Analyzing Markets and Competition

Rapid change, global competition, and the diversity of buyers' preferences in many markets require the constant attention of market watchers to see the shifting requirements of buyers, evaluate changes in competitive positioning, and spot opportunities for new products and services. A broad view of the market is important, even when interest centers on one or a few market segments. Mapping the entire market is necessary to understand and anticipate market changes and competitive threats. "Equipped with this map, a company can be in a position to examine all of the players serving the arena and anticipate what changes may occur between and among the segments of the map."1 Defining markets and evaluating the opportunities they offer for sales and profits assist management in market targeting and positioning decisions. Market and competitor analysis (1) identifies promising business opportunities, (2) evaluates "existing and potential competition, (3) guides the choice of which buyers to target, and (4) indicates the customer requirements to be satisfied by the marketing positioning strategy. The dangers of faulty market sensing are illustrated by the experience of the Schwinn Bicycle Company. During several generations the company's products forged a strong reputation with consumers,2 Surprisingly, management did not see the new competitive threats that developed in the 1980s. The firm's annual sales of bicycles were constant during the 1980s at 900,000 units, while industry sales nearly doubled from 6.7 million bikes in 1982 to 12.6 million in 1987. The rapid sates growth of the mountain bike was a major contributor. Schwinn's management made several mistakes, including not taking the competition seriously and not responding to changing consumer tastes. The company relied too heavily on the famous Schwinn name and was slow to innovate. Competitive advantage slipped away. Production was moved abroad to control costs, but this led to quality problems. Schwinn's market share fell from 25 percent in the 1960s to 8 percent. Dealers were attracted to competing brands. Monitoring existing and potential competi­tors would have alerted Schwinn's management to new market needs and competitive threats. Schwinn's loss of market position negatively impacted the firm's sales and profit. The company filed for bankruptcy in late 1992.The chapter begins with a discussion of how to define product-market; and market boundaries. Next, we look at how buyers are described and analyzed, followed by a discussion of competitor analysis. Finally, we consider market size estimation. Additional forecasting guidelines are available in Appendix 3A.