The Data Institute Acquisition Manual

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Volume 6

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ACQUISITION MANUAL for THE TARGET COMPANY

6
Corporate Development
7
Product Management
8
Overseas Development
9
Product Distribution & Service
10
Advertising + P.R.
16
New Technology Primers
17
Physical Process & Orders
18
Competition Analysis
19
Product Perceptions
20
Customer Perceptions
Financial
Industry
Markets
Products
Data Grids
World MDB
Research MDB
Product MDB
Corporate MDB
Reference MDB

Volume
6

 

Corporate Development Stratagem

Strategic performance and the medium and long term future of the Company is discussed explicitly in this part of the manual.

The Corporate Development section contains a substantial amount of information on the strategic issues which affect the Company.

Relating the historic balance sheet data with the industry norms in each of the countries in which the Company operates gives a proper perspective of the current situation.

A large scale Strategic Analysis of the Company and all its corporate activities assess the effects of Market Share and Return on Investment relative to each of the corporate pursuits of the Company.

The Strategic matters discussed in this section produce a detailed analysis of each aspect of the operational procedures in the Company and view these activities in terms of their medium and long term impact on profits.

Each item evaluated exhibits the interaction between critical factors which combine to constitute the corporate situation at the Company.

General corporate options are reviewed and this furnishes an extended number of Return on Investment Scenarios for each of the major strategic decisions open to the Company.

Yields for the future can be calculated and quantified for the Company as a result of solid corporate development planning.

  1. Historic Financial + Operational Data

  2. Base Financial + Operational Forecasts

  3. Product Sector & Industry Data

  4. Strategy


1

Historic Data:  The Target Company

 

HISTORIC FINANCIAL DATA: THE TARGET COMPANY

 

 

Previous

Previous

Last Year

Total Sales in local currency of
the Company

 

$****

$****

$****

Domestic Sales

%

 

 

 

Exports

%

****%

****%

****%

Pre-tax Profit

%

****%

****%

****%

Interest Paid

%

****%

****%

****%

Non-trading Income

%

****%

****%

****%

Operating Profit

%

****%

****%

****%

Depreciation:   Structures

%

****%

****%

****%

Depreciation:   Plant & Equip.

%

****%

****%

****%

Depreciation:   Miscellaneous

%

****%

****%

****%

Total Depreciation

%

****%

****%

****%

Trading Profit

%

****%

****%

****%

Intangible Assets

%

****%

****%

****%

Intermediate Assets

%

****%

****%

****%

Fixed Assets: Structures

%

****%

****%

****%

Fixed Assets: Plant & Equip.

%

****%

****%

****%

Fixed Assets: Miscellaneous

%

****%

****%

****%

Fixed Assets

%

****%

****%

****%

Capital Expenditure: Structures

%

****%

****%

****%

Capital Expend. Plant and Eq.

%

****%

****%

****%

Capital Expenditure on Vehicles

%

****%

****%

****%

Cap. Exp. Data Processing Eq.

%

****%

****%

****%

Cap. Exp. Miscellaneous Items

%

****%

****%

****%

Total Capital Expenditure

%

****%

****%

****%

Retirements:  Structures

%

****%

****%

****%

Retirements:  Plant and Equip.

%

****%

****%

****%

Retirements:  Miscellaneous

%

****%

****%

****%

Total Retirements

%

****%

****%

****%

Total Fixed Assets

%

****%

****%

****%

Finished Product Stocks

%

****%

****%

****%

Work in Progress as Stocks

%

****%

****%

****%

Materials as Stocks

%

****%

****%

****%

Total Stocks / Inventory

%

****%

****%

****%

Debtors

%

****%

****%

****%

Miscellaneous Current Assets

%

****%

****%

****%

Total Current Assets

%

****%

****%

****%

Total Assets

%

****%

****%

****%

Creditors

%

****%

****%

****%

Short Term Loans

%

****%

****%

****%

Miscellaneous Current Liabilities

%

****%

****%

****%

Total Current Liabilities

%

****%

****%

****%

Net Assets / Capital Employed

%

****%

****%

****%

Shareholders Funds

%

****%

****%

****%

Long Term Loans

%

****%

****%

****%

Misc. Long Term Liabilities

%

****%

****%

****%

Workers

Unit

 

 

 

Hours Worked

Unit
 

 

 

Work in 1st Quarter  % p.a.

 

****%

****%

****%

Work in 2nd Quarter  % p.a.

 

****%

****%

****%

Work in 3rd Quarter  % p.a.

 

****%

****%

****%

Work in 4th Quarter  % p.a.

 

****%

****%

****%

Total Employees

Unit

 

 

 

Raw Materials Cost

%

****%

****%

****%

Finished Materials Cost

%

****%

****%

****%

Fuel Cost

%

****%

****%

****%

Electricity Cost

%

****%

****%

****%

Supplies/Materials/Energy Costs

%

****%

****%

****%

Payroll Costs

%

****%

****%

****%

Wages

%

****%

****%

****%

Directors' Remunerations

%

****%

****%

****%

Employee Benefits

%

****%

****%

****%

Employee Commissions

%

****%

****%

****%

Total Employees Remunerations

%

****%

****%

****%

Sub Contractors

%

****%

****%

****%

Rental & Leasing: Structures

%

****%

****%

****%

Rental/Leasing: Plant & Equip.

%

****%

****%

****%

Total Rental & Leasing Costs

%

****%

****%

****%

Maintenance: Structures

%

****%

****%

****%

Maintenance: Plant and Equip.

%

****%

****%

****%

Total Maintenance Costs

%

****%

****%

****%

Services Purchased

%

****%

****%

****%

Communications Costs

%

****%

****%

****%

Miscellaneous Expenses

%

****%

****%

****%

Sales Variable & Commissions

%

****%

****%

****%

Sales Expenses and Costs

%

****%

****%

****%

Sales Materials Costs

%

****%

****%

****%

Total Sales Costs

%

****%

****%

****%

Distribution Fixed Costs

%

****%

****%

****%

Distribution Variable Costs

%

****%

****%

****%

Warehousing Fixed Costs

%

****%

****%

****%

Warehousing Variable Costs

%

****%

****%

****%

Physical Handling Fixed Costs

%

****%

****%

****%

Physical Handling Variable Costs

%

****%

****%

****%

Physical Process Fixed Costs

%

****%

****%

****%

Physical Process Variable Costs

%

****%

****%

****%

Total Distribution & Handling

%

****%

****%

****%

Mailing & Correspondence Costs

%

****%

****%

****%

Media Advertising Costs

%

****%

****%

****%

Advertising Materials & Print

%

****%

****%

****%

POS & Display Costs

%

****%

****%

****%

Exhibition & Events Costs

%

****%

****%

****%

Total Advertising Costs

%

****%

****%

****%

Product Returns & Rejection

%

****%

****%

****%

Product Installation Costs

%

****%

****%

****%

Product Breakdown Costs

%

****%

****%

****%

Product Configuration Costs

%

****%

****%

****%

Product Service/Maintenance

%

****%

****%

****%

Customer Problem Solving Costs

%

****%

****%

****%

Total After-Sales Costs

%

****%

****%

****%

Total Marketing Costs

%

****%

****%

****%

New Technology Expenditure

%

****%

****%

****%

New Production Technology Exp.

%

****%

****%

****%

Total Research & Development

%

****%

****%

****%

Total Operational Costs

%

****%

****%

****%

Debtors within Agreed Terms

%

****%

****%

****%

Debtors Outside Agreed Terms

%

****%

****%

****%

Un-recoverable Debts

%

****%

****%

****%

 
 

 

 

 

 

 

End User Targets and End User Factors for the Company:

THE TARGET COMPANY  PROFILE

IMMEDIATE CUSTOMER BASE

% OF TOTAL

IMMEDIATE CUSTOMER BASE: Wholesale & Retail

****

IMMEDIATE CUSTOMER BASE: Manufacturers & OEM

****

IMMEDIATE CUSTOMER BASE: End Users

****

IMMEDIATE CUSTOMER BASE: Unallocated

****

OUTLET / BRANCH EMPLOYEE RANGES

% OF TOTAL

EMPLOYEE RANGES: 1-19 Employees

****

EMPLOYEE RANGES: 20-99 Employees

****

EMPLOYEE RANGES: 100+ Employees

****

EMPLOYEE RANGES: Unallocated

****

CUSTOMER PROFILES

IMMEDIATE BUYER

% AGE PROFILE

IMMEDIATE BUYER Age: <= 19

****

IMMEDIATE BUYER Age: 20-24

****

IMMEDIATE BUYER Age: 25-34

****

IMMEDIATE BUYER Age: 35-44

****

IMMEDIATE BUYER Age: 45-54

****

IMMEDIATE BUYER Age: 55-64

****

IMMEDIATE BUYER Age: >=65 / Unallocated

****

IMMEDIATE BUYER

% SOCIAL PROFILE

IMMEDIATE BUYER Social Group: AB

****

IMMEDIATE BUYER Social Group: C1

****

IMMEDIATE BUYER Social Group: C2

****

IMMEDIATE BUYER Social Group: DE / Unallocated

****

END USER

% AGE PROFILE

END USER Age: <= 19

****

END USER Age: 20-24

****

END USER Age: 25-34

****

END USER Age: 35-44

****

END USER Age: 45-54

****

END USER Age: 55-64

****

END USER Age: >=65 / Unallocated

****

END USER

% SOCIAL PROFILE

END USER Social Group: AB

****

END USER Social Group: C1

****

END USER Social Group: C2

****

END USER Social Group: DE / Unallocated

****

 Definitions

 

 

2

Base Scenario Forecast Data:  The Target Company

 

 

Financial Comparisons:

 

Target Company

Base Reference Industry

 

MEDIAN  FORECAST : Financials

MEDIAN  FORECAST : Margins & Ratios

BEST  FORECAST : Financials

BEST  FORECAST : Margins & Ratios

WORST  FORECAST : Financials

WORST  FORECAST : Margins & Ratios

MEDIAN  FORECAST : Financials

MEDIAN  FORECAST : Margins & Ratios

BEST  FORECAST : Financials

BEST  FORECAST : Margins & Ratios

WORST  FORECAST : Financials

WORST  FORECAST : Margins & Ratios

 

 Financial Definitions

 

 

 

Market, Product & Revenue Comparisons:

 

Target Company

Base Reference Market

 

MEDIAN REVENUE FORECAST Scenario

MEDIAN REVENUE FORECAST Scenario Product Share

BEST REVENUE FORECAST Scenario

BEST REVENUE FORECAST Scenario Product Share

WORST REVENUE FORECAST Scenario

WORST REVENUE FORECAST Scenario Product Share

PRODUCT LAUNCH: Scenario

PRODUCT LAUNCH: Scenario Product Share

MEDIAN MARKET FORECAST Scenario

MEDIAN MARKET FORECAST Scenario Product Share

BEST MARKET FORECAST Scenario

BEST MARKET FORECAST Scenario Product Share

WORST MARKET FORECAST Scenario

WORST MARKET FORECAST Scenario Product Share

PRODUCT LAUNCH: Scenario

PRODUCT LAUNCH: Scenario Product Share

   Market Definitions  

 

 

Industry & Operational Norms:

 

Target Company

Base Reference Industry Norms

 

Target Company

The Company – Product Launch

The Company – Median Forecast

The Company – Best Forecast

The Company – Worst Forecast

INDUSTRY NORMS

INDUSTRY NORMS – Product Launch

INDUSTRY NORMS – Median Forecast

INDUSTRY NORMS – Best Forecast

INDUSTRY NORMS – Worst Forecast

 

Industry Definitions

 

 

 

3

Product Sector Data:

 

 

Financial Comparisons & Scenarios:

 

Target Company

 

Reference Industry Finances: Base Reference Country

Company Financial Forecasts

 

Product Sector Financial Data

    Products & Services

Target Company

 

TOTAL

1

2

3

4

5

BASE FORECAST : MEDIAN: Financials

 

F0M F0M F0M F0M F0M F0M
BASE FORECAST : BEST: Financials

 

F0B F0B F0B F0B F0B F0B
BASE FORECAST : WORST: Financials

 

F0W F0W F0W F0W F0W F0W

DERIVED : BEST: Financials

 

FDB FDB FDB FDB FDB FDB
DERIVED : MEDIAN: Financials

 

FDM FDM FDM FDM FDM FDM
DERIVED : WORST: Financials

 

FDW FDW FDW FDW FDW FDW

PRODUCT LAUNCH: Financials

 

FPL FPL FPL FPL FPL FPL

    Financial Definitions

 

 

Market & Revenue Comparisons:

 
   Market Definitions

 

 

Product Comparisons:

 
   Definitions

 

 

Industry Comparisons:

 
   Industry Definitions

 

  

4

Strategy: The Company

 

1

STRATEGIC CONSIDERATIONS

 

FINANCIAL + OPERATIONAL FORECASTS: THE TARGET COMPANY & INDUSTRY PRODUCTS + SERVICES

1.1

 
 

 

STRATEGIC OPTIONS FINANCIAL SCENARIOS BASED BALANCE SHEET - FORECASTS


The STRATEGIC OPTIONS FINANCIAL SCENARIOS BALANCE SHEET FORECASTS section gives a series of Forecasts for the Company and the industry using a number of assumptions relating to the strategic decisions available to the management of the Company.

The Balance sheet forecast given shows the effects of strategic improvements which Corporate Planning Management is likely to recommend:


STRATEGIC OPTIONS FINANCIAL SCENARIOS

  • Fixed Marketing Cost Objectives

  • Variable Marketing Cost Objectives

  • General Marketing Process Cost Objectives

  • Distribution & Product Delivery Cost Objectives

  • Administrative & General Expense Objectives

  • Selling Cost Objectives

  • Advertising Cost Objectives

  • Promotional & Pricing Cost Objectives

  • Research & Product Cost Objectives

  • Market Share Building Objectives

  • Market Share Holding Objectives

  • Market Share Harvesting Objectives


Managers in the Company will, in both the short-term and the long-term, have vital decisions to make regarding the strategic improvements, margins and profitability and these decisions will need to be evaluated in light of the customers, markets, competitors, products, industry and internal factors. The scenarios given isolate a number of the most important factors and provide balance sheet forecasts for each of the scenarios.

The data provides a short and medium term forecast covering the next 6 years for each of the Forecast Financial and Operational items. The Financial and Operational Data sections show each of the items listed below in terms of forecast data and covers a period of the next 6 years.

