Strategic Analysis and Planning with MATRIX V5
Tutorial Step 4 - Market Attractiveness Factors (MAFs)

Take an analytical view of your business and decide which Market Attractiveness Factors (MAFs) are important to your organisation. This may mean spending some time with your management and staff discussing what type of organisation you are, and how you wish to evolve:

• Do you seek 'high volume / low value' markets? Or are you looking for very complex, high value opportunities that may arise only a few times each year?
• How important is market size to you? Do you need a growing market to fuel a substantial and growing organisation, or is the potential for repeat business from a few critical accounts more important to you?
• Do you excel in growing markets which may be lucrative, but where there is considerable risk? Or can make money through the adoption of sound cost-control and management techniques in older, more stable markets?

These deliberations will lead to a list of MAFs, such as 'Market Potential', 'Fit With Core Skills' which can be weigted, scored and processed in accordance with the Simple Multiattribute Rating Technique (SMART). More Information.

MATRIX V5, the software application for business strategists, can accommodate an unlimited number of MAFs via the Market Attractiveness scorecard, though in practice models typically include 5 or 10 at most.

To display the 'Market Attractiveness' scorecard exactly as shown opposite, select the Europe / Metallic Assemblies / Industrial Niche on the Segmentation Matrix, and click the 'Market Attractiveness (Data)' button (above) which is located on the toolbar.

Five Market Attractiveness Factors have been defined. Note that each Market Attractiveness Factor has been explicitly qualified with the 'scale' against which it is to be measured. For example, 'Market Potential' is a Value Function to be measured in $, Gross Margin between the years of 2008 and 2010, whereas ‘Fit with Core Skills’ is a Direct Rating estimated on a ‘0 – 100 Scale’. Clearly 'Market Potential' (weighted at 100) is the most important factor, and for the Active Niche achieves a Value Function of $12,014,000.00. 'Competitive Intensity' (weighted at just 20) is the least important factor and for the Active Niche achieves a Value Function of 50. Note that ‘Competitive Intensity’ is defined as ‘inverse’, which reflects the view that the more intense the competition, the less attractive the opportunity.

Score each MAF for each Niche. MATRIX V5 supports both Direct Rating (e.g. 0 to 100) and Value Function (i.e. ‘raw’), techniques. A Factor may be defined as:

• 'Conventional', where a higher score corresponds to a more attractive proposition. An example is ‘Profitability’ where the more profitable the Niche, the more attractive is the opportunity, or
• 'Inverse', where a higher score corresponds to a less attractive proposition. An example is ‘Cost of Market Entry’, where the higher the Cost of Market Entry, the less attractive is the
opportunity.

Finally, consider the relative importance of each of the different MAFs. Apply high Swing Weights to those MAFs that are most important, and lower Swing Weights to those MAFs that are less important. For example it may be that the potential for ‘Account Development’ and ‘Repeat Business’ is much more critical to the success of your business than ‘Market Growth Rate’ which reflects growth or expansion within the market.

Remember, the Market Attractiveness exercise represents your view of what you want from an ideal business opportunity, and how each of the Niches in your portfolio 'measures up' against the ideal!

The information provided via this data scorecard is used within Market Attractiveness, the Directional Policy Matrix (Position on 'Relative Market Attractiveness' Axis), and Risk Analysis (Position on 'Risk' axis).

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