Market Attractiveness and Market Potential

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Market Attractiveness and Market Potential I. Outline A. What makes markets attractive to enter? B. How can we forecast before entering or in early stages of the evolution of the market, the level of market potential and industry sales? C. Are there entry advantages? What are the sources of such advantages? Are these durable? D. If there are entry advantages, should you always enter first? II. Market attractiveness A. Market size B. Growth rate C. Heterogeneity of customers ✓ Is heterogeneity, and the presence of different segments good or bad? D. Existing competitors and potential competitors E. Level of costs that become sunk post entry F. Uncertainty…show more content…
This sub population adopts the product at the earliest. ✓ Imitators are followers. The likelihood that a randomly chosen imitator will adopt the product at time t is a function of the number of adopters who have already adopted the product up until that time. What is the rationale for this assumption? • Internal characteristics of consumers • Bandwagon effects – consumers like to mimic others and the value of a product goes up because others won it. You want to belong to the ‘in’ group. • Externality effects ✓ Thus sales at time t can be written as S(t) = Pr(some one will adopt at time t| he has not adopted the product till time t)* (Size of the segment that has not adopted the product till time t) Algebraically, S(t) = f(x(t)) (m-x(t)) Where f is a mapping that relates the cumulative number of adopters to probability of adoption and m is the total market potential assumed as fixed. If we assume that adoption occurs continuously over time, then S(t) is the sales rate at time t and S(t)=dx/dt. Thus the sales equation above is a differential equation and can be solved and plotted over time after parameterizing f(t). If we assume that f(t) is linear so that f(t)= a+bx(t) then

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