Srg Industry Analysis Primer Web Version

Industry and Market Analysis –
An SRG Primer Brief

All copy rights reserved

12/06/2008 Dr. R.B. Saunders, II SRG Hampton Roads Western Carolina 1

General Product-Market Assessment Research Steps
1. Define/refine the Market/ Industry;
(Source(s): Key Published industry study, DOC State of the Industry Report, Federal Lab
Intellectual Property Disclosure)
2. Clarify/Develop Industry Structure: See Exhibit II
Source: Published Reports, Expert Summary/overview
3. Review/Identify the key Industrial Players Rules of Commerce (OEM Hurtle Rates(ROI), Performance Barriers,
etc. unique to each ) Source (s): Journal Articles(Lexus Nexus, etc.), reports, Experts Interviews,etc.
4. List Commercially Competitive Products Offerings (segments)
Source(s): Same as above
5. New Product Trends -- Define Technology Research and Development System
Sources: Business Journals, Annual Reports, Trade associations, Third Party Lab Reports (Battelle Memorial
Institute, SRI, etc.)
6. Clarify Role of University Sponsored Research for any given Structure (Source(s): Published Articles, WCU
Professors,
7. Define Next Generation Technical Barriers
(Source(s): Lab Reports, Business Publications Forecasts, Investment House Industry Analyses, Technical
Society Reports (IEEE, SAE, etc.)
12/06/2008 2
Dr. R.B. Saunders, II SRG Hampton Roads Western Carolina

Research Manufacturing Development Marketing Institutional Ultimate
Customers Consumers
Systems
Forecast beyond customer knowledge
Large engineering
Large System producers basic Defined system
research: Analysis PRIORITIES parameters
Options open and fore- and interface
Test and scale
A few large casts
up to full scale
teams

----
Patent screen
World’s Detailed
Basic research best research in Introduce few well understood
explanations;
companies selected fields, and tested products Patent interface
plus network
to universities ----
Dominant market Small scale
very selected
Small scale Best in
world
-------------
Personal interaction
with a few advanced
share companies
frontier research technical users
manufacturing knowledge
of tech.
--------------
Supplier design
and product Best in breed
Risk your company
Involve all functions, plus suppliers, customers, post sale services
simultaneous design
(Taurus Sable example) Corporate leader
Best in breed Best in breed
or team

Innovation Structures (adapted from Quinn et al. 1997)
12/06/2008 3

What’s In A “Market Assessment” ?
Purpose: Create New Venture Product’s Position, Promotions And Pricing Strategy
Approach:
• Assess (Product-) Markets and Competition

• Know Industry Structure and Modes of Competition Through R & D Infrastructure/Arrangements

• Assess Trends in Industry’s Critical Success Factors

• Assess Technology’s Potential Impact -
•-The Products
• Manufacturing Production Technologies

• Business Models (Generic Organization, Pro Forma Financials) Valuation Models of Choice –
Industry Partners, Investment Community, Governmental Sources of Capital


Session Exercise: Quick *and dirty* Market Assessment
1. The Product-Market: Key Research Resource?

2. Review Business Information Sources:
(objective: Secure Generic Industry Standard Value Chain, and Production function, New Product Development Alliances

3. Search Literature for Published Industry Structure Report

4. Use unique *industry specific* web-based resources:

5. Interview Industry Experts Successful Entrepreneurs in the Product Market

12/06/2008 5

What’s the Product? What’s it’s Product-Market: Preliminary Considerations
1. Is it a Widget, Gadget, or…. Process Improvement ? What product can be purchased currently that is most like it.
Who makes it? Who is the largest Retailer of the product /process? What’s the Market Share story? Over time?
(gives you: Major Players, Key Market segments, Production Economies, Barriers to entry)

2. For any given price range, How Large is the current Product-Market (how many units given any given price) have
been sold over the past 5 years or closest approximation?) (gives you size of planned commercial or government
market opportunity)