 

Financial Comparisons: Scenarios

 

Target Company

Base Reference Industry

 


THE TARGET COMPANY FORECASTS

FIXED MARKETING Cost Objectives: Financials

FIXED MARKETING Cost Objectives: Margins & Ratios

VARIABLE MARKETING Cost Objectives: Financials

VARIABLE MARKETING Cost Objectives: Margins & Ratios

GENERAL MARKETING PROCESS Cost Objectives: Financials

GENERAL MARKETING PROCESS Cost Objectives: Margins & Ratios

DISTRIBUTION & PRODUCT DELIVERY Cost Objectives: Financials

DISTRIBUTION & PRODUCT DELIVERY Costs: Margins & Ratios

ADMINISTRATIVE & GENERAL EXPENSE Objectives : Financials

ADMINISTRATIVE & GENERAL EXPENSE Costs : Margins & Ratios

SELLING Cost Objectives: Financials

SELLING Cost Objectives: Margins & Ratios

ADVERTISING Cost Objectives: Financials

ADVERTISING Cost Objectives: Margins & Ratios

PROMOTIONAL & PRICING Cost Objectives: Financials

PROMOTIONAL & PRICING Cost Objectives: Margins & Ratios

RESEARCH & PRODUCT Cost Objectives: Financials

RESEARCH & PRODUCT Cost Objectives: Margins & Ratios

MARKET SHARE BUILDING Objectives : Financials

MARKET SHARE BUILDING Objectives : Margins & Ratios

MARKET SHARE HOLDING Objectives : Financials

MARKET SHARE HOLDING Objectives : Margins & Ratios

MARKET SHARE HARVESTING Objectives : Financials

MARKET SHARE HARVESTING Objectives : Margins & Ratios


FORECAST FINANCIAL SCENARIOS

FIXED MARKETING Cost Objectives: Financials

FIXED MARKETING Cost Objectives: Margins & Ratios

VARIABLE MARKETING Cost Objectives: Financials

VARIABLE MARKETING Cost Objectives: Margins & Ratios

GENERAL MARKETING PROCESS Cost Objectives: Financials

GENERAL MARKETING PROCESS Cost Objectives: Margins & Ratios

DISTRIBUTION & PRODUCT DELIVERY Cost Objectives: Financials

DISTRIBUTION & PRODUCT DELIVERY Costs: Margins & Ratios

ADMINISTRATIVE & GENERAL EXPENSE Objectives : Financials

ADMINISTRATIVE & GENERAL EXPENSE Costs : Margins & Ratios

SELLING Cost Objectives: Financials

SELLING Cost Objectives: Margins & Ratios

ADVERTISING Cost Objectives: Financials

ADVERTISING Cost Objectives: Margins & Ratios

PROMOTIONAL & PRICING Cost Objectives: Financials

PROMOTIONAL & PRICING Cost Objectives: Margins & Ratios

RESEARCH & PRODUCT Cost Objectives: Financials

RESEARCH & PRODUCT Cost Objectives: Margins & Ratios

MARKET SHARE BUILDING Objectives : Financials

MARKET SHARE BUILDING Objectives : Margins & Ratios

MARKET SHARE HOLDING Objectives : Financials

MARKET SHARE HOLDING Objectives : Margins & Ratios

MARKET SHARE HARVESTING Objectives : Financials

MARKET SHARE HARVESTING Objectives : Margins & Ratios

 

 Financial Definitions

 


   

 

   

2

THE TARGET COMPANY STRATEGY

   
 


This report assumes that the following Company Product Sectors are strategically important to the Company:-

Company Products

Significant Company Products

Company Product / Brand Sector 1
Company Product / Brand Sector 2
Company Product / Brand Sector 3
Company Product / Brand Sector 4
Company Product / Brand Sector 5
Company Product / Brand Sector 6
Company Product / Brand Sector 7
Company Product / Brand Sector 8
Company Product / Brand Sector 9
Company Product / Brand Sector 10
Company Product / Brand Sector 11
Company Product / Brand Sector 12
Company Product / Brand Sector 13
Company Product / Brand Sector 14
Company Product / Brand Sector 15

Products & Services

Major Products

Industry Product Sector 1
Industry Product Sector 2
Industry Product Sector 3
Industry Product Sector 4
Industry Product Sector 5
Industry Product Sector 6
Industry Product Sector 7
Industry Product Sector 8
Industry Product Sector 9
Industry Product Sector 10
Industry Product Sector 11
Industry Product Sector 12
Industry Product Sector 13
Industry Product Sector 14
Industry Product Sector 15

 

In addition this report assumes that the following Product Markets are relevant to the Company:-

 


 

**** This report covers all the products or brands which were previous, are currently, or will potentially be in the future, important to the Company.

 



This report assumes that the following geographic areas is the Trade Cell currently covered by the Company:-

THIS DATABASE COVERS THE FOLLOWING COUNTRIES: Geographic coverage of the databases

Company Trade Cell

Trade Cell

Significant Company Markets

Company Trading Area 1
Company Trading Area 2
Company Trading Area 3
Company Trading Area 4
Company Trading Area 5
Company Trading Area 6
Company Trading Area 7
Company Trading Area 8
Company Trading Area 9
Company Trading Area 10
Company Trading Area 11
Company Trading Area 12
Company Trading Area 13
Company Trading Area 14
Company Trading Area 15

Major Trade Cell Markets

Industry Trade Cell Market / Sector 1
Industry Trade Cell Market / Sector 2
Industry Trade Cell Market / Sector 3
Industry Trade Cell Market / Sector 4
Industry Trade Cell Market / Sector 5
Industry Trade Cell Market / Sector 6
Industry Trade Cell Market / Sector 7
Industry Trade Cell Market / Sector 8
Industry Trade Cell Market / Sector 9
Industry Trade Cell Market / Sector 10
Industry Trade Cell Market / Sector 11
Industry Trade Cell Market / Sector 12
Industry Trade Cell Market / Sector 13
Industry Trade Cell Market / Sector 14
Industry Trade Cell Market / Sector 15



This report assumes that the following major Operational activities are strategically important to the Company:-

Target Company Operations

Industry Operations

Significant Company Operations

Company Operations & Activities 1
Company Operations & Activities 2
Company Operations & Activities 3
Company Operations & Activities 4
Company Operations & Activities 5
Company Operations & Activities 6
Company Operations & Activities 7
Company Operations & Activities 8
Company Operations & Activities 9
Company Operations & Activities 10
Company Operations & Activities 11
Company Operations & Activities 12
Company Operations & Activities 13
Company Operations & Activities 14
Company Operations & Activities 15

Industry Operations

Industry Operations & Activities 1
Industry Operations & Activities 2
Industry Operations & Activities 3
Industry Operations & Activities 4
Industry Operations & Activities 5
Industry Operations & Activities 6
Industry Operations & Activities 7
Industry Operations & Activities 8
Industry Operations & Activities 9
Industry Operations & Activities 10
Industry Operations & Activities 11
Industry Operations & Activities 12
Industry Operations & Activities 13
Industry Operations & Activities 14
Industry Operations & Activities 15



This report assumes that the following major Competitors are strategically important to the Company:-

Company Competitors

Industry Competitors

Significant Company Competitors

Company Competitors 1
Company Competitors 2
Company Competitors 3
Company Competitors 4
Company Competitors 5
Company Competitors 6
Company Competitors 7
Company Competitors 8
Company Competitors 9
Company Competitors 10
Company Competitors 11
Company Competitors 12
Company Competitors 13
Company Competitors 14
Company Competitors 15

Industry Competition

Industry Chief Overall Service Competitor
Industry Main National Market Competitor
Industry Main Regional / Local Market Competitor
Industry Main Trade Cell Market Competitor
Industry Main National Product Superiority Competitor
Industry Main Trade Cell Product Superiority Competitor
Industry Main National Price Competition Competitor
Industry Main Trade Cell Price Competition Competitor
Industry Main National Financial Strength Competitor
Industry Main Trade Cell Financial Strength Competitor
Industry Main National Customer Satisfaction Competitor
Industry Main Trade Cell Customer Satisfaction Competitor
Industry Main National Marketing Aggression Competitor
Industry Main Trade Cell Marketing Aggression Competitor
Industry Main New Product Development Competitor

 
ABBREVIATION USED
The abbreviation  ROIc  means: RETURN ON INVESTMENT Change, being the % change of Return on Investment.
The abbreviation  ROSc  means: RETURN ON SALES Change, being the % change of Return on Sales.

 

 

INTRODUCTION


The purpose of this section is to analyze the Medium and Long Term Strategic environment for the Company. The quintessential measure of a company's medium and long term success is profitability and thus this section of the study will pay close attention to issues pertinent too, and cognizant of, the desire for profitability. The most important measure of profitability used in this section is Return on Investment (ROI): this being defined as being 'Income' (after deduction of corporate expenses but before deductions for interest charges) DIVIDED by 'Average Investment' (working capital plus fixed capital at book value).

 

THE TRADE CELL


This volume conducts an analysis in terms of the Company's operational trade cell. This being the regions, countries or states which form the effective competitive and market environment for the Company. Whether or not the Companyoperates in the various areas covered is immaterial as the effects of the marketplace exist nonetheless.

 

CRITICAL FACTORS FOR PROFITABILITY


There are a number of critical factors which effect and determine profitability for Products & Services. These factors will of course vary from country to country and indeed from product group to product group, nevertheless an analysis and appreciation of these critical factors is essential to an understanding of the business environment and the problems and opportunities for the Company.



BASE FORECAST: THE TARGET COMPANY


The BASE tactical prognosis and analysis of the Company can be used as a base-line for the strategic considerations shown in this section.

This Base Financial and Operational Data forecast assumes the following conditions:-

1. Forecasts are based on an interaction of all external factors:-
   a. Market Growth (Medium + Long Term)
   b. Competitive Factors
   c. Industry Factors

2. Forecasts assume ceteris paribus in terms of internal factors and assumes no strategic change in internal company factors or financial decisions.

3. Forecasts assume change (as appropriate) in Market Competitors and use Competitor databases to forecast changes in competitive situations which will affect the Company.

 

Base Forecast : Median Market Scenario

 

The following Excel spreadsheets (or the Access tables in the databases) should be used to produce a graphic representation of the relationship between the Company and the industry and market situation.  The links below point to the industry and market situation, and to the situation in respect of the Company:-

 

INDUSTRY & MARKET

THE TARGET COMPANY

 

MEDIAN MARKET FORECAST Scenario

MEDIAN MARKET FORECAST Scenario Product Share

MEDIAN REVENUE FORECAST Scenario

MEDIAN REVENUE FORECAST Scenario Product Share

 Market Definitions

 

MEDIAN  FORECAST : Financials

MEDIAN  FORECAST : Margins & Ratios

MEDIAN  FORECAST : Financials

MEDIAN  FORECAST : Margins & Ratios

 Financial Definitions




THE MARKET ENVIRONMENT for THE TARGET COMPANY


There are four basic issues to investigate when considering the market environment for the Company:-

   1. Market Growth
   2. Market Structure
   3. Market/s Serviced
   4. Customer & End User Factors

1. MARKET GROWTH (both short-term and medium term) for Products & Services is fully analyzed in other sections and further analyzed in this section. The importance of this factor is of course self-evident and thus not requiring further explanation.

2. THE MARKET STRUCTURE for Products & Services is very critical for profitability. The nature of the market, the location of the Marketplace, the customer base and the supplier structure is fully provided in several other sections of this study and therefore no further discussion is necessary.

3. MARKET SERVICED is the term used to denote the function between the product/s and services offered by the Company and the particular market sector the marketing effort reaches, viz,

 

THE TOTAL INDUSTRY PRODUCTS + SERVICES MARKET

MARKET AVAILABILITY

Demand with no suitable product offering

Available Market

 

Demand controlled by fixed long term agreements with suppliers

 

Demand controlled by Public Policy, Government controls or preferences

MARKET SERVICED

 

Market Area

Serviced

by any

particular

Company


Thus the Market Area Serviced is the sector of the market for which the Company is offering a suitable product or service and the Available Market is the sector of the market reached by the Company's marketing effort. The areas marked as the overlap in the Market Area Serviced, i.e. the market sector for which the Company are offering suitable product/s or services and which may theoretically be reached  by the Company's marketing activities, but of which, part is controlled by either the Purchasers or tied Suppliers. The Market Availability is the total market perceived by the total Purchaser Universe.

The Market Area Serviced is the true market for the Company in terms of product/s and services, however parts of this market may be difficult or impossible to attain due to the control exerted by either the Purchasers or the Suppliers.



MARKET SERVICED BY THE TARGET COMPANY

 

% OF THE INDUSTRY PRODUCTS + SERVICES TRADE CELL MARKET POTENTIALLY AVAILABLE TO THE TARGET COMPANY

The relative percentage of the Products & Services markets in the Trade Cell which it is believed can be served by the Company (given present products and marketing activities) are shown below.

 

TRADE CELL MARKETS SERVICED BY THE TARGET COMPANY

COUNTRY

% of

potentially

available

Market

Company Trading Area 1

 

Company Trading Area 2

 

Company Trading Area 3

 

Company Trading Area 4

 

Company Trading Area 5

 

Company Trading Area 6

 

Company Trading Area 7

 

Company Trading Area 8

 

Company Trading Area 9

 

Company Trading Area 10

 

Company Trading Area 11

 

Company Trading Area 12

 

Company Trading Area 13

 

Company Trading Area 14

 

Company Trading Area 15

 

 

Market Service Efficiency over Time

THE TOTAL INDUSTRY PRODUCTS + SERVICES MARKET EQUALS 100% AND THE PERCENTAGES SHOWN EQUALS THE TRADE CELL MARKET BELIEVED AVAILABLE TO THE TARGET COMPANY.


[ CORPORATE DATABASE USERS: The percentages in the data shows the relative percentage of the total market for Products & Services which is believed the Company can service given existing and proposed products, services and marketing activities as notified to the modelling software in the relevant base data set-up tables. ]

 

 

CUSTOMER FACTORS FOR INDUSTRY PRODUCTS + SERVICES


CONCENTRATIONS OF INDUSTRY PRODUCTS + SERVICES PURCHASES - END USERS

The relative Concentration of Purchases (at End User level) of Products & Services in the Trade Cell are shown below. It is of course evident that in certain markets purchases are substantially more concentrated than in other Trade Cell markets.

% of Physical Number of End User Customers


The percentages in the above chart shows the relative Concentration of Purchases (at End User level) for products and services IN TERMS OF THE % OF THE END USERS WHICH ACCOUNTED FOR 50% OF THE TOTAL MARKET.

[ CORPORATE DATABASE USERS:  The section marked in the data indicates the position for the Company in terms of the reported Concentrations of Purchases (at End User level) experienced for Products & Services as notified to the modelling software in the relevant base data set-up tables.  ]
 

 

CONCENTRATIONS OF INDUSTRY PRODUCTS + SERVICES PURCHASES - IMMEDIATE CUSTOMERS

The relative Concentration of Purchases (at Immediate Customers level) of Products & Services in the Trade Cell are shown below. Clearly in certain markets purchases are substantially more concentrated than in other Trade Cell markets.

