Analysis 36: Comparison of Company to Industry on Reasons for Positive Volatility
| HOW TO INTERPRET THE ANALYSIS: This exhibit compares the company to industry performance on the top four reasons for Positive Volatility. The results are portrayed on an index, where 100 equals the industry's performance. Any measure for the company greater than 100 means that it gained greater volume than the average competitor in the industry for that reason. Any number below 100 means that the company gained less than the average competitor in the industry due to the reason. Beginning with the left hand side of bars, the exhibit shows the company's top four reasons for Positive Volatility.
These reasons are, in order: brand name, volume capability, consistent product, and low price. The size of each bar reflects the company's measure of Volatility on the particular reason to that of the industry. In the case of brand name, the company's Positive Volatility was 4.4 times that of the industry. In other words, if the average industry competitor gained 3 share points due to brand name, the company gained 13.3 share points due to its brand name (3% x 4.42 =13.3%). The company's second most important reason for Positive Volatility was its volume capability. Here it gained 2.15 times as much volume as did the average competitor in the market. Using the example of 3% as the average Positive Volatility due to volume capability for the industry as a whole, this company would have gained 6.5% (3% x 2.15 = 6.5%) due to its volume capability. In the company's top four reasons for Positive Volatility, it clearly outperformed the industry's average competitors on brand name, volume capability and consistent product. It performed at a lower rate than the industry on low price, which means that the average competitor in the industry tended to be more aggressive on offering or meeting a low price than was the company.
The right hand set of bars shows the top four reasons for Positive Volatility for the market as a whole. The numbers on each bar represent the company's index compared to the industry for each of those reasons. The market's top four reasons for Positive Volatility were, in order: short order cycle time, volume capability, special products and low price. These are different reasons than the top four reasons for the company's Positive Volatility. And, in fact, the company gained no Positive Volatility volume on the basis of short order cycle time or special products. It outperformed the industry's average competitor on volume capability and under-performed the average competitor in the industry on low price.
PURPOSE: This analysis highlights the company's comparative strengths in the marketplace. It shows the reasons behind the major occurrences of positive volatility for both the company and market as a whole.
APPROACH: The company lists the top four reasons for its positive volatility events with customers. These reasons are rank ordered according to the volume that each reason brought to the company. Similarly, the company ranks the top four reasons for positive volatility in the rest of the market.
An index is a measure of the performance of one entity relative to another entity. The index is the ratio of the performance of the first entity divided by the performance of the second and then multiplied by 100. An index above 100 indicates that the first entity has a higher result than the second entity. An index below 100 indicates that the first entity has a lower result than the second.
Once these rankings have been completed, the company calculates the total share of positive volatile volume each reason represents, both for the company and for the market as a whole. To get the left-hand set of bars, the company divides the share points for the company by the share points for the industry for the particular positive volatility reason, then multiplies by 100. This produces an index of the company's top positive volatility reason compared to the industry. The company does a similar analysis for the other top reasons.
To get the bars on the right, the analyst divides the share points for the company by the share points for the industry for the particular positive volatility reason then multiplies by 100.
The company can also undertake a similar analysis of it's top four reasons for negative volatility, compared to the market, in order to help prioritize the changes needed in the company's value proposition in order to defend it's current customer volume.
Where there are differences from 100, the company is either relatively strong or weak. The analysis is interpreted as follows: With the left hand bars, the company displays its 4 reasons for positive volatility. These are real strengths for the company. These strengths might be candidates for further development with the performance improvement program.
The index provides an indication of the degree of strength or weakness of the company compared to the industry. The company in this example gained much more volume than the industry as a whole due to brand name. Any measure having an index above 100 indicates the company is strong in that reason compared to the industry. The company was low in its share of volatility coming from low price. Any index below 100 suggests that the company is weaker than the industry as a whole on gaining volume with that reason.
The measures on the right side of the chart indicate the company's performance on an index basis compared to the market on the top four reasons. In this example, the market's top reason for positive volatility was close proximity and having a short order cycle time (OCT). On this reason though, the company had no positive volatility
The indices on the right, are the measures of the company's relative strength, not of the market as a whole. For example, the second most important reason for positive volatility in the marketplace was volume capability. The company gained twice as much of its positive volatility volume due to volume capability as did the market overall.
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Symptoms and Implications: Symptoms developing in the market that would suggest the need for this analysis.
Perspectives: Conclusions we have reached as a result of our long-term study and observations.