Analysis 1: Business Definition

In Fiberglass Insulation Businesses, the main product, R-19, and the competition remain the same. The customer types, however, vary from retailers to residential contractors to commercial contractors, each of which uses different criteria to make its buying decision. In addition, the competitors, while remaining the same, vary in strength in each market. As a result, there are three separate businesses: one for retailers, one for residential contractors and one for commercial contractors.

• Video #18: Short Description of Types of Industry Leaders

• Video #25: Short Explanation of Customer Buying Hierarchy

• Video #57: How Many Customers Do We Have

PURPOSE: This analysis defines the subject market for the development of a business unit strategy.

• Audio Tip #1: Defining a Business

• Audio Tip #2: Examples of Similar, but Different Businesses

• Worksheet #1: Defining the Business

APPROACH: This analysis divides all the products of the company into their separate businesses. These businesses are then the subject of the development of individual tactical and strategic plans. The company conducts this analysis by listing all of its product families. Under each product family, it lists the competitors the product family faces as well as the customer types who buy the product family. If necessary, the company may further subdivide product families in order to have coherent definitions of competitors and customer types in the marketplace under each product grouping.

In general, if either the competitor group or the customer types change from one product family to another, the business itself changes.

You should use this analysis in combination with Analysis 2 and Analysis 66.

Business Definition Examples >>

• Self Test #1: Defining the Business

Return to Diagnose Segments: Introduction

Return to Basic Strategy Guide Step 1

Analyses:

• Analysis 2: Requirements for Customer Information

• Analysis 66: Approach to Create Customer Information Database

Symptoms and Implications: Symptoms developing in the market that would suggest the need for this analysis.

• The market structure is changing as shares shift in the channels of distribution

• Some companies in the industry have begun to replace their direct sales forces with independent distributors (or vice versa)

• New entrants are penetrating the distribution channels of the industry's leading competitors

• The industry leaders are losing share

• Competition is beginning to focus resources on market segments as market growth slows

Perspectives: Conclusions we have reached as a result of our long-term study and observations.

• "Hostility in a Differentiated Market": A bottle of wine is surely a differentiated product. Nevertheless, the table wine industry underwent the same economic traumas faced by more traditional industries.

• "How the Auto Rental Market Became Hostile": The auto rental market, during the '80s, illustrates a typical trip into hostility.

• "If Whitey Ford Ran My Company": A well-managed company succeeds the same way that Whitey Ford won all of those games. Neither a pitcher nor a company can stay in the game long without the basic elements working together.

• "The Two Best Consultants in the World": The two best consultants in the world are a company's customers and its competition. The customer informs a company about the value of its product. The competitor is an authority on the company's cost. Neither consultant is ever wrong.