% of Physical Number of Immediate Customers


The percentages in the above chart shows the relative Trade Cell Concentration of Purchases (at Immediate Customers level) for products and services IN TERMS OF THE % OF THE IMMEDIATE CUSTOMERS WHICH ACCOUNTED FOR 50% OF THE TOTAL MARKET.

INDUSTRY PRODUCTS + SERVICES CUSTOMER PROFILES

IMMEDIATE BUYER

% AGE PROFILE

IMMEDIATE BUYER Age: <= 19

****

IMMEDIATE BUYER Age: 20-24

****

IMMEDIATE BUYER Age: 25-34

****

IMMEDIATE BUYER Age: 35-44

****

IMMEDIATE BUYER Age: 45-54

****

IMMEDIATE BUYER Age: 55-64

****

IMMEDIATE BUYER Age: >=65 / Unallocated

****

IMMEDIATE BUYER

% SOCIAL PROFILE

IMMEDIATE BUYER Social Group: AB

****

IMMEDIATE BUYER Social Group: C1

****

IMMEDIATE BUYER Social Group: C2

****

IMMEDIATE BUYER Social Group: DE / Unallocated

****

END USER

% AGE PROFILE

END USER Age: <= 19

****

END USER Age: 20-24

****

END USER Age: 25-34

****

END USER Age: 35-44

****

END USER Age: 45-54

****

END USER Age: 55-64

****

END USER Age: >=65 / Unallocated

****

END USER

% SOCIAL PROFILE

END USER Social Group: AB

****

END USER Social Group: C1

****

END USER Social Group: C2

****

END USER Social Group: DE / Unallocated

****

[ CORPORATE DATABASES:  The section marked in the data indicates the position for the Company in terms of the reported Concentrations of Purchases (at Immediate Customers level) experienced for Products & Services as notified to the modelling software in the relevant base data set-up tables. ]


THE PRODUCT: THE TARGET COMPANY


Product factors and differentiations are essentially linked to competitive advantages and there are four major Product factors critical for Products & Services. These are as follows:-

   1. The Product Life Cycle and Stage in the Life Cycle
   2. Relative Price
   3. Quality
   4. New Products


THE INDUSTRY PRODUCTS + SERVICES LIFE CYCLE AND STAGES IN THE LIFE CYCLE

Products & Services Growth has already been discussed elsewhere, however it is important to explore the relationships between Products & Services Life Cycle, Stage in the Life Cycle and Return on Investment.

Life Cycles and Stages in Life Cycles can be epitomized according to the following matrix:-

STAGES IN THE LIFE CYCLE

FACTOR

STAGE IN THE LIFE CYCLE

EARLY > > > > > > > LATE

NEWNESS OF PRODUCT

NEW ---------------------------- OLD

NEW PRODUCT INTRODUCTIONS

HIGH --------------------------- LOW

LONG TERM MARKET GROWTH

HIGH --------------------------- LOW

ENTRY & EXIT OF COMPETITORS

HIGH --------------------------- LOW

TECHNOLOGICAL IMPROVEMENTS

HIGH --------------------------- LOW

HIGH DEVELOPMENT EXPENDITURE

HIGH --------------------------- LOW

HIGH MARKETING EXPENDITURE

HIGH --------------------------- LOW



It is always most profitable to enter a market or introduce a product when the Product Life Cycle is at its most dynamic stage of growth. This Life Cycle function is best examined through Gompertz analysis.

The Gompertz curve indicates the growth of cumulative sales and represents a pattern which is related to the experience of Innovation/Diffusion research. The curve examines market penetration and also demonstrates (in graphic form) probable growth.

There are three Life Cycle stages for Products & Services , these are as follows:

1.

The Introductory Stage:

This is when primary demand for the product just starts to grow and in the main the products and services are unknown to potential end users.

2.

The Dynamic Phase:

This is when demand is growing rapidly in real terms. The technological and competitive structure of the market and industry is changing rapidly.

3.

The Maturity Stage:

This is when the majority of potential end users are aware of the product. The technological and competitive structure of the market and industry is stable. Weaker suppliers begin to exit the market. The latter part of this stage will be marked with an actual decline of the market in real terms.



MARKET SHARE / INDUSTRY PRODUCTS + SERVICES LIFE CYCLE / PROFITABILITY

 

MARKET SHARE / INDUSTRY PRODUCTS + SERVICES LIFE CYCLE / PROFITABILITY

THE TARGET COMPANY

% MARKET SHARE

LOW

AVERAGE

HIGH

STAGES IN THE LIFE CYCLE

EARLY

ROIc=****%

ROIc=****%

ROIc=****%

DYNAMIC

ROIc=****%

ROIc=****%

ROIc=****%

MATURE

ROIc=****%

ROIc=****%

ROIc=****%



It will be noticed that as Market Share increases so usually does Return on Investment; moreover as the product Life Cycle progresses from introduction to maturity there is often an increase in Return on Investment at each Market Share level. 

It will also be seen that as products reach maturity Return on Investment usually begins to decline at the higher levels of market share, conversely however Return on Investment often continues to increase at the lower levels of market share.



QUALITY / INDUSTRY PRODUCTS + SERVICES LIFE CYCLE / PROFITABILITY

 

QUALITY / INDUSTRY PRODUCTS + SERVICES LIFE CYCLE / PROFITABILITY

THE TARGET COMPANY

QUALITY

LOWER

SAME

HIGHER

STAGES IN THE LIFE CYCLE

EARLY

ROIc=****%

ROIc=****%

ROIc=****%

DYNAMIC

ROIc=****%

ROIc=****%

ROIc=****%

MATURE

ROIc=****%

ROIc=****%

ROIc=****%



It will be seen from the above that profitability will not be dramatically different if Products & Services quality is regarded as being 'low' or 'average'. Conversely, if Products & Services quality is regarded as being 'high', then there will be a significant improvement in profitability.

There appears to be little change in profitability at any given Quality level as Products & Services progress from introduction to the mature stage of the life cycle.



INDUSTRY PRODUCTS + SERVICES RANGE / LIFE CYCLE STAGE / PROFITABILITY

 

INDUSTRY PRODUCTS + SERVICES RANGE / LIFE CYCLE STAGE / PROFITABILITY

THE TARGET COMPANY

PRODUCT RANGE

MORE LIMITED

SAME

MORE EXTENSIVE

STAGES IN THE LIFE CYCLE

EARLY

ROIc=****%

ROIc=****%

ROIc=****%

DYNAMIC

ROIc=****%

ROIc=****%

ROIc=****%

MATURE

ROIc=****%

ROIc=****%

ROIc=****%



It will be noticed that an extensive Products & Services range in the Early or Dynamic stage of product growth will significantly improve the chances of higher profitability.

Conversely, an extensive product range will produce a marked decline in profitability as Products & Services growth matures and reaches the end of the life cycle; whilst a limited Products & Services range will actually increase as the life cycle matures.



INDUSTRY PRODUCTS + SERVICES RANGE / PROFITABILITY / CAPITAL INTENSITY

 

INDUSTRY PRODUCTS + SERVICES RANGE / LIFE CYCLE STAGE / CAPITAL INTENSITY

THE TARGET COMPANY

PRODUCT RANGE

MORE LIMITED

SAME

MORE EXTENSIVE

FIXED CAPITAL INTENSITY*

LOW

ROIc=****%

ROIc=****%

ROIc=****%

MEDIUM

ROIc=****%

ROIc=****%

ROIc=****%

HIGH

ROIc=****%

ROIc=****%

ROIc=****%



At middle and higher levels of Capital Intensity there appears to be a definitive improvement in profitability if the Products & Services range is more extensive than the average for the industry.

* Capital Intensity is calculated as being Book Value of Plant and Equipment divided by Sales.



MARKET SEGMENTATION EXPENDITURE EFFECT FORECASTS


This section analyses the effects of a Market Segmentation programme and its concomitant expenditure in terms of the Company's Financial and Operational results.

Marketing Segmentation involves the repositioning, repackaging and remarketing of existing products to meet and serve other market segments. In general terms the expenditure incurred is limited to product development costs plus additional marketing costs.

This tactic is regarded as a short or medium-term operation where the benefits are seen in a fairly short time period.

 

Market Segmentation

 

The following Excel spreadsheets (or the Access tables in the databases) should be used to produce a graphic representation of the relationship between the Company and the industry and market situation.  The links below point to the industry and market situation, and to the situation in respect of the Company:-

 

INDUSTRY & MARKET

THE TARGET COMPANY

 

 

MARKET SEGMENTATION: Market

MARKET SEGMENTATION: Share

 

MARKET SEGMENTATION: Market

MARKET SEGMENTATION: Share

 Market Definitions

 

MARKET SEGMENTATION: Financials

MARKET SEGMENTATION: Margins

MARKET SEGMENTATION: Financials

MARKET SEGMENTATION: Margins

 Financial Definitions



MARKET SHARE & CUSTOMIZED OR SPECIFIED PRODUCTS

 

MARKET SHARE & CUSTOMIZED OR SPECIFIED PRODUCTS

THE TARGET COMPANY

PRODUCT RANGE

MORE STANDARDIZED

SAME

MORE CUSTOMIZED

RELATIVE MARKET SHARE

LOW

ROIc=****%

ROIc=****%

ROIc=****%

MEDIUM

ROIc=****%

ROIc=****%

ROIc=****%

HIGH

ROIc=****%

ROIc=****%

ROIc=****%



A relatively low market share is less damaging if customized or specified products are offered.

At the higher market share levels there is however a profit penalty evident when producing customized or specified products.


 

PROFITABILITY / HIGH MARKET SHARE / PRODUCT UNIQUENESS

 

PROFITABILITY / HIGH MARKET SHARE / PRODUCT UNIQUENESS

THE TARGET COMPANY

PRODUCT UNIQUENESS

MORE COMMON

SAME

MORE UNIQUE

RELATIVE MARKET SHARE

LOW

ROIc=****%

ROIc=****%

ROIc=****%

MEDIUM

ROIc=****%

ROIc=****%

ROIc=****%

HIGH

ROIc=****%

ROIc=****%

ROIc=****%


For the Company, product uniqueness and a high relative market share will tend to find that they experience a reduced profitability.

Conversely, if the Company is experiencing a lower relative market share will find a profit benefit from Products & Services uniqueness.



RELATIVE PRICING OF INDUSTRY PRODUCTS + SERVICES IN THE TRADE CELL

 

The relative selling prices for Products & Services in the Trade Cell are shown below. In certain markets prices are substantially at variances with the average pricing in the Trade Cell. These relative prices have been corrected for, and exclude, the effects of inflation, discounting, relative buying indices, et cetera; but including the effects of unavoidable taxes, duties and other levies. Thus the data below represents the actual cost of products and services in real terms and net of the effects of other extraneous factors.

INDUSTRY TRADE CELL RELATIVE PRICING INDEX

COUNTRY

Index

Industry Trade Cell Market / Sector 1

****

Industry Trade Cell Market / Sector 2

****

Industry Trade Cell Market / Sector 3

****

Industry Trade Cell Market / Sector 4

****

Industry Trade Cell Market / Sector 5

****

Industry Trade Cell Market / Sector 6

****

Industry Trade Cell Market / Sector 7

****

Industry Trade Cell Market / Sector 8

****

Industry Trade Cell Market / Sector 9

****

Industry Trade Cell Market / Sector 10

****

Industry Trade Cell Market / Sector 11

****

Industry Trade Cell Market / Sector 12

****

Industry Trade Cell Market / Sector 13

****

Industry Trade Cell Market / Sector 14

****

Industry Trade Cell Market / Sector 15

****

Index of Pricing over Time


The above shows relative Trade Cell pricing for Products & Services. The mid-point line, indicated as '100' represents the Trade Cell average price for Products & Services.

 

[ CORPORATE DATABASES:  The section marked in the data indicates the average selling price for Products & Services marketed by the Company. This will show the relative price differential between the Company's prices and the various price norms. ]


PRICE CUTTING EFFECT ON FINANCIAL + OPERATIONAL FORECASTS


The preceding pages analyses the effects of a Price Cutting programme and its implied increasing turnover in terms of the Company's Financial and Operational results.

Price Cutting programmes have an immediate effects on company turnover but clearly not on profitability, at least in the short-term. There are long-term side effects to this tactic, being that there is a tendency for such programmes to reflect on the quality and market position of the Company.

Short Term Price Cutting programmes tend to be short-term remedies to sales problems and cannot be sustained for over 2 years. Long Term Pricing Cutting involves structural and organisational changes to be sustainable and is thus a strategic issue which is an intrinsic part of other strategic considerations.

 

Long-Term Product Price Cutting Effect



PRICE INCREASE EFFECT ON FINANCIAL + OPERATIONAL FORECASTS


The preceding section analyses the effects of a Price Increase programme and its presumed short-term increasing profits in terms of the Company's Financial and Operational results.

Price Increase programmes have a rapid effects on company profits but of course not on turnover, at least in the short-term and medium-term. There are long-term side effects to this tactic, being that there is a pattern for such programmes to reflect on the market share and market position of the Company.

Price Increase programmes tend to be a short-term panacea to sales problems and cannot be prolonged for over 1 years. Thus the forecasts reflect the short-term tendencies in this course.

 

Short-Term Price Increase Effect

 

The following Excel spreadsheets (or the Access tables in the databases) should be used to produce a graphic representation of the relationship between the Company and the industry and market situation.  The links below point to the industry and market situation, and to the situation in respect of the Company:-

 

INDUSTRY & MARKET

THE TARGET COMPANY

 

SHORT-TERM PRICE INCREASE : Forecast

SHORT-TERM PRICE INCREASE : Share

SHORT-TERM PRICE INCREASE : Forecast

SHORT-TERM PRICE INCREASE : Share

 Market Definitions

 

SHORT-TERM PRICE INCREASE : Financials

SHORT-TERM PRICE INCREASE : Margins

SHORT-TERM PRICE INCREASE : Financials

SHORT-TERM PRICE INCREASE : Margins

 Financial Definitions

 

Long-Term Product Price Increase Effect


 

 

PRODUCTS + SERVICES QUALITY

 

RELATIVE PRODUCTS + SERVICES QUALITY IN THE TRADE CELL

The following chart provides a general representation of relative Products & Services quality in the various Trade Cell markets.