3. What is/are the SIC or code(s) for the target product market? Gives you a key for locating Industry analyses (e.g.,
DOC Industry Studies, Investment Research for indication of Critical trends in Production, and demand, Anticipated
technology innovation)

4. What equipment out there will it substitute? Why/how is it better. (gives, Competitive Product Feature landscape,
Potential innovative product/process Licensing partners, research consortia)

5. Given your discovered field of competitors, What rate of market penetration does your team expect? Why? (or, On
what do you base that expectation?-- the product replacement rate; a New type of Buyer(s)? If so , what are the
estimates of that segment’s growth rate over the next 5 years?

6. What is the MAJOR purchase decision factor that has been found to determine why people buy it?
12/06/2008 6

Primer Back-up Charts

12/06/2008 Dr. R.B. Saunders, II SRG Hampton Roads Western Carolina
7

Marketing Mix1
The Four (4) P’s
Marketing decisions generally fall into the following four controllable categories:

• Product -- appearance, functionality, and support or non-tangibles the customer
will receive.
• Price -- how much you charge for your product or service. Considerations
include: whether you’ll charge the same amount all of the time or vary it
in some way. Varied pricing could occur according to geography, time
frame, or volume.
• Place (distribution) -- where and how your product is distributed and sold
• Promotion – Choice of approach for advertising and *modes* of selling of
product or service
1 Initially coined by Neil Borden, the term "marketing mix" became popularized after Neil H. Borden published his 1964 article, The Concept
of the Marketing Mix. E. Jerome McCarthy was later credited with grouping these ingredients into the four categories that today are known
as the 4 P's of marketing. Ref URL’s: Google: Four P’s for more on this. Or visit: www.ama.org,


Industry Structure: Competitive Landscape

12/06/2008 Dr. R.B. Saunders, II SRG Hampton Roads Western Carolina
9

Assessing Product Placement Options


Assessing Product Placement Options

Source: Kotler, (1984) “ Marketing Management”, Prentice Hall, pgs. 324

Recommended Penn Center Market Analysis Summary Table
SubTask (s): to Identify baseline market information for the following products. Research will identify potential local, regional, national,
global markets/users, average market price, and user requirements for shipping, quantity and product form. (5 days).
Draft Model Deliverable Summary Table:
Product Product-Market Product-Market Product-Market Shipping Standard Shipping Quantity/Product
(Global -Size, Unit (National-Size, Unit (Local -Size, Unit Requirements Units Form
Price, Nominal Unit Price, Nominal Unit Price, Nominal
Packaging)1 Packaging) Unit Packaging)

indigo Global Demand Volume: 350 tons4 Total: Wholesale Retail : TBD $1.00 to 2.00 dollar
for Organic $700 organic indigo balls
National Market for $15,000 to Bulk transport.
million (US) Organic Indigo Plant 3.500.00 annual5 Process Indigo Plant
2
specialty Retail Dye (Balls) into balls (i.e., 1 to 3
~ $2.00 per ball
oz ball) for long term
50 tons world wide Total Sales: in 2003 dollars6
storage or ball
$ 6,100,000.00 to development. May be
12,200,000.00 total stored for years if kept
wholesale sales dry
Total number of
units (3 oz ball):
6,010,000.units
annually

Spanish7 $400 million (US) Total National Total Local Processed Spanish  8 oz prepackaged
moss* Sales ~ $90,000,000 Market Sales: TBD8
Moss product bag
shipped in 6, 8, 10,
National Units $ 75.0 million
25, and 50 lb boxes9
sold: 33 million annually
Wholesale Packages:
units sold annually
Novelty Retail:
@ 1.99 per 8 oz bag
$65.0 Million
Retail volume:

1 Potential local, regional, national, global markets/users please see attached product market segment summaries/descriptions

