Category Attractiveness Analysis

Chapter 4

Aggregate Market Factors

Category Size

Measured both in units and monetary value. Large firms finds large market attractive. Market Growth Fast growing market are universally desired due to abilities to support high margins and profits for future years.

 Product Life cycle

General assessment of the attractiveness of a category at each stage of PLC.

In introductory stage growth rate & mkt. size are low. In growth stage sale take off mkt. become attractive In maturity growth rate is low, mkt. size could be at its peak In decline stage mkt. become unattractive . however PLC is not always is not clear.

Sales cyclicity
Sales cyclicity depends accordingly to substantial

inter year variation & demand.

seasonal
Seasonality- interayear cycles in sales-is generally not viewed positively. e.g. toy industry at christmas.

Profits
Every business has their different profit from

each other every year due to labor versus capital intensity and raw material. Ratios are different acc, to their profits.

Category factors
The threats of new entrants into the product

is high, the attractiveness of the category is diminished.

Bargaining power of buyers

Product costs more Product is undifferentiated Buyers has full information When substitutes exist.

Bargaining power of suppliers

Suppliers are highly concentrated.

No substitute
Differentiation product Supply is limited

Pressure from substitutes

More the substitutes, less the attractiveness in

product category. i.e. some of the highest rate of return are earned in category in which the range of substitutes are small.

capacity
Overcapacity is not a positive sign of long term

profitability. e.g. At recessions, consumer spending on travel service is low, resulting in overcapacity at many world wide resorts.

Environmental analysis
Technological factors

The two key dimensions used to assess a categorys attractiveness are technology and process.

Political factors If a sufficient percentage of a products sales from risky foreign markets ,the product could in fact look unattractiveness relative to others.

Economic factors
Almost all capital goods industries (machine tools, farm equipment, mainframe computer) are sensitive to interest rate fluctuations.

Regulatory factors
Government and other agencies have an impact

on category attractiveness through regulations . E.g. Prohibition on the advertisement of tobacco.

Social factors
Trends in demographic, lifestyle and personal

values among the general population are of particular concern for consumer product manufactures and services

Thank you