Measuring Competition

Hi all,

Someone asked me if there is any easy way to measure/quantify competition for each of the segments we find.

See, it is not necessary that the largest segment be the most attractive. The largest segment also attracts all manner of rival firms and brands. An average of the number of brand-models competing directly for customers in a particular segment (weighted perhaps by their market size) is one easy measure of how 'crowded/competitive' that segment is.

You may ultimately choose to pitch the second largest segment to the client perhaps, because it is the less crowded, perhaps. Whatever you do, ensure you have good arguments and data based evidence to back you up.

Another competition/concentration measure that comes to mind is the HH Index detailed below:

http://en.wikipedia.org/wiki/Herfindahl_index

It is the sum of the squares of marketshares and yields a measure of market power (i.e. inverse degree of competition). It is easy to compute and can be used in support of particular arguments you make.

Hope that helped.

Sudhir