Evaluating Market Conditions

Your mastery of the art of business will largely determine the success or failure of your company. Because it is of vital importance to your company, you must not neglect your study of this art.

Five Strategic Considerations

In formulating a balanced and well thought out strategy, you need to consider many different factors which will affect your decision. An useful way of doing this is to view it in terms of the following five considerations:

• State of company
• Market window
• Market conditions
• Management
• Organization

State of Company

Objectively evaluate each company in the market. Briefly state your opinions and thoughts on each company, and the basis for your opinions. In particular, try to answer the following questions:

• Does the company act in a coherent manner, or is it as if the left hand doesn't know what the right hand is doing? Do the people in the company work as a team?
  
  
• How do the employees of the company feel about it? Are they enthusastic, or are they bitter and divided in their relations with the management of the company?
  
  
• With respect to the industry, is the company gaining or losing market share?

Market Window and Timing

For a given product, there is an ideal time to introduce it. To introduce the product prematurely means that potential customers are not ready to buy it. To introduce the product too late means that substantial competition already exists, or that the product is obsolete.

Consider the nature of the product. There are original products which require time to develop and educate the market. Take for example, the original personal computer. Improved products require little education, but often must contend with many competing products.

What are the conditions of the economy? How available is money? What tariffs exist?

Market Conditions

To enter a market, it is crucial to know its condition. How large is the market, how difficult will it be to enter, what are the conditions for doing business in the market? What are the market barriers? (Factors external to the company).

Japan taxes foreign workers 150% of their salary the first year. By the fifth year, the tax has increased to 500%.

What are the distribution channels for the product?

For semiconductor equipment manufacturers, there are numerous large representative firms in Far East countries which will sell U.S. equipment. In the United States, a foreign company must deal with numerous small representative firms, forcing many to have to use instead a costly direct sales force.

If the market does not currently exist, who are the people who might need or want it?

Consider the Apple II. It created the computer store as a means of selling its product to the consumer.

Management

Management. What are the characteristics of the management? Their experience, competence, and wisdom? (Factors internal to the company).

• Intelligence (ability to plan and quickly change plans)
• Trustworthiness (consistent in behavior)
• Humaneness (compassion for employees)
• Courage (seizing opportunity without vacillation)
• Sternness (willingness to strictly enforce behavior)

A company such as Hewlett-Packard uses decentralized decision making by pushing authority into individual divisions.

Contrast this with Varian, a company started at the same time as Hewlett-Packard in the same location as Hewlett-Packard. Its management and marketing was sufficient when the entire industry was growing rapidly, to grow with it. It gives its managers the responsiblity to perform, with no authority to actually spend the money necessary to implement the necessary actions.

Organization

How is the company organized? How is spending controlled? How are new products developed and introduced to the market?

• Organization
• Chain of command
• Distribution and sales

For each competitor, create a profile of its organization. Include a description of its: product line, target markets, marketing, sales, distribution, manufacturing, labor, purchasing, research and development, and finance and control.

Evaluating Ability to Win

The following seven questions can be used to judge the success that a company will have in penetrating a market:

• In which company are the employees most loyal? What is their turnover?
  
  
• Which company has the CEO with the most ability? Has the company grown through the insight of the CEO, or because of market conditions?
  
  
• Which company is favored most by the conditions of the economy and market?
  
  
• Which company has the best discipline and determination?
  
  
• Which company is stronger? Evaluate in terms of financial resources, product, and people.
  
  
• Which company has the best trained personnel and managers?
  
  
• In which company is merit properly rewarded, and misdeeds punished?

Overall Advice

Use this advice intelligently. There is no substitute for thinking.

• Be flexible. Take advantage of circumstances and modify your plans accordingly.
  
  
• Success in the marketplace is achieved by causing your competition to be misled.
  
  
• Think through all of the different options that are possible before deciding upon a given choice.

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