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For example, a just­in­time stock system could give a cost advantage.  For example, using skilled craftsmen could give a quality advantage.  For example, outsourcing delivering could give a cost advantage. • Marketing and sales – for example, sponsorship of a sports celebrity could enhance the image of the product.  Marks & Spencer’s friendly approach to returns gives it a perceived quality advantage.  For example, centralised buying could result in cost savings due to bulk discounts.  For example, the latest computer­controlled machinery gives greater flexibility to tailor products to individual customer specifications.

Test your understanding 3 Consider the scope and pressures for industry convergence with respect to: (1) supermarkets and biotechnology companies (2) telecoms companies and entertainment companies.  He concluded that industry attractiveness depends on five factors or forces: Key point Expandable text ­ Porter's five forces Illustration 4 – Porter's five forces Illustration – Porter’s five forces model Threat of new entrants Many ‘cheap flight airlines’ have started up in the last ten years or so, despite there being considerable barriers to entry: Capital costs, know­how, government regulation (in all countries served), landing rights.

Markets and segmentation One aim of segmentation is to identify groups of customers who share similar needs for targeting. Traditional segmentation focuses on identifying customer groups based on a number of variables that include: • geographic variables, such as region of the world or country, country size, or climate • demographic variables, such as age, gender, sexual orientation, family size, income, occupation, education, socioeconomic status, religion, nationality/race, and others • psychographic variables, such as personality, life­style, values and attitudes • behavioural variables, such as benefit sought (quality, low price, convenience), product usage rates, brand loyalty, product end use, readiness­to­buy stage, decision­making unit, and others.

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