Market Structuring with the Self-regulatory Model of Consideration Set Formation
”What is our market?”, “Who is our customer?”, and “Who are our competitors?” are obvious but important questions for every company. However in the real world these questions are either not asked with enough insistence or answered incorrectly. Otherwise companies could not fail because they “have produced past the market”, they “have missed market developments” or they “were not able to survive competition” (BAUER 1989, p. 17). Key strategic issues such as basic business definition, opportunity assessment, threat analysis, and resource allocation decisions depend on the definition of the market. Portfolio-analysis, for example, requires the specification of constructs such as market volume, market share or market attractiveness. The breadth or narrowness of a market definition is also a prerequisite for the definition of strategic business units. The results of Portfolio-analysis aid resource allocation between these strategic business units (see DAY et al. 1979). A thorough market definition and market understanding is therefore crucial for strategic planning. However it can also be important for tactical decision making e.g. market share often determines evaluation of managerial performance or allocation of advertising expenses etc. Another important area of application for market structuring represents antitrust legislation. Methods to identify market boundaries will make the evaluation of competitive consequences from mergers and acquisitions more reliable (see BOURGEOIS et al. 1987, p. 332 f. for a discussion of the North American antitrust legislation and BAUER 1989, p. 75–107 for a discussion of its German counterpart).
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