The AERU Value Chain Compass

Scale

Market

Many factors impact on the size of a potential market segment for a value chain’s product. These include the product price, the availability of close substitutes, consumer preferences and demographics, the choice of distribution channels, the budget for marketing and the effectiveness of engagement with final consumers. A new value chain also needs to pay attention to how much time it might take to achieve a visible presence in a crowded and strongly contested market.

The case studies of enterprises developing new value chains all devoted significant resources to analysing evidence of potential market size under different scenaros.

Questions for developing a value chain

• What evidence can the value chain gather on the potential size of its target market segment under different scenarios controlled by the value chain?

• What are the key parameters (such as product price) influencing the potential market size, and how sensitive is consumer demand to each of these parameters?

• How much time would it take for a new product to reach a financially viable level of sales?