 

INDUSTRY TRADE CELL RELATIVE QUALITY INDEX

COUNTRY

Index

Industry Trade Cell Market / Sector 1

****

Industry Trade Cell Market / Sector 2

****

Industry Trade Cell Market / Sector 3

****

Industry Trade Cell Market / Sector 4

****

Industry Trade Cell Market / Sector 5

****

Industry Trade Cell Market / Sector 6

****

Industry Trade Cell Market / Sector 7

****

Industry Trade Cell Market / Sector 8

****

Industry Trade Cell Market / Sector 9

****

Industry Trade Cell Market / Sector 10

****

Industry Trade Cell Market / Sector 11

****

Industry Trade Cell Market / Sector 12

****

Industry Trade Cell Market / Sector 13

****

Industry Trade Cell Market / Sector 14

****

Industry Trade Cell Market / Sector 15

****

Index of Quality over Time


The above chart shows relative Trade Cell quality for products and services. The mid-point line, indicated as '100' represents the Trade Cell average quality of Products & Services.

 

[ CORPORATE DATABASES:  The section marked indicates the average quality for products and services marketed by the Company. This will show the relative quality differential between the Company's product quality and the various quality norms. ]

 

PRODUCTS + SERVICES QUALITY

It is essential for the Company to be fully aware of the importance and criticalness of Products & Services Quality.

The arbiter of product quality must be the end user and thus any definition of quality must be decided upon by the customer.

It is not intended here to analyze the actual product quality demanded for Products & Services. This is an evaluation exercise outside the scope of this study, however many End Users perceptions and attitudes are covered in the various survey sections.

Product Quality includes both Products & Services as well as associated or ancillary services, delivery promptness, after-sales services, et cetera.

Products & Services Quality must be analyzed in relation to other product in the market as well as the Company's interaction with the marketplace.

The definition of Product Quality should not consider relative prices or pricing as being part of the definition of Quality.



VALUE SCALE FOR QUALITY

The following Value Scale for Quality will be used below:-

   HQP-LQP

Where,

   HQP = % OF SALES FROM  HIGH QUALITY PRODUCTS

   LQP = % OF SALES FROM  LOW QUALITY PRODUCTS

 


PROFITABILITY & PRODUCTS + SERVICES

 

THE TARGET COMPANY PROFITABILITY & PRODUCTS + SERVICES

****

****

****

****

****

****

****

****

****

ROIc=%

.

.

.

.

.

.

.

.

.

+200%

.

.

.

.

.

.

.

.

.

+180%

.

.

.

.

.

.

.

.

.

+160%

.

.

.

.

.

.

.

.

.

+140%

.

.

.

.

.

.

.

.

.

+120%

.

.

.

.

.

.

.

.

.

+100%

.

.

.

.

.

.

.

.

.

+80%

.

.

.

.

.

.

.

.

.

+60%

.

.

.

.

.

.

.

.

.

+40%

.

.

.

.

.

.

.

.

.

+20%

.

.

.

.

.

.

.

.

.

0%

.

.

.

.

.

.

.

.

.

-20%

.

.

.

.

.

.

.

.

.

-40%

.

.

.

.

.

.

.

.

.

-60%

.

.

.

.

.

.

.

.

.

-80%

.

.

.

.

.

.

.

.

.

-100%

.

.

.

.

.

.

.

.

.

-120%

.

.

.

.

.

.

.

.

.

-140%

.

.

.

.

.

.

.

.

.

-160%

.

.

.

.

.

.

.

.

.

-180%

.

.

.

.

.

.

.

.

.

-200%

10

15

20

25

30

35

40

45

50

VALUE SCALE



It will be noticed that if the Company produces no high quality products and services it is less likely to achieve a high profitability.

Producing a relatively high proportion of Products & Services output as high quality products will tend to achieve a higher level of profitability.

By producing a very high proportion of the Product Range output as high quality products will undoubtedly gain the highest levels of profitability.




RELATIVE PRODUCTS + SERVICES QUALITY & PROFITABILITY

 

CIRCUMSTANCES WHERE ROI IS GREATER THAN THE INDEX

RELATIVE PRODUCTS + SERVICES QUALITY & PROFITABILITY

CIRCUMSTANCES WHERE ROI IS GREATER THAN THE INDEX

TOTAL NUMBER of SUPPLIERS %

.

.

.

.

.

.

.

.

.

100%

.

.

.

.

.

.

.

.

.

90%

.

.

.

.

.

.

.

.

.

80%

.

.

.

.

.

.

.

.

.

75%

.

.

.

.

.

.

.

.

.

70%

.

.

.

.

.

.

.

.

.

65%

.

.

.

.

.

.

.

.

X

60%

.

.

.

.

.

.

.

X

.

55%

.

.

.

.

.

.

.

X

.

50%

.

.

.

.

.

X

X

.

.

45%

.

.

.

X

X

.

.

.

.

40%

.

.

X

.

.

.

.

.

.

35%

.

X

.

.

.

.

.

.

.

30%

X

.

.

.

.

.

.

.

.

25%

.

.

.

.

.

.

.

.

.

20%

.

.

.

.

.

.

.

.

.

15%

.

.

.

.

.

.

.

.

.

10%

-20

-10

-0

10

20

30

40

50

60

RELATIVE PRODUCT QUALITY VALUE SCALE


INDEX of YEAR-on-YEAR ROIc = %

2008

****%

2009

****%

2010

****%

2011

****%

2012

****%

2013

****%

2014

****%

2015

****%

2016

****%

2017

****%

2018

****%

2019

****%

2020

****%

... to 2028

****%



Producing higher quality Products & Services is more likely to achieve a higher profitability for the Company.


 

QUALITY / PROFITABILITY & CONCENTRATED MARKETS

 

QUALITY / PROFITABILITY & CONCENTRATED MARKETS

THE TARGET COMPANY

QUALITY VALUE SCALE

LOWER

SAME

HIGHER

MARKET CONCENTRATION

LOW

ROIc=****%

ROIc=****%

ROIc=****%

MEDIUM

ROIc=****%

ROIc=****%

ROIc=****%

HIGH

ROIc=****%

ROIc=****%

ROIc=****%


The benefits of producing high quality products are most dramatic in highly concentrated market situations.

The higher the product quality produced the greater the profitability in a highly concentrated market.

Market Concentration is defined as being the percentage of the market accounted for by 50% of the End Users (in terms of numbers).


 

PRODUCTS + SERVICES QUALITY & RELATIVE MARKET SHARE

 

PRODUCTS + SERVICES QUALITY & RELATIVE MARKET SHARE

THE TARGET COMPANY

QUALITY VALUE SCALE

LOWER

SAME

HIGHER

RELATIVE MARKET SHARE

LOW

ROIc=****%

ROIc=****%

ROIc=****%

MEDIUM

ROIc=****%

ROIc=****%

ROIc=****%

HIGH

ROIc=****%

ROIc=****%

ROIc=****%



Both high Products & Services quality and a high level of relative market share will generate greater profitability.

In most cases high product quality can mitigate against a low level of market share and similarly a high market share can mitigate against low product quality.


 

PRODUCTS + SERVICES QUALITY / PROFITABILITY & MARKET GROWTH

 

High Products & Services quality is essential to profitability during low market growth periods.

PRODUCTS + SERVICES QUALITY / PROFITABILITY & MARKET GROWTH

THE TARGET COMPANY

QUALITY VALUE SCALE

LOWER

SAME

HIGHER

SHORT-TERM REAL MARKET GROWTH

LOW

ROIc=****%

ROIc=****%

ROIc=****%

MEDIUM

ROIc=****%

ROIc=****%

ROIc=****%

HIGH

ROIc=****%

ROIc=****%

ROIc=****%



In having high quality products the Company will enjoy a substantially higher level of profitability even during periods of low market growth.



QUALITY IMPROVEMENT EFFECT FORECASTS


This section analyses the effects of a Quality Improvements programme and its associated expenditure in terms of the Company's Financial and Operational results.

Quality Improvement involves the re-engineering, repositioning and remarketing of existing products to meet and serve more up-market segments. In general terms the expenditure incurred is some product development costs plus additional marketing costs.

This tactic is regarded as a short or medium-term operation where the benefits are seen over a short period.

 

Quality Improvement

 

The following Excel spreadsheets (or the Access tables in the databases) should be used to produce a graphic representation of the relationship between the Company and the industry and market situation.  The links below point to the industry and market situation, and to the situation in respect of the Company:-

 

INDUSTRY & MARKET

THE TARGET COMPANY

 

QUALITY IMPROVEMENT: Market Forecast

QUALITY IMPROVEMENT: Share

QUALITY IMPROVEMENT: Market Forecast

QUALITY IMPROVEMENT: Share

 Market Definitions

 

QUALITY IMPROVEMENT: Financials

QUALITY IMPROVEMENT: Margins

QUALITY IMPROVEMENT: Financials

QUALITY IMPROVEMENT: Margins

 Financial Definitions


 


NEW PRODUCTS

 

The relative levels of New Product Introductions of Products & Services in the Trade Cell is shown below. It will be seen that in certain geographic markets new product introductions are frequently different in the various Trade Cell Markets.

It should be noted that in this context the term 'New Products' also includes a certain amount of "Product Substitutions and New Product Segmentation".

 

INDUSTRY TRADE CELL RELATIVE NEW PRODUCT INDEX

COUNTRY

Index

Industry Trade Cell Market / Sector 1

****

Industry Trade Cell Market / Sector 2

****

Industry Trade Cell Market / Sector 3

****

Industry Trade Cell Market / Sector 4

****

Industry Trade Cell Market / Sector 5

****

Industry Trade Cell Market / Sector 6

****

Industry Trade Cell Market / Sector 7

****

Industry Trade Cell Market / Sector 8

****

Industry Trade Cell Market / Sector 9

****

Industry Trade Cell Market / Sector 10

****

Industry Trade Cell Market / Sector 11

****

Industry Trade Cell Market / Sector 12

****

Industry Trade Cell Market / Sector 13

****

Industry Trade Cell Market / Sector 14

****

Industry Trade Cell Market / Sector 15

****

Index of New Products over Time


The above chart shows relative Trade Cell New product Introductions for products and services. The mid-point line, indicated as '100' represents the Trade Cell average for New Product Introductions of Products & Services.


 

PROFITABILITY / MARKET GROWTH & NEW PRODUCT INTRODUCTIONS

 

PROFITABILITY / MARKET GROWTH & NEW PRODUCT INTRODUCTIONS

THE TARGET COMPANY

NEW PRODUCTS AS A FUNCTION OF TOTAL SALES

LOWER

SAME

HIGHER

LONG-TERM REAL TERMS MARKET GROWTH

LOW

ROIc=****%

ROIc=****%

ROIc=****%

MEDIUM

ROIc=****%

ROIc=****%

ROIc=****%

HIGH

ROIc=****%

ROIc=****%

ROIc=****%



The higher the overall long-term market growth the more damaging is the effect of the Company new product introductions on profitability. Thus if the market is growing rapidly there will be a dramatic decline in profitability if there is also a high incidence of new product encroachment.

If however the forecasted market growth rates are relatively low then a high incidence of the Company new product introductions will not too adversely affect overall profitability.


 

NEW PRODUCT INTRODUCTIONS / INFLATION & PROFITABILITY

 

PROFITABILITY / MARKET GROWTH & NEW PRODUCT INTRODUCTIONS

THE TARGET COMPANY

RATE OF INFLATION

LOW

AVERAGE

HIGH

NEW PRODUCTS AS A FUNCTION OF TOTAL SALES

LOWER

ROIc=****%

ROIc=****%

ROIc=****%

SAME

ROIc=****%

ROIc=****%

ROIc=****%

HIGHER

ROIc=****%

ROIc=****%

ROIc=****%



If the Company experiences a low level of new product introduction they will suffer in terms of overall profitability in periods of high price inflation.

With a relatively high level of new products introductions the company may actually experience an improvement in profitability during period of moderate price inflation; however this effect will tend to be reduced during periods of higher price inflation.


 

NEW PRODUCT INTRODUCTIONS / INVESTMENT IN NEW PLANT + EQUIPMENT & PROFITABILITY

 

NEW PRODUCT INTRODUCTIONS / INVESTMENT IN NEW PLANT & EQUIPMENT & PROFITABILITY

THE TARGET COMPANY

REPLACEMENT VALUE / ORIGINAL COST OF P + E

LOW

AVERAGE

HIGH

NEW PRODUCTS AS A FUNCTION OF TOTAL SALES

LOWER

ROIc=****%

ROIc=****%

ROIc=****%

SAME

ROIc=****%

ROIc=****%

ROIc=****%

HIGHER

ROIc=****%

ROIc=****%

ROIc=****%



A company experiencing a high level of new product introduction coupled with New Plant & Equipment investment will suffer in terms of overall profitability.

 

INDEX FOR THE TARGET COMPANY

Previous
INDEX

Previous
INDEX

Last Year
INDEX

P & E Average Investment

****

****

****


THE TARGET COMPANY REAL TERMS PROFILE

P & E INVESTMENT

% OF 10 YEAR AVERAGE

P & E INVESTMENT: < than Depreciation

****

P & E INVESTMENT: = to Depreciation

****

P & E INVESTMENT: > than Depreciation

****

P & E INVESTMENT: Unallocated

****

PLANT & EQUIPMENT

% OF TOTAL P & E

PLANT & EQUIPMENT: Years Old: 0-3

****

PLANT & EQUIPMENT: Years Old: 3-6

****

PLANT & EQUIPMENT: Years Old: 6-9

****

PLANT & EQUIPMENT: Years Old: 9+ / Rest

****

 

 

Company Plant & Equipment objectives

 

THE TARGET COMPANY

 

Previous

Previous

Last Year

Fixed Assets: Plant & Equip.

%

****%

****%

****%

Capital Expend. Plant and Eq.

%

****%

****%

****%

Capital Expenditure on Vehicles

%

****%

****%

****%

Cap. Exp. Data Processing Eq.

%

****%

****%

****%

Rental/Leasing: Plant & Equip.

%

****%

****%

****%

Maintenance: Plant and Equip.

%

****%

****%

****%

Retirements:  Plant and Equip.

%

****%

****%

****%

Depreciation:   Plant & Equip.

%

****%

****%

****%

MARKET CONDITIONS:

CONCLUSIONS FOR THE TARGET COMPANY:

MARKET FINDING

PLANT & EQUIPMENT COST: Forecast

PLANT & EQUIPMENT COST: Share

PROFIT & PROCESS COST REDUCTION : Forecast

PROFIT & PROCESS COST REDUCTION : Share

 

FINANCIAL CONCLUSION

PLANT & EQUIPMENT COST: Financials

PLANT & EQUIPMENT COST: Margins

PROFIT & PROCESS COST REDUCTION : Financials

PROFIT & PROCESS COST REDUCTION : Margins

 

 Market Definitions  Financial Definitions

 

NEW PRODUCTS / PRODUCT QUALITY & PROFITABILITY

 

NEW PRODUCTS / PRODUCT QUALITY & PROFITABILITY

THE TARGET COMPANY

VALUE SCALE OF QUALITY

LOW

AVERAGE

HIGH

NEW PRODUCTS AS A FUNCTION OF TOTAL SALES

LOWER

ROIc=****%

ROIc=****%

ROIc=****%

SAME

ROIc=****%

ROIc=****%

ROIc=****%

HIGHER

ROIc=****%

ROIc=****%

ROIc=****%



A company experiencing a high level of new product introduction will suffer in terms of overall profitability if their product quality is low.

