What should you be observing and assessing during an interview? How to be effective and consistent with your goals when applying for a job.
by Alberto Aleo
Have you ever been called into your boss’ office without any warning as you prepare to leave in the evening and been assigned, with an apparently guileless air, an impossible mission? When you try to raise any doubts you are met with responses like: “This is your chance to grow!” or “I wouldn’t have chosen you unless I had every faith in you”. Such phrases only serve to make you wonder if, not only is your situation desperate, but you are also being made fun of. Obviously this happened to me, and obviously, my boss was right: completing the task helped me to grow professionally and strengthened the faith and esteem we shared. But what was the demanding task I was set?
– – –
I was to calculate our company’s market share though we operated in a sector for which there were no sources that could provide data on product sales, and no market figures were registered in any archive or in any other form.
– – –
Just to complete the picture, we had a broad range of rivals with very few similarities: from multinationals to hundreds of small, local producers. I can’t deny that when my boss told me what I was to do, I had to sit down and, though I am normally very proactive, the only answer I found was, “It can’t be done”. I subsequently managed, thanks to her guidance and help, to complete the mission that I had considered impossible. So here are some tips in case you find yourself equally unprepared to respond to a similar request:
1. Get hold of the balance sheets of the main competitors who, according to your sales manager, are the more important actors on the market. This done, you should have the balance sheets of competitors who account for at least 80% of the market in terms of turnover. Don’t worry, according to Pareto’s law these should not account for more than 20% of the actors present, so it should not take you too long.
2. Look at the item “revenues” from the income statement and, still working with the sales manager, divide it into a percentage according to the product lines present in the offer of the company you are analysing. Now, consider only the product lines for which your companies are in direct competition. For example, if you produce machine tools for the building industry and your competitors also have other products such as tools for other uses, you only need to know how much the proportion of the first product, i.e. construction tools, accounts for in the competitor’s total turnover. Let’s say it is only 30%, at this point, we will consider only 30% of the competitor’s turnover.
3. Subtract from the turnover obtained, the percentage that historically is not generated directly by the sale of products (for example spare parts, assistance services, etc.) in that type of market. To obtain this information, check again with your colleagues in sales or with the other income-generating departments (after sales, warehouse).
4. Try to identify the average value of the product of each company examined and divide the turnover by this amount. Now you should have an idea of the number of products sold in one year by that company.
You are now ready to compare your data with those of other competitors, but don’t forget that to have the total value of sales in that market you have to add the 20% of products sold by small competitors, which you can indicate as “others”. Pareto’s law again comes in handy here: in every market, about 20% of the turnover is generated by 80% of minor producers, which due to their small size can be grouped into a single category.
It is important to note that if the presence of the companies you analysed is not homogeneous in all the national markets in which they operate, namely if their turnover varies in different countries, the calculation above could be seriously off course. To overcome this hurdle you will have to check the distribution of turnover in the various branches or obtain this data empirically by deducing the figures from the number and size of branches and dealers present in the various countries.
For example, if I want to analyse the market share in France of the same manufacturer of construction tools, I will need to refer to the number of dealers in that country. If French retailers are 30% of the company’s total retailers, this will probably indicate the percentage of turnover to be assigned to that market as a proportion of all the business generated. It should not be difficult to obtain data related to a company’s retailers – internet comes in useful here. Alternatively, you could ask your branch managers, who will most probably know the number of competitors in the area. Another empirical way to derive figures for the turnover of different branches, or more generally for producers whose balance sheets are unavailable, is to use the average turnover/employee ratio for the sector. It is usually easier to find out the number of employees and this data (using the average ratio mentioned) will indicate the turnover.
– – –
It is really important to have an idea of the market share, both to define objectives and to understand the structure of the forces in the field and, therefore, choose your tools more effectively.
– – –
Personally, I will always be grateful to my boss who, with patience and trust, taught me to carry out this fundamental analysis even in markets where no reference data exist.
| partem claram semper aspice |