Finance:Six Segment Analysis

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The Six Segment Analysis is a framework to analyze the general environment of a firm. The framework is frequently used in the analysis of competitive strategy. Six Segment Analysis can help managers to identify potential opportunities and threats. The six segments of the general environment are demographic, sociocultural, political/legal, technological, economic, and global.[1]

In contrast to Michael Porter's Five forces analysis, which focuses on the competitiveness of a specific industry, Six Segment Analysis target on broader macro-environmental trends. Such trends could potentially affect the profitability of the industry as a whole and influence the sustainability of the competitive strategies of a company.

Composition

Below is a sample list of macro-environmental trends classified according to the six segments.[2]

Natural

  • sensitivity to the environment
  • Growth of importance and pressure
  • Reduce pollution
  • Renewal of energy
  • Global warming

Sociocultural segment

  • Women in the workplaces
  • Workforce diversity
  • Attitudes about quality of worklife
  • Concerns about environment
  • Shifts in work and career preferences
  • Shifts in product and service preferences

Political/legal segment

  • Antitrust laws
  • Taxation laws
  • Deregulation philosophies
  • Labor training laws
  • Educational philosophies and policies

Technological segment

  • Product innovations
  • Applications of knowledge
  • Focus of private and government-supported R&D expenditures
  • New communication technologies

Economic segment

  • Inflation rates
  • Interest rates
  • Trade deficits or surpluses
  • Budget deficits or surpluses
  • Personal savings rate
  • Business savings rates
  • Gross domestic product

Global segment

  • Important political events
  • Critical global markets
  • Newly industrialized countries
  • Different cultural and institutional attributes

Interaction with other frameworks

When management analyzes a firm's strategic position, it is important to obtain a good understanding of the external environment of the company. Typically the external environment analysis consists of general environment, industry environment and competitor environment.[3] Six Segment Analysis provides insights on the threats and opportunities existing in the general environment.

While a very popular framework for the industry environment analysis is the Five forces analysis, strategic group is a substructure of an industry that may play a role in understanding performance differences among firms.[1]

Competitor analysis typically starts with an identification of the market structure and proceed with complex strategic decision making analysis of Game Theory.


See also

  • PEST analysis PEST is the more commonly used term for six segment analysis
  • Market environment#PESTEL analysis

References

https://en.wikipedia.org/wiki/Six Segment Analysis was the original source. Read more.