A company experiencing a high level of Product Quality may actually benefit in profit terms in periods of limited new product introductions.



NEW PRODUCT EXPENDITURE EFFECT FORECASTS


The following pages analyses the effects of New Product or Product Revision expenditure in terms of the Company's Financial and Operational results.

New Products refer to entirely new products or services offered to customers and Product Revisions refer to the improvement or enhancement of existing products or services.

The data assumes that the Company will increase its New Product investment by a rate of 5% above that of the industry averages.

 

New Product Development

 

The following Excel spreadsheets (or the Access tables in the databases) should be used to produce a graphic representation of the relationship between the Company and the industry and market situation.  The links below point to the industry and market situation, and to the situation in respect of the Company:-

 

INDUSTRY & MARKET

THE TARGET COMPANY

 

NEW PRODUCT DEVELOPMENT: Forecast

NEW PRODUCT DEVELOPMENT: Share

NEW PRODUCT DEVELOPMENT: Forecast

NEW PRODUCT DEVELOPMENT: Share

 Market Definitions

 

NEW PRODUCT DEVELOPMENT: Financials

NEW PRODUCT DEVELOPMENT: Margins

NEW PRODUCT DEVELOPMENT: Financials

NEW PRODUCT DEVELOPMENT: Margins

 Financial Definitions


 


COMPETITION


There are four major Competitive criteria which acutely affect the Company and Products & Services Markets:-

   1. Market Share
   2. Relative Market Share
   3. Nature of the Competitive Environment
   4. Perfectness of the Market

These factors are examined below and provide an extremely important data set on which the Company may base strategic and tactical decisions for the marketing of products and services.

Company Competitors

Industry Competitors

Significant Company Competitors

Company Competitors 1
Company Competitors 2
Company Competitors 3
Company Competitors 4
Company Competitors 5
Company Competitors 6
Company Competitors 7
Company Competitors 8
Company Competitors 9
Company Competitors 10
Company Competitors 11
Company Competitors 12
Company Competitors 13
Company Competitors 14
Company Competitors 15

Industry Competition

Industry Chief Overall Service Competitor
Industry Main National Market Competitor
Industry Main Regional / Local Market Competitor
Industry Main Trade Cell Market Competitor
Industry Main National Product Superiority Competitor
Industry Main Trade Cell Product Superiority Competitor
Industry Main National Price Competition Competitor
Industry Main Trade Cell Price Competition Competitor
Industry Main National Financial Strength Competitor
Industry Main Trade Cell Financial Strength Competitor
Industry Main National Customer Satisfaction Competitor
Industry Main Trade Cell Customer Satisfaction Competitor
Industry Main National Marketing Aggression Competitor
Industry Main Trade Cell Marketing Aggression Competitor
Industry Main New Product Development Competitor



MARKET SHARE

 

MARKET SHARE & PRODUCTS + SERVICES PROFITABILITY

 

MARKET SHARE & PRODUCTS + SERVICES PROFITABILITY

CIRCUMSTANCES WHERE ROI IS GREATER THAN THE INDEX

TOTAL NUMBER OF
SUPPLIERS %

.

.

.

.

.

.

.

.

.

100%

.

.

.

.

.

.

.

.

.

90%

.

.

.

.

.

.

.

.

.

80%

.

.

.

.

.

.

.

.

X

75%

.

.

.

.

.

.

.

X

.

70%

.

.

.

.

.

.

X

.

.

65%

.

.

.

.

.

X

.

.

.

60%

.

.

.

.

.

X

.

.

.

55%

.

.

.

.

X

.

.

.

.

50%

.

.

.

X

.

.

.

.

.

45%

.

.

X

.

.

.

.

.

.

40%

.

.

X

.

.

.

.

.

.

35%

.

X

.

.

.

.

.

.

.

30%

X

.

.

.

.

.

.

.

.

25%

.

.

.

.

.

.

.

.

.

20%

.

.

.

.

.

.

.

.

.

15%

.

.

.

.

.

.

.

.

.

10%

LOW

---------

--------

--------

--------

--------

--------

--------

HIGH

MARKET SHARE


INDEX of YEAR-on-YEAR ROIc = %

2008

****%

2009

****%

2010

****%

2011

****%

2012

****%

2013

****%

2014

****%

2015

****%

2016

****%

2017

****%

2018

****%

2019

****%

2020

****%

... to 2028

****%



It is self-evident that the Company in having a higher Market Share are more likely to achieve a higher profitability and this also holds true in the Products & Services industry throughout the Trade Cell.


 

PRODUCTS + SERVICES PROFITABILITY & RELATIVE MARKET SHARE

 

PRODUCTS + SERVICES PROFITABILITY & RELATIVE MARKET SHARE

****

****

****

****

****

****

****

****

****

ROIc=%

.

.

.

.

.

.

.

.

.

+200%

.

.

.

.

.

.

.

.

.

+180%

.

.

.

.

.

.

.

.

.

+160%

.

.

.

.

.

.

.

.

.

+140%

.

.

.

.

.

.

.

.

.

+120%

.

.

.

.

.

.

.

.

.

+100%

.

.

.

.

.

.

.

.

.

+80%

.

.

.

.

.

.

.

.

.

+60%

.

.

.

.

.

.

.

.

.

+40%

.

.

.

.

.

.

.

.

.

+20%

.

.

.

.

.

.

.

.

.

0%

.

.

.

.

.

.

.

.

.

-20%

.

.

.

.

.

.

.

.

.

-40%

.

.

.

.

.

.

.

.

.

-60%

.

.

.

.

.

.

.

.

.

-80%

.

.

.

.

.

.

.

.

.

-100%

.

.

.

.

.

.

.

.

.

-120%

.

.

.

.

.

.

.

.

.

-140%

.

.

.

.

.

.

.

.

.

-160%

.

.

.

.

.

.

.

.

.

-180%

.

.

.

.

.

.

.

.

.

-200%

LOW -> -> -> -> -> - ->  -> -> -> -> -> -> -> -> HIGH

RELATIVE MARKET SHARE



Products & Services Profitability is closely correlated with Relative Market Share and thus  in enjoying a high Market Share, the Company will also experience a similarly high profitability.


 

PRODUCTS + SERVICES MARKET SHARE STABILITY


The stability or instability of Trade Cell Market Shares (at End User level) will potentially be an opportunity or problem for the Company in terms of products and services.

INDUSTRY TRADE CELL MARKET SHARE STABILITY

 

COUNTRY

MARKET STABILITY INDEX

Industry Trade Cell Market / Sector 1

****

Industry Trade Cell Market / Sector 2

****

Industry Trade Cell Market / Sector 3

****

Industry Trade Cell Market / Sector 4

****

Industry Trade Cell Market / Sector 5

****

Industry Trade Cell Market / Sector 6

****

Industry Trade Cell Market / Sector 7

****

Industry Trade Cell Market / Sector 8

****

Industry Trade Cell Market / Sector 9

****

Industry Trade Cell Market / Sector 10

****

Industry Trade Cell Market / Sector 11

****

Industry Trade Cell Market / Sector 12

****

Industry Trade Cell Market / Sector 13

****

Industry Trade Cell Market / Sector 14

****

Industry Trade Cell Market / Sector 15

****

Market Share % over Time


The above shows Trade Cell Market Share stability (at End User level) which may potentially impact on the Company in its provision of products and services.

 

INDEX FOR THE TARGET COMPANY

Previous
INDEX

Previous
INDEX

Last Year
INDEX

Market Share Stability

****

****

****

 

[ CORPORATE DATABASE: These Market Share percentages are based on sales figures apportioned to the Company, related to the Total Market (as quantified in other sections) at this moment in time (or at the time of the latest reported Company figures). ]

 

RELATIVE MARKET SHARES IN THE TRADE CELL

 

The Forecasted RELATIVE Market Shares (at End User level) CUMULATIVELY achieved by the FOUR largest suppliers of products and services are shown below.

 

INDUSTRY TRADE CELL CUMULATIVE MARKET SHARE

COUNTRY

% MARKET SHARE

Industry Trade Cell Market / Sector 1

 

Industry Trade Cell Market / Sector 2

 

Industry Trade Cell Market / Sector 3

 

Industry Trade Cell Market / Sector 4

 

Industry Trade Cell Market / Sector 5

 

Industry Trade Cell Market / Sector 6

 

Industry Trade Cell Market / Sector 7

 

Industry Trade Cell Market / Sector 8

 

Industry Trade Cell Market / Sector 9

 

Industry Trade Cell Market / Sector 10

 

Industry Trade Cell Market / Sector 11

 

Industry Trade Cell Market / Sector 12

 

Industry Trade Cell Market / Sector 13

 

Industry Trade Cell Market / Sector 14

 

Industry Trade Cell Market / Sector 15

 

Relative Market Share


The above shows RELATIVE Trade Cell Market Shares (at End User level) which may potentially be achieved by the FOUR largest suppliers of products and services.

These Relative Market Share percentages are based on the estimated cumulative sales figures of the four major suppliers, divided by the Total Market (as quantified in other sections) at this moment in time.


 

NATURE OF THE COMPETITIVE SITUATION FOR PRODUCTS + SERVICES


ENTRY & EXIT OF INDUSTRY COMPETITORS IN PRODUCTS + SERVICES MARKETS

 

TRADE CELL COMPETITOR ENTRY + EXIT

COUNTRY

INDEX

Industry Trade Cell Market / Sector 1

 

Industry Trade Cell Market / Sector 2

 

Industry Trade Cell Market / Sector 3

 

Industry Trade Cell Market / Sector 4

 

Industry Trade Cell Market / Sector 5

 

Industry Trade Cell Market / Sector 6

 

Industry Trade Cell Market / Sector 7

 

Industry Trade Cell Market / Sector 8

 

Industry Trade Cell Market / Sector 9

 

Industry Trade Cell Market / Sector 10

 

Industry Trade Cell Market / Sector 11

 

Industry Trade Cell Market / Sector 12

 

Industry Trade Cell Market / Sector 13

 

Industry Trade Cell Market / Sector 14

 

Industry Trade Cell Market / Sector 15

 

Evidence of Competitor Entry + Exit


The above shows an index of relative Entry or Exit of Competitors over time. The term 'Competitors' denotes suppliers as well as subsidiaries and other marketing or distribution companies providing products and services.

The index norm is shown as '100' and this represents an equilibrium situation where the numbers of Competitor Entries equal the numbers of Competitor Exits. An index greater than 100 indicates more competitor entries than exits, and vice versa.


THE TARGET COMPANY COMPETITORS:

INDEX

Company Competitors 1

****

Company Competitors 2

****

Company Competitors 3

****

Company Competitors 4

****

Company Competitors 5

****

Company Competitors 6

****

Company Competitors 7

****

Company Competitors 8

****

Company Competitors 9

****

Company Competitors 10

****

Company Competitors 11

****

Company Competitors 12

****

Company Competitors 13

****

Company Competitors 14

****

Company Competitors 15

****


 

RELATIVE STRENGTHS OF COMPETITORS IN PRODUCTS + SERVICES MARKETS

TRADE CELL RELATIVE INDUSTRY COMPETITOR STRENGTHS

COUNTRY

INDEX

Industry Trade Cell Market / Sector 1

 

Industry Trade Cell Market / Sector 2

 

Industry Trade Cell Market / Sector 3

 

Industry Trade Cell Market / Sector 4

 

Industry Trade Cell Market / Sector 5

 

Industry Trade Cell Market / Sector 6

 

Industry Trade Cell Market / Sector 7

 

Industry Trade Cell Market / Sector 8

 

Industry Trade Cell Market / Sector 9

 

Industry Trade Cell Market / Sector 10

 

Industry Trade Cell Market / Sector 11

 

Industry Trade Cell Market / Sector 12

 

Industry Trade Cell Market / Sector 13

 

Industry Trade Cell Market / Sector 14

 

Industry Trade Cell Market / Sector 15

 

Relative Strength of Competitors in the Market over Time


The above shows an index of relative Strengths of Competitors over time.  The term 'Competitors' denotes suppliers as well as subsidiaries and other marketing or distribution companies providing products and services.

 

[ CORPORATE DATABASE:  The index norm is shown as '100' in the chart and this represents an equilibrium situation where the Strengths of Competitors equal that of the Company. ]


PERFECTNESS OF THE PRODUCTS + SERVICES MARKET



RELATIVE PERFECTNESS OF THE PRODUCTS + SERVICES MARKETS

INDUSTRY TRADE CELL RELATIVE MARKET PERFECTNESS

COUNTRY

INDEX

Industry Trade Cell Market / Sector 1

 

Industry Trade Cell Market / Sector 2

 

Industry Trade Cell Market / Sector 3

 

Industry Trade Cell Market / Sector 4

 

Industry Trade Cell Market / Sector 5

 

Industry Trade Cell Market / Sector 6

 

Industry Trade Cell Market / Sector 7

 

Industry Trade Cell Market / Sector 8

 

Industry Trade Cell Market / Sector 9

 

Industry Trade Cell Market / Sector 10

 

Industry Trade Cell Market / Sector 11

 

Industry Trade Cell Market / Sector 12

 

Industry Trade Cell Market / Sector 13

 

Industry Trade Cell Market / Sector 14

 

Industry Trade Cell Market / Sector 15

 

Relative Perfectness of the Market over Time


The above shows an index of relative Perfectness of the Markets over time. The index norm is shown as '100' and this represents an equilibrium situation where the Market for Products & Services is neither PERFECT nor IMPERFECT.  An index above '100' shows more Perfectness and an index below '100' shows that the market is relatively Imperfect.

Evidence of the Perfectness or Imperfectness of the Products & Services markets is indicated as being greater than or less than the norm. The measure of Perfectness is the classical economic definition of the term and relates to the existence of a very competitive 'open-market' situation in which prices are determined by supply and demand, there are no barriers to entry and trading is not restricted in any way, thus enabling the full exploitation and benefit from the freeness of the marketplace. The more Perfect the market the less the evidence of restrictive practices, trade cartels and agreements and overall legislation.




THE INDUSTRY

Among the critical Industry factors which will affect the Company are the following:-

   1. Long Term Industry Growth
   2. Physical Process Considerations
   3. Capital Structure in terms of Investment & Capital Intensity
   4. Physical Process in terms of Vertical Integration
   5. Marketing / Sales Costs
   6. Product Development and Process Development Costs


Before examining the above factors and their relationship to Products & Services profitability it is proposed that a few paragraphs be devoted to more general aspects of the Products & Services industry and the questions these aspects may raise for the Company.

