International Industry Analysis - Class 1 - Demand Analysis

hello welcome to the first class of the international industry analysis course focused on demand analysis so in this class you will learn how to present the demand Evolution how to perform a market segmentation how to estimate the market valuation how to determine the key success factors and finally how to identify the future demand trends so any International industry analysis should start with an overview of the evolution of global demand and for that purpose we'll have to research for Global revenues of sales of products or Services provided and that involves obviously a mixture of past statistics

as well as future forecasts if available Let me Give an example so here we have the past Evolution and a future forecasts for online gaming revenues and as you can see the covet year 2020 was an exceptional year in terms of growth it grew around 20 percent uh obviously because of the coveted lockdowns so it's interesting to understand how specific events May have an impact on this evolution of global demand furthermore the geographical distribution of global Demand by country should be presented and for that purpose of course let's use a map worldwide map as you

can see here some countries have a higher let's say weight in global demand than others the ones darker such as United States of America China and Japan have a higher percentage of the World Market than other countries okay so now it's time to get a deeper understanding of the demand by segmenting the market segmentation is a key exercise so it's really important to understand how to do it in a broad way so that we can identify which segments are the most critical ones so let's use eight criteria first we're gonna use the purchase process criteria

which are the who the what and the how much the who obviously is who are the buyers the what is what do they buy what kind of products what kind of services and how much is how much are they willing to pay are they willing to pay a premium price are they looking for low cost are they paying just regular prices so then comes another block of criteria the purchase or consumption motivation criteria so here we are looking at the for whom for whom are the product or Services bought maybe it's not for the same

people as the buyer so children are pets or elderly or in companies you also buy products or services to be used by employees as well as the the why the motivation and this one is always a key segmentation variable okay oh well and finally we have to purchase our consumption setting criteria which include the when is there a seasonality is there a particular time when products or services are bought the where are they bought in stores are they bought uh from abroad through Imports for instance and obviously the how they bought physically and they bought

online and so on so all these eight criteria must be very well applied and this requires more detail okay so that's why we have here a very detailed table with b2c and B2B application of the eight criteria first the three related to the process then the two related motivation and lastly the two related to the setting okay very well and to understand customers preferences on a more personal level let's analyze their personalities with the support of the Eagles man the Eagles map is a very Innovative personality model based on solid biological psychological as well as

managerial foundations and it's stands on for personality profiles the E the entrepreneurs the G the governors the O the operationals and S the socials okay now especially in high involvement purchases customers choices tend to reflect their own personality so it's important to understand how they are and therefore how do they buy let me give an example we worked with a premium fashion retailer chain and we analyze their customer segments of course and we identified five key segments and then we understood how they buy in different ways of course they have different preferences and this had

to do with their own personality so we positioned them differently on the ego's map and once this became clear of course all marketing campaigns even the the interaction in the stores became adapted to the nature of the customers okay and obviously sales increased very fast so now let's estimate the value of each market set in financial courses you have learned how to apply the Net Present Value to calculate the value of a market of a project however here it's hard to apply this formula to broader Global segments so we will instead apply a simplified version

of an impressive value which is the sustainable value fund so let's take a close look at both of them here we have the Net Present Value formula with a cash flows divided by a risk adjusted discount rate and the simplified version obviously translates cash flows into sales and margin so here we start with future sales plus growth of course and then we get the margin divided by risk which is a well-known return risk ratio analysis in any Financial course and finally we add the sustainability index to make sure that we take into consideration sustainability in

our strategic analysis okay now if you have segmented statistical data for each segment you can immediately have the first two components of the formula sales and growth but to calculate the margins for each segment since there is no reliable data specifically for each segment then we'll have to use another framework called the five forces model as you know the prime force model allows you to estimate the structural return so that means the margin of any business or any segment okay it's based on five courses obviously so the thread of new entrance the threat of substitute

products the bargaining power of suppliers the burning power of buyers and the competition among existing rivals Okay so what we will do obviously is to apply this framework to each segment to have an estimate of those margins and once we have the margins as well as the sales it's actually easy to calculate the risk what is still missing is the sustainability index formula and for that purpose we'll have to understand better what is sustainability there are three typical topics for sustainability that and the E the environmental sustainability the S the social sustainability and the g

the governance sustainability okay so we can just select a few topics from each type of sustainability and apply it to and to all the segments to check whether some are more sustainable in this Factor than others okay so let's put it all together and we get obviously the end result is the formula applied to all segments leading to a score a sustainable value score okay as you can see here we have five Consulting segments and I've applied all the all the individual measures and in the end it's easy to identify which segment is the most

valuable which one is the least valuable and you can even perform a sensitivity analysis at the end to get a range it's never an exact core it's a range between just two two levels okay now this requires expansive calculations so that's why I've prepared already a formatted the Excel file that allows you to just put inside the sales values and automatically calculate the growth rates then you need to put in the margins and for that purpose there's an extra Excel sheet just covering the five forces so you can easily apply this to each segment and

automatically it goes into the that table then we have the risk which is also automatically calculated and finally the sustainability index with a ESG factors that you select and then you qualitatively assess how they are applied to each statement and automatically of course a sustainable value is calculated and even the sensitivity analysis is already prepared for you so the purpose once again is not for you to waste too much time is to apply well these topics so once all segments have been valued it's time to look at the key success factors what are those activities

that must be really well performed for any company to succeed in a given segment independently of whether that segment is very attractive or not attractive okay so key success factors can be identified by combining first the factors that provide value for customers and those that are used as competition variables those that are used to differentiate among competitors so let's take a closer look at two examples here we have uh steel and Supermarket businesses completely different and different key purchasing factors so value for customers uh different competition variables of course and combining these two types of

factors we arrive at the key success factors okay obviously key success factors tend to be somewhat different between different segments so we'll have to take a closer look at each setting okay and we will find that there are different activities different key success factors in different segments but there are also some similar activities and they're taken somewhat differently in different key success factors let me exemplify with the two segments of the car industry so we have here the small cars and the luxury cars and as you can easily understand for small cars low cost operations

are absolutely critical to keep the costs low since prices are also low but in the luxury segment service is a key success factor because high-end customers expect a much better service than uh clients of of small cars but you also have some similar activities that are undertaken somewhat differently so for instance communication in the small Mark small car market we're talking about mass communication whereas in the luxury segment we're talking about a very focused segmentation more tailored to the specific needs of uh you know F1 customers right very well finally let's take a look at

the future demand trends and for this purpose we will use a framework called the pastelona now as you probably know the pastel analysis is combination of six factors the P stands for politics the E for economics the s for society the T for technology the another E for environment and finally the L for legislation so what we're going to do is we're going to try to identify Trends in all these six areas and obviously see how do they impact on demand do they have a positive a negative or a neutral impact on demand this can

be easily undertaken through a table like this one here where you first clarify what what is the trend for each of those pastel variables and then you put a plus minus or equal and you make some comments on the side of why do you think that this has a positive or negative or neutral impact on demand and keep in mind that some of these Trends may have a more of an impact on just one or two segments and not on all sets okay so let's wrap up the key topics from our first class of the

international analysis course we've covered the demand evolution the market segmentation the market valuation the key success factors and we're finished with the demand terms so now you can read the first class handouts in more detail and then you'll be able to apply all these topics to the industry that you select for your team project I hope you enjoyed the video and I'm looking forward to seeing you all in class goodbye