5C’s and 4 P’s
5 C’s
Exploring
value creation Customers Company Competitors Collaborators Context
opportunities
Choosing the Market S Target market T P
value Segmentation selection Positioning
Creating,
delivering and Product Place / Promotion
communicating Channel
Value
4 P’s
Capturing
Pricing
value
Customer Customer
Sustaining acquisition retention
value
Profits
Evaluating Company
Growth Share Matrix (BCG Matrix)
Classification of SBUs/products into four
cell matrix based on
Market Attractiveness
Indicator – Industry’s annual growth rate
10% traditional cutoff
Business Strength
Indicator – Company’s Market Share Relative to Largest
Competitor
The BCG Growth-Share Matrix
20%-
Market Growth Rate
18%- Stars Question marks
4
16%-
14%-
12%- 5
3
? 2? 1
10%-
Cash cows Dogs
8%- 8
6%-
4%- 7
2%- 6
0
10x 4x 2x 1.5x 1x .5x .4x .3x .2x .1x
Relative Market Share
Strategy Implications BCG
Star – Leader in Expanding Industry
BUILD - Continue to increase market share – if
necessary at expense of short-term earnings
Cash Cow – Leader in mature or declining
industry
HOLD - Maintain share and cost leadership until
further investment becomes marginal
Maximize cash flow
Strategy Implications BCG
Problem Child (Question Marks)– Low market
share in Expanding Industry
HARVEST if weak, BUILD if strong.
Assess chances of dominating segment. If good, go
after share. If bad, redefine business or withdraw.
Dogs – Low market share in a mature or
declining industry
DIVEST Plan an orderly withdrawal so as to maximize
cash flow or concentrate on niches that require limited
effort
Assumptions of Growth /Share Matrix
High market share generates cash revenues ?
High market growth uses more cash resources ?
Evaluating Context and
Competitors
SWOT
Factors affecting an organization can usually be
classified as:
Internal factors
Strengths (S) Strengths Weaknesses
Weaknesses (W)
External factors
Opportunities (O) Opportunities Threats
Threats (T)
Strengths
A firm's strengths are its resources and
capabilities that can be used for developing a
competitive advantage.
Examples of such strengths include:
Patents
Strong brand names
Good reputation among customers
Cost advantages from proprietary know-how
Exclusive access to natural resources
Good access to distribution networks
Weaknesses
The absence of certain strengths are a
weakness.
For example:
Lack of patent protection
A weak brand name
Poor reputation among customers
High cost structure
Lack of access to best natural resources
Lack of access to key distribution channels
Weaknesses - Continued
In some cases, a weakness may be the flip
side of a strength.
For example, a firm has a large amount of
manufacturing capacity.
While this capacity may be considered a
strength that competitors do not share, it
also may be a considered a weakness if the
large investment in manufacturing capacity
prevents the firm from reacting quickly to
changes in the strategic environment.
Opportunities
The external environmental analysis may reveal
certain new opportunities for profit and growth.
Some examples of such opportunities include:
An unfulfilled customer need
Arrival of new technologies
Loosening of regulations
Removal of international trade barriers
Threats
Changes in the external environmental
also may present threats to the firm.
Some examples of such threats include:
shifts in consumer tastes away from the
firm's products
emergence of substitute products
new regulations
increased trade barriers
SWOT Interactions
For the external factors
Seriousness of Impact
Low High
Minimum
High
Must
resources if
plan for
any
Probability
of
occurrence Maintain
Low
Forget it flexibility in
plan
Porter’s Five Forces Model
POTENTIAL
ENTRANTS
Threat of new
3a. entrants
INDUSTRY
Bargaining power COMPETITORS
2a. of suppliers
2b. Bargaining power
of buyers
SUPPLIERS BUYERS
Rivalry among
1. existing firms
3b. Threat of substitute new
products or services
SUBSTITUTES
Three stages in Porters external analysis
1. Analyze industry structure
• How concentrated is it?
• What are the dynamics
2. Analyze the industry's context
• Are there powerful buyers?
• Are there powerful suppliers?
3. Analyze its long term viability
• Will more firms enter?
• Will substitute products or services be found?
Industry Competitors: Summary
Bargaining power Bargaining power
of suppliers Industry of buyers
Suppliers Buyers
competitors
• Is it a concentrated industry?
• 4 firm concentration ratio (what % of total industry output is accounted
for by the 4 largest firms)
• concentrated if > 70%
• fragmented if < 30%
– If fragmented…
• STOP HERE AND PROCEED INTERNAL ANALYSIS
– Otherwise
• Is there non-price competition?
– e.g. around brand, through product innovation
• Are there large economies of scale ?
• Are there high barriers to exit?
• Is the product a commodity?
• Do companies segment the market and differentiate
their products from each another?
1. Industry Rivalry
Bargaining power Bargaining power
of suppliers of buyers
Industry
Suppliers Buyers
competitors
• Rivalry refers to the extent to which firms compete on the
basis of price alone
– Competing by out spending on advertising is not considered
highly rivalrous
– Competing by out spending on innovation is not considered
highly rivalrous
– Competing by cutting prices is considered highly rivalrous
Industry competitors:
Cournot’s model of competition
Bargaining power Bargaining power
of suppliers of buyers
Industry
Suppliers Buyers
competitors
Potential price
LRAC
1 2 3 4 5 6
# of firms
2. Bargaining power
Bargaining power Bargaining power
of suppliers Industry of buyers
Suppliers Buyers
competitors
• Suppliers (2a) • Buyers (2b)
– Are we buying from a monopoly – Are we selling to a monopsony,
(or from a highly concentrated (or into a highly concentrated
industry)? (bad) market)? (bad)
– Does their product represent an – Does our product represent a
insignificant portion of our significant portion of the buyers
product costs? (?) product costs? (bad)
– Do we take a small – Do they take a significant
(insignificant) proportion of their proportion of our output (bad)
output (bad) – Can they backward integrate
– Can they forward integrate into into our business? (bad)
our business? (bad) – Can they easily switch suppliers
– Is it difficult for them to switch (bad)
suppliers (good)
3. Threat of new entry or substitution
• Are there barriers to entry? (3a)
– Economies of scale (good?)
– Significant sunk costs (e.g. brand) to act as a deterrent
– Does regulation restrict entry? (good)
• How likely is it that a substitute product for the needs
the industry currently meets will be found? (3b)
• If no likely substitutes and entry barriers are high,
above normal returns may persist over time.
Entry Deterrence
• Excess capacity
• Product proliferation
– closing any open niches
• Pricing
– Limit pricing (scale)
– Predatory pricing (illegal)
– Price signaling
PEST Analysis
Political factors
Economic factors
Socio-cultural factors
Technological factors
Thank You
