Risk assessment in target market selection by bread baking enterprises

Abstract

Introduction. The aim of research is to justify a comprehensive approach to enterprise risk management, which includes analysis of risk factors at the stages of target market selection by enterprise. Materials and methods. Statistical and financial reporting of 26 Ukrainian bakery enterprises was carried out. For expert evaluation of the likelihood of risk events and the occurrence of each risk factor, a rating scale is employed, which includes five possible states ranging from 0 – Improbable to 1 – Likely. The scale for expert assessment of possible losses includes six ranges from 0 – no loss to 0.91–1 – catastrophic loss. Results and discussion. The issue of minimizing or neutralizing risks is particularly pertinent when enterprises are selecting target markets. Seven stages of target market selection are proposed: assessment of enterprise level capabilities; identification of segmentation principles and factors; development of matrix models (functional maps); collection and analysis of information about the bakery market; selection and evaluation of market segments; collection and analysis of information about competitors; and target segments selection and making optimal managerial decisions. The assessment of risk factors and possible consequences at the stages of target market selection by bread baking enterprises has led to the following conclusions: the probability of the risk of profit shortfall is 0.69, while the probability of the risk due to uneven output of finished products is 0.66. The probability of risk is 0.59 if the products do not meet the consumers requirements, the product features are worse in comparison with competitors, or if the marketing strategy is insufficiently developed. The overall risk in selecting a target market for bread baking enterprises is 0.21, signifying a low probability of risk situations, but the total possible losses are at a moderate (acceptable) level of 0.6. Conclusions. The proposed approach allows to prevent risks or at least to minimize the possible losses in the emergence of risk in target market selection and can be extended to other enterprises taking into account the branch specifics of their activity.