FAQ
Market Definition & Market Share
Note that these responses are not official additions to the theory, only explanations for the cases based on the specific questions received.
Market Definition
For more information see:
Example of
Market Definition
I have come up with the following ... as my definition of the market. Is this ok?
You should answer part (b) first before doing part (a). Define each individual element of the market and support fully with facts. Then you can combine them into the one sentence statement.
How should I go about supporting my definition of the market?
For each part of your definition (for example, the geographic area), explain how this is appropriate in terms of being 1) a real market from the customer's view, and 2) includes most (at least 90%) of the company's current business. Repeat for each of the other parts of the definition (at least the customer and product/service and perhaps the position in the chain or distribution method if appropriate).
Is the market definition the same as the company definition?
No. You are to define the industry/market that the company competes in, not the company. The company's name and specifics about it, including its' strategy and philosophy do not belong in the market definition.
In class, I heard you say that "when discussing the market, the company has no role in the definition." While that is clearly understandable, as many companies make up the market, I have the following questions: Under market, question A, the definition calls for "this business" Question B, asks for full support why this is the best definition. Based on the above, when answering these questions, is it correct to quote the author, in terms of how it directly relates to the company?
The customer and competing companies ultimately define the market (see Porter's definition of the industry); the company chooses the market within which they will compete.
The company may elect (through their mission and strategies) to compete in something smaller than the market defined by the customer, but the market definition must still be a "real" market - i.e., one defined by the customer and competitors; not one changed arbitrarily by the company.
The company in the case sells to distributors who then sell to the consumer. I'm confused as to who is the customer.
You must clearly include in your definition and support, both the direct customer (the distributor who pays you) and your ultimate customer (the consumer).
Can you give an example of a market definition where there is both a primary and secondary customer?
Ford is a manufacturer of cars and light trucks selling through franchised dealers to the general public throughout the world.
Market Share Theory
For more information see:
Market Share Theory
For those cases where I am asked to fully analyze the market, do I have to do a CPM or G/E Matrix?
No. Just discuss in writing the size of the market, growth rate, who the main competitors are, and their size.
I am having difficulty finding the exact market growth rate.
There is additional information on the BCG FAQ page regarding market growth rate.
I have more than 5 companies that hold the 70% market. According to the market share theory 3-5 companies hold the 70% of the market. Do I consider the case company a small company because of the small market share. I found many companies in the industry hold small amount of market share.
The actual share percentage of the company is not important (60%, 7%), nor is the exact number of companies (could be 3, could be 10) that make up a number like 70%. This will vary in different industries. The question is, is it "large" in comparison to the largest, not in comparison to the industry overall. Usually, it is pretty obvious when after going through a number of companies, the market share suddenly drops significantly and the companies become "small".
Look at some of the examples I gave out and compare the share of the smallest of the large companies to the share of the largest (smallest share divided by largest share) - is it 10% as big? 75% as big?
This company seems to operate in two different markets. Can I use data from one market (like market share) and apply it to the second market?
If there are two markets, then you must analyze each of the two markets separately. Use the information given for each.
See Sample Answer With Headers For Question 4 for BUS 704 for a sample 4.B. answer.
- Last revised 2/01/2004 -
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Copyright © 1999-2004 Raymond S. Kulzick - Last modified: September 13, 2008