SELF TEST #10: Comparison of Company to Industry in Components of Volatility
Define Positive Volatility
Positive Volatility is the percentage of industry or individual company volume sold during a period of time that is gained by a company, or by a set of suppliers, from another company or set of suppliers. Positive Volatility is the sum of Get-In plus Increase Use volume.
Define Negative Volatility
Negative Volatility is the percentage of industry or individual company volume sold during a period of time that is lost by a company, or by a set of suppliers, to another company or set of suppliers. Negative Volatility is the sum of Get-Out plus Decrease Use volume.
Define Net Volatility
Net Volatility is the percentage of industry or individual company volume sold during a period of time that is the difference between the Positive Volatility and the Negative Volatility.
Define Get-In Volatility
Get-In Volatility is the portion of a company's sales volume sold during a period of time resulting from the acquisition of new sales volume from new customers.
Define Increase Use Volatility
Increase Use Volatility is the portion of a company's sales volume sold during a period of time resulting from an increase in the company's penetration of its relationship with existing customers.
Define Get-Out Volatility
Get-Out Volatility is the amount of sales volume a company loses during a period as a result of a customer removing the company from its relationship.
Define Decrease Use volatility
Decrease Use volatility is the amount of sales volume a company loses during a period as a result of a customer decreasing the proportion of its total purchases it buys from the company.
Define Unstable Customer
This term refers to a customer who has replaced one of his suppliers or changed the share of volume assigned to one of his suppliers during the period.
Identify the type of volatility in each of these events:
Our company suffered a Get-Out event, losing the Secondary role purchase volume. The Primary role competitor, who received part of our company's volume had an Increase Use event. The Tertiary supplier, who received the other part of the customer's purchases that formerly had gone to our company, also had an Increase Use event. The Tertiary role supplier replaced our company as the Secondary role supplier.
Our company had supplied a customer with 10% of its needs in the Tertiary role relationship with the customer. Because of the fine job our company did, the customer increased the proportion of purchases it made from the company to 25%, which raised our company's position with the customer to a Secondary role relationship.
Our company had an Increase Use event. The former Secondary supplier had either a Get-Out or Decrease Use event. We do not have enough information to know which type of Negative volatility the former Secondary Role supplier suffered.
Our company had been supplying 75% of a customer's needs. The customer then reduced the proportion it bought from our company from 75% to 60%.
The company suffered a Decrease Use Negative volatility event. Another competitor, or competitors, realized either an Increase Use or Get-In event.
A customer new to the market interviewed several potential suppliers and decided to give our company 10% of its total purchases.
Our company enjoyed a Get-In event with this new customer. At least one other competitor in the market, and maybe more, also enjoyed a Get-In event with this new customer.
What should we expect a strong Standard Leader to have in the way of volatility in any market?
We would normally expect a strong Standard Leader to have net Positive volatility in any market.
What might we expect to see in volatility with a strong Standard Leader in a Developing market?
A Developing market is fast growing, with many new end-use customers. In this market, we would expect to see a strong Standard Leader gaining share with Positive volatility that exceeds the market, especially in Get-In events, compared to the industry.
What might we expect to see in volatility in a strong Standard Leader in a Hostile marketplace?
A Hostile marketplace sees relatively low volatility overall and few customers newly entering the market. In such a market, we would normally expect to see a strong Standard Leader continue gaining share through volatility, but often to gain that share by having a lower Negative volatility than the industry average.
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