Organizations need to analyze internal and external environment of the organization to support growth strategy and to understand market attractive of the company.
Market Attractiveness: Wendell Smith in 1956 introduced the concept of product differentiation and market segmentation, which are considered the counterpart to one another. Product development and improvement should be aimed to market segments. Market segments is an opportunity for the company to make better offering because the subgroups, the segments that are distinguished must form a sound basis for product and communication policy (Verhallen & van Raaij, 1991).
Several Models for measuring market attractiveness are:
“Success in planning marketing activities requires the precise utilization of both product differentiation and market segmentation as components of marketing strategy”. product differentiation and market segmentation are closely related but they have important differences (Smith, Winter 1995). Product differentiation is the blending of demand to the will of supply and market segmentation means the adjustment of product or marketing efforts to consumer or users’ requirements. It is based on the development of the demand side of the market. Discussion of three models for measuring market attractiveness are Porter's Five Forces Model, Ansoff’s Growth Matrix and BCG Growth Sharing Matrix.
Understanding Market Attractiveness through Porter’s Five Forces Model:
As mentioned in Nellis & Parker(2006), Porter’s five forces model helps company to find out the segments attractiveness by analyzing the five principal factors: the rivalry threat, threats of new market entrants, threat of substitute products, bargaining power of buyer and bargaining power of suppliers.
Understanding market attractive and company competitiveness through BCG’s Growth Sharing matrix
Understanding Market Attractiveness through The Ansoff’s Growth Matrix:
Ansoff’s Growth Matrix describes that four types of product and market opportunities which can be pursued. The product or market is placed either on X or Y axis and it has four quadrants. This matrix describes that the four growth alternatives open for the companies are through increased market penetration, through market development, through product development or through diversification. This matrix provides insight of how company’s value proposition is achieved by creating value for the customers (Ansoff, 1957).
Understanding market attractive and company competitiveness through BCG’s Growth Sharing matrix:
BCG's Growth Sharing Matrix is another model to find out the market attractiveness of the company. The matrix indicates that the profit of the company is directly related to its market share. Therefore, a company can increase market share if it seems profitable. It predicts the future actions of a company. Hence, the company can decide its proper management strategy. The matrix emphasizes on the cash flow and draws attention to investment characteristics. It is helpful for managers to evaluate balance in the firm’s current portfolio of stars, cash cows, question marks, and dogs (Mohajan,2018).
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She is a graduate of Master in International Business
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