are obvious.
B. The Sociocultural Environment
Sociocultural trends are those that have to do with the values, attitudes, and
behavior of individuals in a given society.
Cultures tend to evolve slowly, however, so some sociocultural trends can take a
generation to have a significant impact as people tend to carry for a lifetime the
values with which they grow up.
Two trends of particular relevance today are:
oGreater interest in corporate social responsibility by businesses
oTrends toward fitness and nutrition—The implications of running, working
out, fitness clubs, the South Beach, Atkins diets, etc. are playing out in
grocery store produce departments, where entire sections are now devoted to
organic produce; in the farming communities of North America and Europe,
where fields formerly farmed with fertilizers are being transformed into
organic ones; and on restaurant menus, where selections are being revamped
to make them appeal to customers who have adopted new eating habits.
C. The Economic Environment
When people’s incomes rise or fall, when interest rates rise or fall, when the fiscal
policy of governments results in increased or decreased government spending,
entire sectors of economies are influenced deeply, and sometimes suddenly.
oThe implications of trends like these in consumer spending can be dramatic
for marketers to be sure, but they can be far subtler than one might imagine.
It seems abundantly clear that the world’s wealth is moving inexorably eastward
and south, to the rapidly growing markets of Asia and Latin America, including the
BRIC countries and others.
Marketers everywhere must face the fact that the so-called emerging markets are
no longer just seen as sources of low-cost commodities and labor.
oRather, they are where any growth in demand must come from.
In purchasing-power-parity terms, three of the world’s four biggest economies
(China, Japan, and India) are already in Asia, and more than half of global GDP
growth over the past decade has come from Asia.
D. The Regulatory Environment
In every country and across some countries, there is a regulatory environment
within which local and multinational firms operate.
As with other macro trend components, political and legal trends, especially those
that result in regulation or deregulation, can have powerful impact on market
attractiveness.
Government, business, and the general public throughout much of the world have
become increasingly aware that overregulation protects inefficiencies, restricts
entry by new competitors, and creates inflationary pressures.
Deregulation has typically changed the structure of the affected industries as well as
lowered prices, creating rapid growth in some markets as a result.
A trend of reregulation is taking hold, especially in Europe and the United States,
as a result of the perceived failure of the global financial services industry to
self-regulate its practices, seen as a key cause of the 2007-2008 financial meltdown.
E. The Technological Environment
In the past three decades, an amazing number of new technologies have created
new markets, changed how businesses operate, how goods and services as well as
ideas are exchanged, how crops are grown, and how individuals learn and interact
with each other.
Some observers say the digitization of manufacturing will bring on the third
industrial revolution, following mechanization of the British textile industry in the
eighteenth century and Henry Ford’s invention of mass production in the twentieth.
The cost of producing smaller batches with wider variety is falling dramatically,
and mass customization may be the wave of the future.
In addition to creating attractive new markets, technological developments are
having a profound impact on all aspects of marketing practice, including:
oMarketing communication (ads on the web or via e-mail)
oDistribution (books and other consumer and industrial goods bought and sold
via the web)
oPackaging (use of new materials)
oMarketing research (monitoring supermarket purchases with scanners or
internet activity with digital “cookies”)
F. The Natural Environment
Everything ultimately depends on the natural environment, including marketing.
Changes in the earth’s resources and climate can have significant and far-reaching
effects.
In general, discussion of the problems in natural environment has stressed the
threats and penalties facing businesses throughout the world.
oBut businesses can do a number of things to turn problems into opportunities.
In response to growing consumer concern in Britain about environmental issues, a
growing number of marketers, including Tesco, the United Kingdom’s largest
supermarket chain, have begun adding carbon footprint labels to some of their
products.
Businesses have seen opportunities in developing thousands of green products
(those that are environmentally friendly).