The business and industrial environment in the Trade Cell is predominantly one of powerful industrial groups struggling to survive in an increasingly harsh economic climate. These large and cohesive operating units usually supply and market through established channels and are thus to some extent screened from the full impact of the competitive forces in the marketplace. The major problem of competition will inevitably hark back to Process Costs and Operating Costs and the first question which the Company must ask is if they are able to compete using their present means of operation.

The Company must consider a number of issues pertinent to the supply and marketing of products and services:-

a.

Process Costs and Profitability

Can the Company achieve the same process costs and rates of return enjoyed by other high market share Products & Services suppliers given the normal economies of scale achieved in procurement, marketing and other costs?


Can the Company benefit from the 'Learning Curve' phenomenon through which rationale the total process costs of supply and marketing of products and services will tend to decline by a more or less constant percentage with each doubling of the Company's cumulative sales of Products & Services?

b.

Market Dominance

Can the Company effectively compete in the Products & Services market against competitors who are perhaps wielding the prerogatives of Market Dominance?



Large market share competitors will earn higher profits and/or because of their corporate strengths will be able to control and administer both their own process costs and market prices. Such competitors are likely to adopt an aggressive marketing stance if competition is seen to be a serious threat and may embark on a price war; can the Company cope with a price war?

 

THE TARGET COMPANY INDUSTRY INDICES

Previous
INDEX

Previous
INDEX

Last Year
INDEX

 P & E Av Investment

****

****

****

 Relative Prices

****

****

****

 New Products

****

****

****

 Relative Quality

****

****

****

 Salesforce Expenditure

****

****

****

 Advertising Expenditure

****

****

****

 Promotional Expenditure

****

****

****

 Product Adoption

****

****

****

 Sales Conversion

****

****

****

 Sales Growth

****

****

****

 Capacity Utilization

****

****

****

 Product Standardization

****

****

****

 Relative Compensation

****

****

****

 Market Share Stability

****

****

****

 Relative Integration

****

****

****


 

LONG TERM INDUSTRY GROWTH

The following table gives the forecasted long term annual growth rate in REAL TERMS for the Products & Services industry:-

TRADE CELL INDUSTRY GROWTH  INDEX

COUNTRY

Index

Industry Trade Cell Market / Sector 1

 

Industry Trade Cell Market / Sector 2

 

Industry Trade Cell Market / Sector 3

 

Industry Trade Cell Market / Sector 4

 

Industry Trade Cell Market / Sector 5

 

Industry Trade Cell Market / Sector 6

 

Industry Trade Cell Market / Sector 7

 

Industry Trade Cell Market / Sector 8

 

Industry Trade Cell Market / Sector 9

 

Industry Trade Cell Market / Sector 10

 

Industry Trade Cell Market / Sector 11

 

Industry Trade Cell Market / Sector 12

 

Industry Trade Cell Market / Sector 13

 

Industry Trade Cell Market / Sector 14

 

Industry Trade Cell Market / Sector 15

 

Index of Industry Growth over Time


The above shows an index of Industry Growth over time.

The index norm is shown as '100' and this represents ZERO growth for the Products & Services industry.

These annual growth rate figures represent real terms growth and are plotted as a year-on-year median probability trend line.



PHYSICAL PROCESS CONSIDERATIONS

PHYSICAL PROCESS CAPACITY UTILIZATION & MARKET SHARE

 

PHYSICAL PROCESS CAPACITY UTILIZATION & MARKET SHARE

THE TARGET COMPANY

PROCESS COSTS / SALES

LOWER

SAME

HIGHER

RELATIVE MARKET SHARE

LOW

ROIc=****%

ROIc=****%

ROIc=****%

MEDIUM

ROIc=****%

ROIc=****%

ROIc=****%

HIGH

ROIc=****%

ROIc=****%

ROIc=****%



Process Intensity is highly critical to profitability irrespective of the relative market shares held by the Company.


 

CAPACITY UTILIZATION & MARKET SHARE

 

CAPACITY UTILIZATION & MARKET SHARE

THE TARGET COMPANY

CAPACITY UTILIZATION

LOWER

SAME

HIGHER

RELATIVE MARKET SHARE

LOW

ROIc=****%

ROIc=****%

ROIc=****%

MEDIUM

ROIc=****%

ROIc=****%

ROIc=****%

HIGH

ROIc=****%

ROIc=****%

ROIc=****%




With a low level of market penetration, capacity utilization is extremely critical.

INDEX FOR THE TARGET COMPANY

Previous
INDEX

Previous
INDEX

Last Year
INDEX

Capacity Utilization

****

****

****


If the Company experiences a low market share of the Products & Services market, together with a low capacity utilization, then it will tend to achieve a much lower profitability than if the Company experiences a high market share. If the Company experiences a high market share it will be far more able to overcome the problems associated with reduced capacity utilization and are therefore able to retain overall profitability.


 

PRODUCTIVITY / PRODUCTS + SERVICES PROFITABILITY / MARKET GROWTH

 

PRODUCTIVITY / PRODUCTS + SERVICES PROFITABILITY / MARKET GROWTH

THE TARGET COMPANY

SALES PER EMPLOYEE

LOWER

SAME

HIGHER

LONG-TERM MARKET GROWTH RATE

LOW

ROIc=****%

ROIc=****%

ROIc=****%

MEDIUM

ROIc=****%

ROIc=****%

ROIc=****%

HIGH

ROIc=****%

ROIc=****%

ROIc=****%



Operating in high growth markets requires a high level of employee productivity in order to maintain profitability.

 

INDUSTRY EMPLOYEE RANGES

% OF TOTAL

EMPLOYEE RANGES: 1-19 Employees

****

EMPLOYEE RANGES: 20-99 Employees

****

EMPLOYEE RANGES: 100+ Employees

****

EMPLOYEE RANGES: Unallocated

****



UNIONIZATION & MARKET SHARE

 

UNIONIZATION & MARKET SHARE

THE TARGET COMPANY

EMPLOYEE UNIONIZATION

LOWER

SAME

HIGHER

RELATIVE MARKET SHARE

LOW

ROIc=****%

ROIc=****%

ROIc=****%

MEDIUM

ROIc=****%

ROIc=****%

ROIc=****%

HIGH

ROIc=****%

ROIc=****%

ROIc=****%



When the Company experiences a high level of unionized labor and a high market share it will tend to experience a lower level of profitability when compared with a similar market share but a lower level of employee unionization. These effects are more pronounced where the unionization imposes additional costs, for example pensions or health care entitlements where the workforce is aging.

At lower market share levels unionization does not adversely affect profitability and in many instances will actually assist profitability to a certain extent.


 

UNIONIZATION / PRODUCTS + SERVICES PROFITABILITY & MARKET GROWTH

 

UNIONIZATION / PRODUCTS + SERVICES PROFITABILITY & MARKET GROWTH

THE TARGET COMPANY

EMPLOYEE UNIONIZATION

LOWER

SAME

HIGHER

LONG-TERM MARKET GROWTH*

LOW

ROIc=****%

ROIc=****%

ROIc=****%

MEDIUM

ROIc=****%

ROIc=****%

ROIc=****%

HIGH

ROIc=****%

ROIc=****%

ROIc=****%



In low growth markets the affects of high unionization is most profound. A high level of labor unionization in low growth markets or periods of low growth will adversely effect profitability.

High employee unionization will not drastically impair profitability in high growth markets or in periods of high growth. * Market Growth in Real Terms.


 

UNIONIZATION / PRODUCTS + SERVICES PROFITABILITY & INDUSTRY CONCENTRATION

 

UNIONIZATION / PRODUCTS + SERVICES PROFITABILITY & INDUSTRY CONCENTRATION

THE TARGET COMPANY

EMPLOYEE UNIONIZATION

LOWER

SAME

HIGHER

INDUSTRY CONCENTRATION

LOW

ROIc=****%

ROIc=****%

ROIc=****%

MEDIUM

ROIc=****%

ROIc=****%

ROIc=****%

HIGH

ROIc=****%

ROIc=****%

ROIc=****%



In situations with a highly concentrated industry high unionization will adversely effect profitability.

 

INDUSTRY SUPPLIER CONCENTRATION

% OF TOTAL

AVAILABLE REVENUE*

SUPPLIER CONCENTRATION: Largest 8 companies

****

SUPPLIER CONCENTRATION: Largest 8 companies

****

SUPPLIER CONCENTRATION: Largest 50 companies

****

SUPPLIER CONCENTRATION: Unallocated

****

 


 

UNIONIZATION / PRODUCTS + SERVICES PROFITABILITY & HARVESTING STRATEGIES

 

UNIONIZATION / PRODUCTS + SERVICES PROFITABILITY & HARVESTING STRATEGIES

THE TARGET COMPANY

EMPLOYEE UNIONIZATION

LOWER

SAME

HIGHER

MARKET SHARE STRATEGY

HARVEST

ROIc=****%

ROIc=****%

ROIc=****%

HOLD

ROIc=****%

ROIc=****%

ROIc=****%

BUILD

ROIc=****%

ROIc=****%

ROIc=****%



If the Company experiences a high level of Employee Unionization they are also likely to experience relatively low profitability if they attempt to Harvest their market share.


 

PRODUCTS + SERVICES PROFITABILITY / PROCESS UNIQUENESS & MARKET SHARE

 

PRODUCTS + SERVICES PROFITABILITY / PROCESS UNIQUENESS & MARKET SHARE

THE TARGET COMPANY

PROCESS UNIQUENESS

LESS UNIQUE

SAME

MORE UNIQUE

RELATIVE MARKET SHARE

LOW

ROIc=****%

ROIc=****%

ROIc=****%

MEDIUM

ROIc=****%

ROIc=****%

ROIc=****%

HIGH

ROIc=****%

ROIc=****%

ROIc=****%



Where the Company has a high market share it will not benefit from physical process uniqueness. Small and Medium market shares will reap the greatest profitability benefits from process uniqueness.

 

 

The Company  Systems Investment objectives

 

THE TARGET COMPANY

 

Previous

Previous

Last Year

New Production Technology Expenditure

%

****%

****%

****%

ANALYSIS MARKET CONDITIONS:

CONCLUSIONS FOR THE TARGET COMPANY:

 

 MARKET FINDING

SYSTEMS INVESTMENT: Forecast

SYSTEMS INVESTMENT: Product Share

 

FINANCIAL CONCLUSION

SYSTEMS INVESTMENT: Financials

SYSTEMS INVESTMENT: Margins & Ratios

 Market Definitions  Financial Definitions



CAPITAL STRUCTURE IN TERMS OF INVESTMENT INTENSITY

 

In the main, Investment Intensity does not assist profitability in the Products & Services industry.

As Investment Intensity increases this enlarges the denominator of Return on Investment and consequently profitability suffers.

Investment Intensity may also encourage and fuel the intensity of competition as the high levels of investment and fixed costs make plant loadings and capacity utilization highly critical and thereby is likely to provoke discounting, price wars and similar short term expediencies designed to improve sales.

Investment Intensity is a particular danger during periods of:-

   a) access to plentiful and cheap capital or financing by parent groups
   b) scarcity of suitable labor
   c) wage demands or cost pressures from labor costs
   d) management predilections towards automation or sophisticated processes
   e) financial or fiscal advantages of capital equipment debt.

 

PRODUCTS + SERVICES PROFITABILITY & INVESTMENT INTENSITY

 

PRODUCTS + SERVICES PROFITABILITY & INVESTMENT INTENSITY

****

****

****

****

****

****

****

****

****

ROIc=%

.

.

.

.

.

.

.

.

.

+200%

.

.

.

.

.

.

.

.

.

+180%

.

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.

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.

+160%

.

.

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.

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.

+140%

.

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+120%

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+100%

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+80%

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+60%

.

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+40%

.

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+20%

.

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0%

.

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-20%

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-40%

.

.

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.

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-60%

.

.

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.

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-80%

.

.

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-100%

.

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-120%

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-140%

.

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-160%

.

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.

.

-180%

.

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.

.

.

.

.

.

-200%

LOW -> -> -> -> -> -> -> -> -> -> -> -> -> -> -> -> -> -> HIGH

INVESTMENT / SALES


Profitability usually tends to decline consistently in the Products & Services industry as the level of Investment Intensity increases.



NEW PLANT + EQUIPMENT INVESTMENT EFFECT FORECASTS


This section analyses the effects of a New Plant and Equipment Investment programme and its inherent expenditure in terms of the Company's Financial and Operational results.

By the very nature of New Plant + Equipment programmes the lead-times are extensive and the pay-back period tends to be rather protracted. The benefits from this scenario will not be seen for some 3-5 years from inception.

 

New Plant + Equipment Investment

 

The following Excel spreadsheets (or the Access tables in the databases) should be used to produce a graphic representation of the relationship between the Company and the industry and market situation.  The links below point to the industry and market situation, and to the situation in respect of the Company:-

 

INDUSTRY & MARKET

THE TARGET COMPANY

 

 

NEW PLANT + EQUIPMENT INV: Forecast

NEW PLANT + EQUIPMENT INV: Shares

 

NEW PLANT + EQUIPMENT INV: Forecast

NEW PLANT + EQUIPMENT INV: Shares

 Market Definitions

 

 

NEW PLANT + EQUIPMENT INV: Financials

NEW PLANT + EQUIPMENT INV: Margins

 

NEW PLANT + EQUIPMENT INV: Financials

NEW PLANT + EQUIPMENT INV: Margins

 Financial Definitions




NET MARGINS & INVESTMENT INTENSITY

 

NET MARGINS & INVESTMENT INTENSITY

****

****

****

****

****

****

****

****

****

ROSc=%

.

.

.

.

.

.

.

.

.

+200%

.

.

.

.

.

.

.

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.

+180%

.

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.

.

.

+160%

.

.

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.

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.

+140%

.

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.

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+120%

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+100%

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+80%

.

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+60%

.

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+40%

.

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+20%

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0%

.

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-20%

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.

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-40%

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.

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-60%

.

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.

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.

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.

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-80%

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-100%

.

.

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-120%

.

.

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.

.

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.

-140%

.

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.

.

.

.

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-160%

.

.

.

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.

.

.

.

.

-180%

.

.

.

.

.

.

.

.

.

-200%

LOW -> -> -> -> -> -> -> -> - -> -> -> -> -> -> -> -> HIGH

INVESTMENT / SALES



Net Margins (in terms of Return on Sales) usually tends to decline consistently in the Products & Services industry as the level of Investment Intensity increases.


 

MARGINS & INVESTMENT INTENSITY

 

MARGINS & INVESTMENT INTENSITY

****

****

****

****

****

****

****

****

****

ROSc=%

.

