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Industry Segmentation OverviewView Template for: Industry Segmentation Overview The purpose of this section is to divide the entire industry (the competitive playing field) into its strategically relevant parts, by product variety and buyer type, and then to locate each competitor in the industry segment(s) in which they currently compete (and in those segments they are likely to enter). The rows of the industry matrix represent strategically relevant product varieties. The columns of the matrix represent buyer types. Not all buyers are alike. The goal is to group the industry's buyers into the most strategically relevant categories based upon their needs and the cost of serving them. In practice, many business managers define the industry matrix with only the buyer segments and product varieties they currently serve. It is important to include all industry buyer types and all product varieties served by all competitors. Better still, include potential new buyer types and potential new product varieties. To think of new product varieties, it is often helpful to imagine what new product an innovative and cash rich competitor could announce in five years. Below the matrix should be a listing of acronyms of all current and potential competitors. For example: HD = Home Depot OM = OfficeMax ST = Staples For convenience, it is sometimes helpful to group similar competitors with a single acronym. For example: MWC = Membership Warehouse Clubs Within the matrix, place the acronym of the current and potential competitors in the appropriate segments. Potential competitors can easily be identified with a "(P)" following their acronym. For example, WW(P) could represent Woolworths as a potential competitor in a given industry segment. For a stand-alone business, this critical exercise is fairly straight forward. For a business unit operating within a large corporation, there is one common mistake that needs to be avoided. The buyer types for each corporate business unit should reflect the strategically relevant buyer types for that unique industry. For example, a company which competes in ten industries should have each of the ten SBUs independently develop an industry segmentation matrix reflecting its own unique buyer segmentation. Resist compromising on one company-wide segmentation scheme. A detailed analysis for building an industry segmentation matrix is presented in Michael Porter's book Competitive Advantage. |
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