Influence and Shape of Business
To evaluate the economic opportunity, factors specific to the situation can be considered in evaluating segment options against these criteria and the resultant impact on the profits. Company thrust: Need to identify the requirements for success in the concerned target market. It must determine what particular business system consisting of marketing, production, finance, personnel. etc. , be needed to meet the requirements for success in that segment. The firm’s thrust should be such that it gives the company a critical advantage in that segment. Size and growth potential:
Not only the present size but also the future growth potential the concerned target market must be considered. The current market demand by itself proves misleading. The measurement might also create its own problems. Investment needed: Investment needed for tapping that particular target market is another factor to consider and take care to see that both entry costs and costs associated with building market share have been included. Profitability: The question of profitability is associated with investment decision. To calculate it we have to estimate both future sales and costs in the concerned segment.
It must also be considered is value-added to the product that is to be marketed in that large segment, for a low value-added product makes profitability more hazardous. Risk: There are the usual risks associated with the extent to which a particular target would respond. Other risks like the new product taking away part of the market share form the existing product(s) of the company in that target market need also be considered. Competition: The selection of target market also implies selecting the competitors with whom the company will compete.
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Another important point to note in this context is that segment may be large but may already be will served by several well-entrenched competitors. The question naturally would be whether one would like to enter such a segment. Understanding of the general environment in which an organization operates is the foremost pre-requisite towards a marketing strategy formulation. The six broad dimensions which the framework provides are political, economic, socio-cultural, technological, and environmental and legal which helps to keep a competitive advantage.
These are capable of giving a comprehensive overview of how things may be unfolding. The objective of the analysis out of this framework however should not only restrict to the present and past but the real focus should be on projecting the trends into future in order to get the real feel of the environment.. This shall enable the firm to proactively strategize for future considering the general environment it is going to face and the issues which will be of importance.