Seminari de recerca del JUICE: Mapping and forecasting market structure evolution

A market map provides managers with a static snapshot of the competitive positions of a market’s participants (such as brands). Yet, as markets tend to be in flux, knowledge about the trajectories of brands’ competitive positions over time would be more informative than a static snapshot. In contrast to static snapshots, trajectories create a forward-looking perspective on competition, reveal whether positions are converging or diverging and help managers to identify shifts in their market’s structure. Although data for market structure analysis is increasingly available in high frequency, extant mapping methods are predominantly static, and do not reveal brands’ trajectories. Herein, we propose a novel approach for mapping and forecasting the evolution of market structure over time. Our approach is based on “EvoMap”, a novel dynamic mapping method. We combine EvoMap with time-series models, which allows the market analyst to identify and forecast the trajectories of brand’s competitive positions over time. We validate our approach in an extensive simulation study and show that alternative approaches – e.g., repeated applications of extant mapping methods - cannot accurately identify the trajectories of brands’ competitive positions over time. We apply EvoMap to study the trajectories of more than 1,000 firms during 1995 to 2017 and demonstrate how to identify changes in individual firms’ competitive environments, groups of converging / diverging competitors and forecast the identified trajectories into the future.