Final answer:
The most appropriate advice for evaluating market segment attractiveness is to consider the degree of competition and barriers to entry. It's important to recognize that fast growth, substitutes, buyer power, and market size all influence attractiveness, but context such as differentiation and barriers matter greatly.
Step-by-step explanation:
When evaluating the attractiveness of a particular market segment, the best advice to offer your colleague would be C. Carefully consider the degree of competition and ease of entry into the segment. This involves assessing whether the segment is already crowded with competitors, which could reduce the potential for profitability. Moreover, it's important to evaluate the barriers to entry that might exist, as some markets may have high startup costs or strong incumbents with robust brand loyalty, making it difficult for new entrants to gain a foothold.
Additionally, though not directly listed as an option, it is essential to understand product differentiation and substitute availability. In a market with close substitutes, consumers may easily switch to an alternative if prices rise or if they are dissatisfied, making the demand more elastic. This can limit pricing power and therefore the attractiveness of a segment. In contrast, if your firm's product has no close substitutes, it may have more control over pricing and could operate much like a monopoly.
Fast-growing market segments (B. Fast-growing segments are always attractive) can be enticing, but they often attract more competitors, and growth does not always equate to profitability. As for A. A segment is attractive if there are substitute products available, this can indicate a competitive market where differentiation is crucial. Option D. The power of buyers is not a consideration when evaluating the attractiveness of a segment is incorrect, as buyer power can greatly impact a company's ability to set prices and maintain margins. Finally, E. If a segment is larger than others, it should be targeted is not necessarily true; larger markets might also mean more competitors and may not align with a company's competencies or strategic goals.