.

.

.

.

.

.

.

.

+200%

.

.

.

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.

.

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.

+180%

.

.

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.

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.

.

.

+160%

.

.

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.

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.

+140%

.

.

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.

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.

+120%

.

.

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.

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+100%

.

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.

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.

+80%

.

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+60%

.

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+40%

.

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+20%

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0%

.

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-20%

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-40%

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-60%

.

.

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-80%

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-100%

.

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-120%

.

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.

-140%

.

.

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-160%

.

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.

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-180%

.

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.

.

.

.

-200%

LOW -> -> -> -> -> -> -> -> -> -> -> ->-> -> -> -> -> -> -> -> -> HIGH

INVESTMENT / SALES



Gross Margins (in terms of Return on Sales) will usually decline only slightly in the Products & Services industry as the level of Investment Intensity increases.




PRODUCTS + SERVICES PROFITABILITY / MARKET SHARE & CAPITAL INTENSITY

 

PRODUCTS + SERVICES PROFITABILITY / MARKET SHARE & CAPITAL INTENSITY

THE TARGET COMPANY

RELATIVE MARKET SHARE

LOW

AVERAGE

HIGH

FIXED CAPITAL INTENSITY*

LOWER

ROIc=****%

ROIc=****%

ROIc=****%

SAME

ROIc=****%

ROIc=****%

ROIc=****%

HIGHER

ROIc=****%

ROIc=****%

ROIc=****%



When the Company experiences a high level of Fixed Capital Investment, and a low market share, it will tend to experience a significantly lower level of profitability when compared if it experiences both low Fixed Capital Investment and a high market share.

* Fixed Capital Intensity is defined as the Book Value of Plant & Equipment as a percentage of Sales.





PRODUCTIVITY / PRODUCTS + SERVICES PROFITABILITY & INVESTMENT INTENSITY

 

PRODUCTIVITY / PRODUCTS + SERVICES PROFITABILITY & INVESTMENT INTENSITY

THE TARGET COMPANY

SALES PER EMPLOYEE

LOWER

SAME

HIGHER

INVESTMENTS divided by ADDED VALUE

LOW

ROIc=****%

ROIc=****%

ROIc=****%

MEDIUM

ROIc=****%

ROIc=****%

ROIc=****%

HIGH

ROIc=****%

ROIc=****%

ROIc=****%



In Investment Intensive situations high productivity is essential to profitability. A low level of productivity will drastically reduce profitability, especially where Investment Intensity is high.




PROCESS CAPACITY UTILIZATION / PRODUCTS + SERVICES PROFITABILITY & CAPITAL INTENSITY

 

PROCESS CAPACITY UTILIZATION / PRODUCTS + SERVICES PROFITABILITY & CAPITAL INTENSITY

THE TARGET COMPANY

PROCESS CAPACITY UTILIZATION

LOWER

SAME

HIGHER

FIXED CAPITAL INTENSITY*

LOW

ROIc=****%

ROIc=****%

ROIc=****%

MEDIUM

ROIc=****%

ROIc=****%

ROIc=****%

HIGH

ROIc=****%

ROIc=****%

ROIc=****%



Process Capacity Utilization will have a nominal effect on profitability in the Company when it experiences a low level of Fixed Capital Intensity, however this adverse effect is significantly amplified as Fixed Capital Intensity rises.

* Fixed Capital Intensity is defined as the Book Value of Plant & Equipment as a percentage of Sales.




INVENTORIES / PRODUCTS + SERVICES PROFITABILITY & CAPITAL INTENSITY

 

INVENTORIES / PRODUCTS + SERVICES PROFITABILITY & CAPITAL INTENSITY

THE TARGET COMPANY

INVENTORY / SALES

LOWER

SAME

HIGHER

FIXED CAPITAL INTENSITY*

LOW

ROIc=****%

ROIc=****%

ROIc=****%

MEDIUM

ROIc=****%

ROIc=****%

ROIc=****%

HIGH

ROIc=****%

ROIc=****%

ROIc=****%



A High Inventory holding is very critical to profitability irrespective of the level Fixed Capital Intensity. The higher the level of Fixed Capital Intensity the greater the negative effect of a high Inventory holding.

* Fixed Capital Intensity is defined as the Book Value of Plant & Equipment as a percentage of Sales.




PHYSICAL PROCESS IN TERMS OF VERTICAL INTEGRATION

 

In the context of this section Vertical Integration is measured in terms of Added Value divided by Sales.

PRODUCTS + SERVICES PROFITABILITY / MARKET SHARE & VERTICAL INTEGRATION

 

PRODUCTS + SERVICES PROFITABILITY / MARKET SHARE & VERTICAL INTEGRATION

THE TARGET COMPANY

RELATIVE MARKET SHARE

LOW

AVERAGE

HIGH

VALUE ADDED divided by SALES

LOWER

ROIc=****%

ROIc=****%

ROIc=****%

SAME

ROIc=****%

ROIc=****%

ROIc=****%

HIGHER

ROIc=****%

ROIc=****%

ROIc=****%



The acquisition of a high market share will be most important to situations which have a substantial degree of Vertical Integration.

Vertical Integration is however relatively unimportant to the Company experiencing a low market share.




PRODUCT + SERVICES PROFITABILITY / DIVERSIFICATION / VERTICAL INTEGRATION

 

PRODUCTS + SERVICES PROFITABILITY / DIVERSIFICATION & VERTICAL INTEGRATION

THE TARGET COMPANY

OVERALL DIVERSIFICATION

MORE DIVERSIFIED

AVERAGE

LESS DIVERSIFIED

VALUE ADDED divided by SALES

LOWER

ROIc=****%

ROIc=****%

ROIc=****%

SAME

ROIc=****%

ROIc=****%

ROIc=****%

HIGHER

ROIc=****%

ROIc=****%

ROIc=****%



If the Company experiences a high degree of Corporate Diversification it will enjoy a higher profitability if they are also Vertically Integrated.

Conversely, Corporate Diversification has a negative effect on profitability in situations which do not have a substantial Vertical Integration.




PRODUCTS + SERVICES PROFITABILITY / VERTICAL INTEGRATION & CUSTOMER BASE

 

PRODUCTS + SERVICES PROFITABILITY / VERTICAL INTEGRATION & CUSTOMER BASE

THE TARGET COMPANY

PHYSICAL CUSTOMER BASE

SMALL

AVERAGE

LARGE

VALUE ADDED divided by SALES

LOWER

ROIc=****%

ROIc=****%

ROIc=****%

SAME

ROIc=****%

ROIc=****%

ROIc=****%

HIGHER

ROIc=****%

ROIc=****%

ROIc=****%



A low level of Vertical Integration is critical in profit terms to situations which have to service a numerically large number of customers.

The numbers of customers serviced is however relatively unimportant to the Company when it experiences a high level of Vertical Integration.

 

INDUSTRY IMMEDIATE CUSTOMER BASE

% OF TOTAL REVENUE

IMMEDIATE CUSTOMER BASE: Wholesale & Retail

****

IMMEDIATE CUSTOMER BASE: Manufacturers & OEM

****

IMMEDIATE CUSTOMER BASE: End Users

****

IMMEDIATE CUSTOMER BASE: Unallocated

****




PRODUCTS + SERVICES PROFITABILITY / VERTICAL INTEGRATION & PRODUCT QUALITY

 

PRODUCTS + SERVICES PROFITABILITY / VERTICAL INTEGRATION & PRODUCT QUALITY

THE TARGET COMPANY

PRODUCT QUALITY

LOWER

SAME

HIGHER

VALUE ADDED divided by SALES

LOW

ROIc=****%

ROIc=****%

ROIc=****%

MEDIUM

ROIc=****%

ROIc=****%

ROIc=****%

HIGH

ROIc=****%

ROIc=****%

ROIc=****%



A low level of Vertical Integration is especially critical to profitability in situations which have a low Product Quality.

Quality is also important to the Company when it experiences a high degree of Vertical Integration.




PRODUCTS + SERVICES PROFITABILITY / VERTICAL INTEGRATION & INVENTORIES

 

PRODUCTS + SERVICES PROFITABILITY / VERTICAL INTEGRATION & INVENTORIES

THE TARGET COMPANY

INVENTORY RATIOS

LOWER

SAME

HIGHER

VALUE ADDED divided by SALES

LOW

ROIc=****%

ROIc=****%

ROIc=****%

MEDIUM

ROIc=****%

ROIc=****%

ROIc=****%

HIGH

ROIc=****%

ROIc=****%

ROIc=****%



A low level of Vertical Integration is especially critical to profitability in situations which have a high Inventory value.

A large Inventory is also important to the Company if it experiences a high degree of Vertical Integration.




PRODUCTS + SERVICES PROFITABILITY / VERTICAL INTEGRATION & PRODUCTIVITY

 

PRODUCTS + SERVICES PROFITABILITY / VERTICAL INTEGRATION & PRODUCTIVITY

THE TARGET COMPANY

VALUE ADDED / EMPLOYEE RATIOS

LOWER

SAME

HIGHER

VALUE ADDED divided by SALES

LOW

ROIc=****%

ROIc=****%

ROIc=****%

MEDIUM

ROIc=****%

ROIc=****%

ROIc=****%

HIGH

ROIc=****%

ROIc=****%

ROIc=****%



A low level of Vertical Integration is especially critical to profitability in situations which have a low Employee Productivity.

Employee Productivity is relatively unimportant to the Company if it experiences a high degree of Vertical Integration.




NEW TECHNOLOGY INVESTMENT EFFECT FORECASTS


This paragraph analyses the effects of a New Technology Investment programme and its inferred overhead in terms of the Company's Financial and Operational results.

New Technology Investment programmes are long-range investments which do not necessarily bear fruit until after year 5 or after. The implementation of such investment is essential for the long-term survival of the Company and failure in this respect reflects on the survivability of the Company. 

 

New Technology Investment

 

The following Excel spreadsheets (or the Access tables in the databases) should be used to produce a graphic representation of the relationship between the Company and the industry and market situation.  The links below point to the industry and market situation, and to the situation in respect of the Company:-

 

INDUSTRY & MARKET

THE TARGET COMPANY

 

NEW TECHNOLOGY INV: Forecast

NEW TECHNOLOGY INV: Share

NEW TECHNOLOGY INV: Forecast

NEW TECHNOLOGY INV: Share

 Market Definitions

 

NEW TECHNOLOGY INV: Financials

NEW TECHNOLOGY INV: Margins

NEW TECHNOLOGY INV: Financials

NEW TECHNOLOGY INV: Margins

 Financial Definitions


 


MARKETING & SALES COSTS

 

PRODUCTS + SERVICES PROFITABILITY / MARKET SHARE & MARKETING COSTS

 

PRODUCTS + SERVICES PROFITABILITY / MARKET SHARE & MARKETING COSTS

THE TARGET COMPANY

MARKETING COSTS / SALES RATIOS

LOWER

SAME

HIGHER

RELATIVE MARKET SHARE

LOW

ROIc=****%

ROIc=****%

ROIc=****%

MEDIUM

ROIc=****%

ROIc=****%

ROIc=****%

HIGH

ROIc=****%

ROIc=****%

ROIc=****%



A low Market Share is especially critical to profitability in situations which have a high level of Marketing Costs.

Marketing Costs are relatively unimportant to the Company when it experiences a high Market Share.




PRODUCTS + SERVICES PROFITABILITY / INVESTMENT INTENSITY & MARKETING COSTS

 

PRODUCTS + SERVICES PROFITABILITY / INVESTMENT INTENSITY & MARKETING COSTS

THE TARGET COMPANY

MARKETING COSTS / SALES RATIOS

LOWER

SAME

HIGHER

INVESTMENTS divided by ADDED VALUE

LOW

ROIc=****%

ROIc=****%

ROIc=****%

MEDIUM

ROIc=****%

ROIc=****%

ROIc=****%

HIGH

ROIc=****%

ROIc=****%

ROIc=****%



Investment Intensity is especially critical to profitability in situations which have a high level of Marketing Costs.

Increased Marketing Costs will adversely affect profitability at all levels of Investment Intensity.




PRODUCTS + SERVICES PROFITABILITY / CUSTOMER BASE & MARKETING COSTS

 

PRODUCTS + SERVICES PROFITABILITY / CUSTOMER BASE & MARKETING COSTS

THE TARGET COMPANY

MARKETING COSTS / SALES RATIOS

LOWER

SAME

HIGHER

PHYSICAL CUSTOMER BASE

SMALL

ROIc=****%

ROIc=****%

ROIc=****%

SAME

ROIc=****%

ROIc=****%

ROIc=****%

LARGER

ROIc=****%

ROIc=****%

ROIc=****%



A numerically small number of Customers is especially critical to profitability in situations which have a high level of Marketing Costs.

A high level of Marketing Costs will positively benefit profitability in the Company where it has a high numeric number of Customers.

 

 

The following Excel spreadsheets (or the Access tables in the databases) should be used to produce a graphic representation of the relationship between the Company and the industry and market situation.  The links below point to the industry and market situation, and to the situation in respect of the Company:-

 

INDUSTRY & MARKET

THE TARGET COMPANY

Fixed Marketing Costs

 

FIXED MARKETING COST : Market

FIXED MARKETING COST : Share

FIXED MARKETING COST : Market

FIXED MARKETING COST : Share

 

FIXED MARKETING COST : Financials

FIXED MARKETING COST : Margins

FIXED MARKETING COST : Financials

FIXED MARKETING COST : Margins

Variable Marketing Costs

 

VARIABLE MARKETING COST : Market

VARIABLE MARKETING COST : Share

VARIABLE MARKETING COST : Market

VARIABLE MARKETING COST : Share

 

VARIABLE MARKETING COST : Financials

VARIABLE MARKETING COST : Margins

VARIABLE MARKETING COST : Financials

VARIABLE MARKETING COST : Margins

General Marketing Process Costs

 

GENERAL MARKETING COST: Market

GENERAL MARKETING COST: Share

GENERAL MARKETING COST: Market

GENERAL MARKETING COST: Share

 

GENERAL MARKETING COST: Financials

GENERAL MARKETING COST: Margins

GENERAL MARKETING COST: Financials

GENERAL MARKETING COST: Margins

 Financial Definitions        Market Definitions




PRODUCTS + SERVICES PROFITABILITY / PRODUCT QUALITY & MARKETING COSTS

 

PRODUCTS + SERVICES PROFITABILITY / PRODUCT QUALITY & MARKETING COSTS

THE TARGET COMPANY

MARKETING COSTS / SALES RATIOS

LOWER

SAME

HIGHER

PRODUCT QUALITY

LOW

ROIc=****%

ROIc=****%

ROIc=****%

NORMAL

ROIc=****%

ROIc=****%

ROIc=****%

HIGH

ROIc=****%

ROIc=****%

ROIc=****%




A low Product Quality is especially critical to profitability in situations which have a high level of Marketing Costs.