Research to be performed by SRG as subcontractor for BWC as contractor
2 U.S. Industry Surveys (2002 ) “Retailing: Specialty” Standard and Poors August 29, 2002 pg
3 Aggregated total organic pigmentation market : $700 million total organic pigmentation market 25% is dyes of that
4 Along with BASF, major US competitors are in India followed by other countries in Asia and Africa. The total natural pigment and dye market (for all colors) - representing $700

million in sales-is currently 25% of total dye consumption. The trend toward introducing more expensive, high performance pigments is expected to boost the market for natural dyes
(Market Share Reporter, 2000). In 1994 documented world trade of natural indigo was approximately 50 tons annually (Food and Agriculture Organization of the United Nations, 1995).
5 Based on equivalent value of Nigerian recorded transactions (Per 3 oz ball $.50 to 1.00 in 1992 reference year)
6 According to a master Nigerian dyer, a 1 to 3 ounce ball exchanged in Nigeria for the equivalent of $.50 to 1.00 (1992 reference) or ~ 2.00 2003 dollars, the process requires

15 to 50 balls and 6 vats to generate active organic dye needed for crafts dying. (phone conversation with Mr. Adesola Falade
SRG____________________________________________________________________________________________________________________________________________Greensboro


12/06/2008 17

Source: Quinn (1992) “Intelligent Enterprise”.

Key Concepts: Cycle of Technology Development
{ BASIC
RESEARCH APPLIED DEVELOPMENT INTRO MATURITY
RESEARCH GROWTH

LABORATORY VERIFICATION TECHNICAL AND COMMERCIAL
SCIENTIFIC DEMONSTRATION
SUGGESTION, DECLINE
OF APPLICATION
DISCOVERY, AND PRODUCT ENGINEERING
RECOGNITION,
NEW CONCEPT
PREPROTOTYPE
RETURN

$0
INVESTMENT

BREAK EVEN
INVESTMENT
| | | | | | | | |

-16 -14 -12 -6 -2 -1 2 6
YEARS
LIFE CYCLE

FIGURE 1. Technology Research and Development Process (adapted from Boos 1976;Renault 1996)

12/06/2008 Dr. R.B. Saunders, II SG R Hampton Roads Western Carolina 19

Elements of Industrial Structure
Entry Barriers Rivalry Determinants
•Scale Economies New Entrants • Industry Growth
•Proprietary Product differences •fixed costs/value added
•Brand Switching Costs •Intermittent Overcapacity
Threat of
•etc. •Switching Costs
New Entrants
•Concentration and Balance
•etc.
Bargaining
Power of Bargaining Power
of Buyers
Suppliers Suppliers Buyers

Determinants of Supplier Threat of Determinants of Buyer
Power
•Input Differentiation Substitutes •Bargaining Leverage
Power
•Supplier concentration •Buyer Concentration viz.
•Presence of substitute inputs Substitutes Firm concentration
•Forward integration threat •Pull through
relative to backward •Buyer Volume
integration threat Source: Porter 1985
•etc.


The Product-Marketing Function:
Marketing Concept
“(holds) That the key to Achieving Organizational Goals Consists in Determining the
Needs and Wants of Target Markets and Delivering the Desired Satisfaction more
Effectively and Efficiently than Competitors “ {emphasis added}

Source: Kotler, (1984), “Marketing Management”, pg 22.


The Fundamental Enterprise Model

FIRM INFRASTRUCTURE
(e.g., Finance, Planning)
HUMAN RESOURCE MANAGEMENT
M
Support TECHNOLOGY RESEARCH AND DEVELOPMENT A
Activities MARKETING RESEARCH - PUBLIC RELATIONS R
OR
“STAFF FUNCTIONS” PROCUREMENT G
AFTER-SALES I
INBOUND OPERATIONS OUTBOUND SALES SERVICE N
LOGISITICS (MANUFACTURING, LOGISITICS
PRODUCTION) (Customer
Service)

PRIMARY ACTIVITIES
OR “LINE FUNCTIONS’
SOURCE: Porter 1990, pg. 41, 1985,1984


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