● Barriers to entry in the market segment: There may be entry barriers to a
segment that will reduce its appeal. These can be in the form of
patents, new specialised plant or machinery necessary, or the need for
high promotional expenditure. It may be that the overall level of
investment necessary to successfully enter an area may be unrealistic
for some companies. These same barriers may also put off other poten-
tial entrants. Therefore if a company calculates that it can overcome
these barriers it may be able to enter a segment where there is little
direct competition.
● Barriers to exiting the market segment: There may be barriers that make
exiting a segment difficult. Expensive facilities may have to be built
that can only be used in servicing a particular market segment.
Therefore withdrawing from this segment would leave redundant
expensive plant. Other barriers could include service agreements to
provide spare parts to customers for a number of years into the future,
or plant and machinery that would be expensive to decommission.
Organisations would have to anticipate the potential barriers to exit
when they are initially evaluating a segment’s attractiveness.Environmental factors
Social
Social changes can lead to newly emerging segments that are not currently
served by any organisation. There can be a significant advantage to
companies that are the first to move into these areas. Organisations also
need to review the impact that any likely changes in social trends will
have on a particular segment.Political
Changes in the political environment can create new segments in a market.
The deregulation of the utilities market created several new market seg-
ments that organisations could address. The political environment may also
make certain segments less attractive. Segments that are located in particu-
lar geographic areas may be affected by political instability. There may also
be regulatory changes that will affect a sector such as pharmaceuticals.Economic
Economic trends may make segments more or less attractive. The growing
affluence of older people in western economies is making them a much
more attractive group than 20 years ago.Technology
Technological changes have to be taken into consideration when evaluat-
ing a segment. A judgement will have to be made as to whether new entrants
will be able to enter a segment competing on a different basis by using
technology to create innovative ways of delivering a product or service.182 Strategic Marketing: Planning and Control