INDUSTRY SEGMENTATION

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Presentation transcript:

INDUSTRY SEGMENTATION

TOPIC COVERS…. Definition The role of segmentation Bases for segmenting industries Steps in segmentation analysis

Definition “Industry segmentation is the division of an industry into sub-units for purposes of developing competitive strategies” (Porter, 1985, M E p.231). Industry segmentation is broader than market segmentation as the latter is encompassed in the former.

The Role of segmentation Enables structural analysis (e.g.5 forces analysis) segment by segment. Enables the firm to choose in which segment to compete. Facilitates implication of focus strategies. Exposes segments in which the firm is weak. Facilitates the identification of KSFs for each segment.

Bases for Segmenting Industries These are of four main types (Porter M E 1985) Product Variety Buyer Type Channel (Immediate Buyer)segments Geographical Buyer Location

Product Segments These take the following forms Physical Size Price Level Product Features Technology or Design Inputs Employed Packaging Performance

Buyer Segments Industrial Commercial Buyers buyer industry technological sophistication purchasing process buyer size, etc Consumer Goods Buyers demographics life style language purchase association

Channel Segments Direct Vs Distributors Direct Mail Vs Retail/wholesale Distributors Vs Brokers Types of Retailers Exclusive Vs Non-exclusive Outlets

Geographic Segments Localities, regions or countries Weather zones Country stage of development

Steps In Segmentation Analysis Identifying key segmentation variables. Constructing a segmentation matrix. Analysing segment attractiveness. Identifying the segment’s KSFs. Choose between narrow versus broad segment scope.

IDENTIFYING KEY SUCCESS FACTORS PRE-REQUISITES FOR SUCCESS WHAT DO CUSTOMERS WANT ? HOW DOES THE FIRM SURVIVE COMPETITION ? ANALYSIS OF DEMAND ANALYSIS OF COMPETITION WHO ARE OUR CUSTOMERS ? WHAT DO THEY WANT ? WHAT DRIVES COMPETITION ? WHAT ARE THE MAIN DIMENSIONS OF COMPETITION ? HOW INTENSE IS COMPETITION ? HOW CAN WE OBTAIN A SUPERIOR COMPETITIVE POSITION ? KEY SUCCESS FACTORS