ⓘ Six Segment Analysis

                                     

ⓘ Six Segment Analysis

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.

In contrast to Michael Porters 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.

                                     

1. Composition

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

Natural

  • sensitivity to the environment
  • geographical distribution
  • pollution size
  • Renewal of energy
  • Growth of importance and pressure
  • age structure
  • Global warming
  • income distribution

Political/legal segment

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

Technological segment

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

Economic segment

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

Global segment

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

1.1. Composition Sociocultural segment

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

1.2. Composition Political/legal segment

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

1.3. Composition Technological segment

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

1.4. Composition Economic segment

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

1.5. Composition Global segment

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


                                     

2. Interaction with other frameworks

When management analyzes a firms 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. 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.

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