Marketing Strategy and Competitive Positioning pdf ebook

CHAPTER 9 SELECTING MARKET TARGETS
Management strength and depth 
A major asset, and hence potential strength, of any company is its human resources – and 
particularly its management strength and depth. The skills and competencies of the staff 
working in an organisation are the tacit strengths on which it can exploit opportunities in 
the marketplace. In service organisations (such as consultancy companies, health services, 
etc.) in particular, the strength of the supplier often comes down to the individual skills of 
the managers who deal directly with the customers.
Marketing strength 
Marketing strength stems from experience and synergy with other product areas. Compa-
nies operating primarily in consumer markets often believe they have superior marketing 
skills to those operating in slower-moving industrial markets. They then see these markets 
as areas where they can use the fast-moving consumer goods skills they have learned else-
where to good effect. Experience of transferring skills from one business sector to another, 
however, has not been universally successful.
Forward and backward integration 
The extent of control of the supply of raw materials (backward integration) and distribution 
channels (forward integration) can also affect the strength, or potential strength, of a com-
pany in serving a specific target. Where integration is high, especially in markets where sup-
plier and buyer power are high, the firm could be in a much stronger position than its rivals.
Summary 
The important point to consider when assessing company or business strength is that 
strength is relative to competitors also serving the segment and to the requirements of 
customers in that segment.
9.5 
Making market and segment choices 
Conventional approaches suggest the use of portfolio matrices as a useful way of summa-
rising the alternative business investment opportunities open to a multi-product company, 
and for making explicit choices between markets and segments. While such matrices have 
been used to assess the balance of the portfolio of businesses the company operates (see 
Chapter 3 ), the same techniques can usefully be adapted to help with the selection of market 
targets. 
Classic portfolio techniques include the Directional Policy Matrix (DPM) developed by 
the UK Chemical Division of Royal Dutch Shell ( Robinson et al ., 1978 ) or the McKinsey/
GE Business Screen ( Wind and Mahajan, 1981 ). These are generally considered as methods 
for modelling existing portfolios, but they are actually, in many instances, better suited 
to deciding which markets to target in the first place. An adapted model is presented in 
Figure 9.6 ; this is the operational version of the conceptual model we saw in Figure 9.1 at 
the start of our evaluation of market targets.
Using this approach, the factors deemed relevant in a particular market are identified 
(typically from the factors listed previously) and are each assigned weights depending on 
their perceived importance (using hard data wherever possible). The subjective choice and 
weighting of the factors to be used in the analysis ensure that the model is customised to 
the needs of the specific company. The process of selecting and weighting the factors can, 
in itself, prove a valuable experience in familiarising managers with the realities of the 
company’s markets. Where appropriate, factors can be more objectively assessed through 
the use of marketing research or economic analysis. 

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MAKING MARKET AND SEGMENT CHOICES
Once the factors have been determined and weighted, each potential market segment is 
evaluated on a scale from ‘excellent = 5’ to ‘poor = 1’, and a summary score on the two 
main dimensions of ‘market segment attractiveness’ and ‘company business strength in serv-
ing that segment’ computed using the weightings. Sensitivity analyses can then be conducted 
to gauge the impact of different assumptions on the weight to attach to individual factors 
and the assessments of targets on each scale.
The resulting model, such as that shown in Figure 9.7 for a hypothetical company, ena-
bles the alternatives to be assessed and discussed objectively.
Ideally, companies are looking for market targets in the bottom right-hand corner of 
Figure 9.7. These opportunities rarely exist, and the trade-off then becomes between going 
into segments where the company is, or can become, strong, but that are less attractive 
(such as target opportunity 1), or alternatively tackling more attractive markets but where 
the company is only average in strength (target 2).
To develop defensible positions in the marketplace, the former (sticking to areas of 
current or potential strength) often makes the most sense. Indeed, many would argue (see 
Ohmae, 1982) that most companies are better advised to consolidate in apparently less 
attractive markets where they have considerable exploitable strengths than to ‘chase the 
rainbows’ of seemingly attractive markets where they are only average or weak players.
Where business strength is weak, investment should be avoided in average or unattrac-
tive markets (target 7), unless in very attractive market segments where some strengths 
could be built or bought in through merger/acquisition (target 3). Similarly, investment 
in unattractive segments should be avoided unless particular company strengths can