Market Opportunity Analysis

Market opportunity analysiswhere will the business compete?

Learning objectives1. 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 opportunity’s

attractiveness?




attractiveness?

Market opportunity analysisWhat? 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

Market opportunity analysisA 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

Market opportunity analysisConsiderations 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

Market opportunity analysis

Look at Value System to

Discover New Business

Opportunities

Liberate Trapped

Value

Introduce New-to-

the-World Value

Create More Efficient Markets, e.g., eBay

Enable Ease of Access, e.g., Gap

Customize Offerings, e.g. MyYahoo

Extend Reach and Access, e.g., keen.com

Create More Efficient Systems, e.g., FedEx

Disrupt Current Pricing Power, e.g., Priceline

Build Community, e.g., MyFamily.com

Enable Collaboration, e.g., ProjectPoint

Introduce New Functionality/Expertise, e.g., C-Mode

Market opportunity analysisQuestions 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)

Market opportunity analysisHow? Using a market opportunity analysis framework that revolves

around four key elements:

CustomerCustomer Analysis of the customer environment uncovers unmet or

underserved customer needs, as well as the market they occupy

TechnologyTechnology 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 firm’s offering

CompetitionCompetition

Analysis of the company environment provides the current state of the company’s resourcesCompanyCompany

Analysis of the competition environment reveal the structure of the industry and market, key competitors in the marketplace, and the firm’s relative advantage to each of the key players

Market opportunity analysis

Specify Opportunity in Concrete TermsSpecify Opportunity in Concrete Terms

Assess Advantage Relative to CompetitionAssess Advantage Relative to Competition

Assess the Company’s Resources to Deliver the OfferingAssess the Company’s Resources to Deliver the Offering

Assess Market Readiness of TechnologyAssess Market Readiness of Technology

Identify the Specific Customers a Company Will PursueIdentify the Specific Customers a Company Will Pursue

Identify the Unmet and/ or Underserved Customer NeedIdentify the Unmet and/ or Underserved Customer Need

Assess Opportunity AttractivenessAssess Opportunity Attractiveness

CustomerCustomer

TechnologyTechnology

CompetitionCompetition

CompanyCompany




attractiveness?

Identify customer needsP

ost

pu

rch

ase

Search for AvailabilityRead Reviews Review Contents

EvaluationEvaluation

Problem Recognition Problem Recognition

Information GatheringInformation Gathering

Purchase Decision Purchase Decision

Satisfaction Satisfaction

Pre

pu

rch

ase

Pu

rch

ase

Need for Activity/ClassGift Interested in Author/Subject Matter

Good Quality of ContentsArrived on Time

Loyalty Loyalty

QualityPrice Availability Fits Needs

Purchase Online Purchase Offline

Easy Buying Experience

Repeat Purchases High Percentage of Consumers’ Book

Purchases

The “Customer Decision Process” framework: analyze and discover customer needs

Identify customer needsQuestions 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?




attractiveness?

Identify specific customers

Segmentation Type Description Examples - Variables

Geographic

Divides the market into different geographical units

Country / region / city

Demographic Divides the market on the basis of demographic variables

Age, gender, income

Firmographic Divides the market on the basis of company-specific variables

Number of employees, company size

Behavioral Divides the market based on how customers actually buy and use the product

Website loyalty, prior purchases

Occasion (Situational)

Divides the market based on the situation that leads to a product need, purchase, or use

Routine occasion, special occasion

Psychographic Divides the market based on lifestyle and / or personality

Personality (laid back, type A), lifestyle

Benefits Divides the market based on benefits or qualities sought from the product

Convenience, economy, quality

Market segmentation approaches: identify customers (must-haves vs nice to have)

Identify specific customersActionable 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.




attractiveness?

Assess competitive advantagesDirect 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

Assess competitive advantages

Assess competitive advantagesCompetitor mapping

– Assess competition intensity• Identify underserved and most competitive areas;• Identify current competitors’ strengths• Identify collaborators

– Assess competitive hurdles

Assess competitive advantages

High performance level Medium performance level Low performance level

Competitor mapping:




attractiveness?

Assess resource needsResource characteristics:

– central to delivering new benefits or unlocking trapped value.

– Hold the promise for winning against current and prospective competitors.

Assess resource needsThree 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.

Assess resource needsPartnership: close resource gaps

– Complementary: Intel & Microsoft.– Capability: AOL & Associated Press.




attractiveness?

Assess technology’s 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?


Moore’s Law• the processing power of successive generations

of microchips will double every 1.5 years

Gilder’s Law• total bandwidth of communications systems will

triple every 12 months


Source: The Net Effect




attractiveness?

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




attractiveness?

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 eBay’s auction market is 80%


Priceline.com’s overall opportunity assessment:

Marketwatch.comProcess Steps

View Current Business and Financial News

View Current Business and Financial News

Plan Investment StrategyPlan Investment Strategy

Place Stock Order*Place Stock Order*

Track Portfolio PerformanceTrack Portfolio Performance

Tax ReportingTax Reporting

News constantly updated around the clock Real-time quotes Comprehensive chart data

“Story behind the numbers” from experienced staff

Personalized investment tools

Comprehensive portfolio tracking

Unmet and Underserved Needs

Learn About InvestingLearn About Investing

Read Analysis / CommentaryRead Analysis / Commentary

Education on investing options and strategies

Step 1: Identify unmet and underserved needs

Marketwatch.comStep 1: Identify unmet and underserved needs

Marketwatch.comStep 2: Identify specific customers

Marketwatch.comStep 3: Assess competitive advantage

Marketwatch.comStep 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.comStep 5: Assess technology’s 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.comStep 6: Craft an opportunity story:

Marketwatch.com

CompetitiveVulnerability

Magnitude ofUnmet Needs

InteractionBetween

Segments

Likely Role ofGrowth

TechnologyVulnerability

Market Size Level ofProfitability

Neutral Factor

Positive Factor

Negative Factor

Step 7: Assess opportunity’s attractiveness:

Market Opportunity Analysis

Documents

customer analysis

competition analysis

technology analysis

value creation

set of value

trapped value

value chains value systems

world value