When the Company has high Product Quality it is less affected by high Marketing Costs and its profitability is damaged less.




PRODUCTS + SERVICES PROFITABILITY / NEW PRODUCTS & MARKETING COSTS

 

PRODUCTS + SERVICES PROFITABILITY / NEW PRODUCTS & MARKETING COSTS

THE TARGET COMPANY

MARKETING COSTS / SALES RATIOS

LOWER

SAME

HIGHER

NEW PRODUCT INTRODUCTIONS

LOW

ROIc=****%

ROIc=****%

ROIc=****%

NORMAL

ROIc=****%

ROIc=****%

ROIc=****%

HIGH

ROIc=****%

ROIc=****%

ROIc=****%



A high rate of New Product Introduction is especially critical to profitability in situations that have a high level of Marketing Costs.

When the Company experiences a low level of New Product Introductions they are less effected by high Marketing Costs, and in many cases can actually increase profitability through a higher rate of Marketing Expenditure.




MARKETING EXPENDITURE CHANGE FORECASTS


This section analyses the effects of a changes in Advertising and Marketing expenditure in terms of the Company's Financial and Operational results.

Marketing Expenditure includes Sales & Selling costs, Distribution / Warehousing / Handling / Processing costs, Advertising / Promotional costs, After-sales costs and Total Marketing costs.

The Scenario assumes that the Company increases its Marketing spend by 5% above that of the market and competitor average for the countries in which the Company operates.

 

Marketing Expenditure Change

 

The following Excel spreadsheets (or the Access tables in the databases) should be used to produce a graphic representation of the relationship between the Company and the industry and market situation. The links below point to the industry and market situation, and to the situation in respect of the Company:-

 

INDUSTRY & MARKET

THE TARGET COMPANY

 

 

Marketing Expenditure Increase : + 2%

MARKETING EXPENDITURE: + 2%  Forecast

MARKETING EXPENDITURE: + 2%  Share

 

Marketing Expenditure Increase : + 2%

MARKETING EXPENDITURE: + 2%  Forecast

MARKETING EXPENDITURE: + 2%  Share

 

 

Marketing Expenditure Increase : + 4%

MARKETING EXPENDITURE: + 4%  Forecast

MARKETING EXPENDITURE: + 4%  Share

 

Marketing Expenditure Increase : + 4%

MARKETING EXPENDITURE: + 4%  Forecast

MARKETING EXPENDITURE: + 4%  Share

 

 

Marketing Expenditure Increase : + 6%

MARKETING EXPENDITURE: + 6%  Forecast

MARKETING EXPENDITURE: + 6%  Share

 

Marketing Expenditure Increase : + 6%

MARKETING EXPENDITURE: + 6%  Forecast

MARKETING EXPENDITURE: + 6%  Share

 

 

Marketing Expenditure Increase : + 8%

MARKETING EXPENDITURE: + 8%  Forecast

MARKETING EXPENDITURE: + 8%  Share

 

Marketing Expenditure Increase : + 8%

MARKETING EXPENDITURE: + 8%  Forecast

MARKETING EXPENDITURE: + 8%  Share

 

 

Marketing Expenditure Increase : +10%

MARKETING EXPENDITURE: +10%  Forecast

MARKETING EXPENDITURE: +10%  Share

 

Marketing Expenditure Increase : +10%

MARKETING EXPENDITURE: +10%  Forecast

MARKETING EXPENDITURE: +10%  Share

 

 

Marketing Expenditure Increase : +12%

MARKETING EXPENDITURE: +12% Forecast

MARKETING EXPENDITURE: +12%  Share

 

Marketing Expenditure Increase : +12%

MARKETING EXPENDITURE: +12% Forecast

MARKETING EXPENDITURE: +12%  Share

 

 

Marketing Expenditure Decrease : - 2%

MARKETING EXPENDITURE: - 2%  Forecast

MARKETING EXPENDITURE: - 2%  Share

 

Marketing Expenditure Decrease : - 2%

MARKETING EXPENDITURE: - 2%  Forecast

MARKETING EXPENDITURE: - 2%  Share

 

 

Marketing Expenditure Decrease : - 4%

MARKETING EXPENDITURE: - 4%  Forecast

MARKETING EXPENDITURE: - 4%  Share

 

Marketing Expenditure Decrease : - 4%

MARKETING EXPENDITURE: - 4%  Forecast

MARKETING EXPENDITURE: - 4%  Share

 

 

Marketing Expenditure Decrease : - 6%

MARKETING EXPENDITURE: - 6%  Forecast

MARKETING EXPENDITURE: - 6%  Share

 

Marketing Expenditure Decrease : - 6%

MARKETING EXPENDITURE: - 6%  Forecast

MARKETING EXPENDITURE: - 6%  Share

 

 

Marketing Expenditure Decrease : - 8%

MARKETING EXPENDITURE: - 8%  Forecast

MARKETING EXPENDITURE: - 8%  Share

 

Marketing Expenditure Decrease : - 8%

MARKETING EXPENDITURE: - 8%  Forecast

MARKETING EXPENDITURE: - 8%  Share

 

 

Marketing Expenditure Decrease : -10%

MARKETING EXPENDITURE: -10%  Forecast

MARKETING EXPENDITURE: -10%  Share

 

Marketing Expenditure Decrease : -10%

MARKETING EXPENDITURE: -10%  Forecast

MARKETING EXPENDITURE: -10%  Share

 

 

Marketing Expenditure Decrease : -12%

MARKETING EXPENDITURE: -12%   Forecast

MARKETING EXPENDITURE: -12%  Share

 

Marketing Expenditure Decrease : -12%

MARKETING EXPENDITURE: -12%  Forecast

MARKETING EXPENDITURE: -12%  Share

 Market Definitions


 

MARKETING EXPENDITURE CHANGE SCENARIOS

 

 

The following Excel spreadsheets (or the Access tables in the databases) should be used to produce a graphic representation of the relationship between the Company and the industry and market situation. The links below point to the industry and market situation, and to the situation in respect of the Company:-

 

INDUSTRY & MARKET

THE TARGET COMPANY

 

 

+ 2% Marketing Expenditure Increase

MARKETING EXPENDITURE: + 2% Financials

MARKETING EXPENDITURE: + 2% Margins

 

+ 2% Marketing Expenditure Increase

MARKETING EXPENDITURE: + 2% Financials

MARKETING EXPENDITURE: + 2% Margins

 

 

+ 4% Marketing Expenditure Increase

MARKETING EXPENDITURE: + 4% Financials

MARKETING EXPENDITURE: + 4% Margins

 

+ 4% Marketing Expenditure Increase

MARKETING EXPENDITURE: + 4% Financials

MARKETING EXPENDITURE: + 4% Margins

 

 

+ 6% Marketing Expenditure Increase

MARKETING EXPENDITURE: + 6% Financials

MARKETING EXPENDITURE: + 6% Margins

 

+ 6% Marketing Expenditure Increase

MARKETING EXPENDITURE: + 6% Financials

MARKETING EXPENDITURE: + 6% Margins

 

 

+ 8% Marketing Expenditure Increase

MARKETING EXPENDITURE: + 8% Financials

MARKETING EXPENDITURE: + 8% Margins

 

+ 8% Marketing Expenditure Increase

MARKETING EXPENDITURE: + 8% Financials

MARKETING EXPENDITURE: + 8% Margins

 

 

+ 10% Marketing Expenditure Increase

MARKETING EXPENDITURE: +10% Financials

MARKETING EXPENDITURE: +10% Margins

 

+ 10% Marketing Expenditure Increase

MARKETING EXPENDITURE: +10% Financials

MARKETING EXPENDITURE: +10% Margins

 

 

+ 12% Marketing Expenditure Increase

MARKETING EXPENDITURE: +12% Financials

MARKETING EXPENDITURE: +12% Margins

 

+ 12% Marketing Expenditure Increase

MARKETING EXPENDITURE: +12% Financials

MARKETING EXPENDITURE: +12% Margins

 

 

- 2% Marketing Expenditure Decrease

MARKETING EXPENDITURE: - 2% Financials

MARKETING EXPENDITURE: - 2% Margins

 

- 2% Marketing Expenditure Decrease

MARKETING EXPENDITURE: - 2% Financials

MARKETING EXPENDITURE: - 2% Margins

 

 

- 4% Marketing Expenditure Decrease

MARKETING EXPENDITURE: - 4% Financials

MARKETING EXPENDITURE: - 4% Margins

 

- 4% Marketing Expenditure Decrease

MARKETING EXPENDITURE: - 4% Financials

MARKETING EXPENDITURE: - 4% Margins

 

 

- 6% Marketing Expenditure Decrease

MARKETING EXPENDITURE: - 6% Financials

MARKETING EXPENDITURE: - 6% Margins

 

- 6% Marketing Expenditure Decrease

MARKETING EXPENDITURE: - 6% Financials

MARKETING EXPENDITURE: - 6% Margins

 

 

- 8% Marketing Expenditure Decrease

MARKETING EXPENDITURE: - 8% Financials

MARKETING EXPENDITURE: - 8% Margins

 

- 8% Marketing Expenditure Decrease

MARKETING EXPENDITURE: - 8% Financials

MARKETING EXPENDITURE: - 8% Margins

 

 

- 10% Marketing Expenditure Decrease

MARKETING EXPENDITURE: -10% Financials

MARKETING EXPENDITURE: -10% Margins

 

- 10% Marketing Expenditure Decrease

MARKETING EXPENDITURE: -10% Financials

MARKETING EXPENDITURE: -10% Margins

 

 

- 12% Marketing Expenditure Decrease

MARKETING EXPENDITURE: -12% Financials

MARKETING EXPENDITURE: -12% Margins

 

- 12% Marketing Expenditure Decrease

MARKETING EXPENDITURE: -12% Financials

MARKETING EXPENDITURE: -12% Margins

 Financial Definitions


 


PRODUCT DEVELOPMENT AND PROCESS DEVELOPMENT COSTS

 

The introduction of New Products and the sustained development of Process techniques are vital to every situation the Company will encounter in the Products & Services industry.

Long Term profitability and growth is dependent on an on-going and viable Research and Development programme and the Company must obviously be heedful of this requirement.

The various components of the question of Research and Development of New Products and New Process Techniques are of course complex and include questions of professional and technical manpower, capital requirements, research facilities, et cetera, and are not within the scope of this study.

These questions must however be put and the Company must decide if they have the necessary capabilities, or if they can organically develop the necessary capabilities or if these capabilities can be purchased.

There is an established link between technically and technologically superior products and successful enterprises and one must not only consider the product and the process but also the development of associated services, after-sales services, et cetera. The provision of associated products and services may be as important as the provision of the product itself.

It is assumed that the Company already use standardized PERT and CPA procedures for their process control and development and are also probably using a systemized New Product Screening procedure. Obviously the more complicated the process the greater the need for efficient review systems; in terms of Products & Services "Product Screening", this study will seek to provide a suggested New Product Screening procedure (found in the accompanying documentation).

The rest of this particular section will explore the impact Product Development and Process Development expenditures have on Profitability and other factors.

 

 

The following Excel spreadsheets (or the Access tables in the databases) should be used to produce a graphic representation of the relationship between the Company and the industry and market situation.  The links below point to the industry and market situation, and to the situation in respect of the Company:-

 

INDUSTRY & MARKET

THE TARGET COMPANY

Research & Product Cost Objectives

 

RESEARCH & PRODUCT COST : Market

RESEARCH & PRODUCT COST : Share

RESEARCH & PRODUCT COST : Market

RESEARCH & PRODUCT COST : Share

 

RESEARCH & PRODUCT COST : Financials

RESEARCH & PRODUCT COST : Margins

RESEARCH & PRODUCT COST : Financials

RESEARCH & PRODUCT COST : Margins

Product Positioning

 

PRODUCT POSITIONING : Market

PRODUCT POSITIONING : Share

PRODUCT POSITIONING : Market

PRODUCT POSITIONING : Share

 

PRODUCT POSITIONING : Financials

PRODUCT POSITIONING : Margins

PRODUCT POSITIONING : Financials

PRODUCT POSITIONING : Margins

 Financial Definitions        Market Definitions



PRODUCTS + SERVICES PROFITABILITY / DEVELOPMENT EXPENDITURE & MARKET GROWTH

 

PRODUCTS + SERVICES PROFITABILITY / DEVELOPMENT EXPENDITURE & MARKET GROWTH

THE TARGET COMPANY

LONG-TERM MARKET GROWTH

LOW

AVERAGE

HIGH

DEVELOPMENT divided by SALES

LOWER

ROIc=****%

ROIc=****%

ROIc=****%

SAME

ROIc=****%

ROIc=****%

ROIc=****%

HIGHER

ROIc=****%

ROIc=****%

ROIc=****%



High Development Expenditure tends to be profitable in Mature Markets with a relatively low Long Term Growth rate.

Similarly, Low Development Expenditure tends to be profitable in Dynamic Markets with a relatively high Long Term Growth rate.

Mid-range Development Expenditure is apparently profitable in any Market Growth situation.



PRODUCTS + SERVICES PROFITABILITY / DEVELOPMENT EXPENDITURE & PRODUCT QUALITY

 

PRODUCTS + SERVICES PROFITABILITY / DEVELOPMENT EXPENDITURE & PRODUCT QUALITY

THE TARGET COMPANY

PRODUCT QUALITY

LOW

AVERAGE

HIGH

DEVELOPMENT divided by SALES

LOWER

ROIc=****%

ROIc=****%

ROIc=****%

SAME

ROIc=****%

ROIc=****%

ROIc=****%

HIGHER

ROIc=****%

ROIc=****%

ROIc=****%



Mid-Range Development Expenditure appears to be very attractive in terms of profitability if used to improve Product Quality. Mid-Range Development Expenditure can benefit the Company, irrespective of the existing quality of their products, if it is applied to the improvement of Product Quality.



PRODUCTS + SERVICES PROFITABILITY / DEVELOPMENT EXPENDITURE & MARKETING COSTS

 

PRODUCTS + SERVICES PROFITABILITY / DEVELOPMENT EXPENDITURE & MARKETING COSTS

THE TARGET COMPANY

MARKETING COSTS / SALES RATIOS

LOWER

SAME

HIGHER

DEVELOPMENT divided by SALES

LOW

ROIc=****%

ROIc=****%

ROIc=****%

NORMAL

ROIc=****%

ROIc=****%

ROIc=****%

HIGH

ROIc=****%

ROIc=****%

ROIc=****%



If Development Expenditure is low then Marketing Costs do not seriously affect Profitability at any level.

If Development Expenditure is high then a high level of Marketing Costs wil