Creating new market space
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Transcript of Creating new market space
Creating New Market SpaceCreating New Market Space
Salman Ahmed (8519)
Fall 2011
Salman Ahmed (8519)
Fall 2011
Strategic Marketing & Planning (MKT501C)
Strategic Marketing & Planning (MKT501C)
Objective of the Article
Determining a systemic approach to value
innovation that can help companies to create
new market space via looking across six
boundaries of the existing competition
Shifting the Focus of StrategyThe Conventional
Boundaries of Competition
HEAD-TO-HEAD COMPETITION(Focus On)
CREATING NEW MARKET SPACE
(Looking Across)
Industry Industry rivalry Substitute industries
Strategic Group Competitive position within strategic group
Looks across strategic groups within industry
Buyer Group Better serving the buyer group
Redefines the buyer group of the industry
Scope of Product & Service Offerings
Maximizing the value of product and service offerings within the bounds of its industry
Complementary product and service offerings that go beyond the bounds of its industry
Functional-Emotional Orientation of Industry
Improving price-performance in line with the functional-emotional orientation
Rethinks the functional-emotional orientation of its industry
Time Adapting to external trends as they occur
Participates in shaping external trends over time
Looking Across Substitute Industries
• Companies compete with companies within their
own industry as well as with those companies that
offer substitute products
• The space between substitute industries provides
the opportunity for value innovation
1 2 3 4 5 6
Looking Across Substitute Industries…Cont.
Examples:
•Home Depot
•South-West Airline
•Intuit (financial and tax preparation software company)
Looking Across Substitute Industries…Cont.
Home Depot:
•Created a market of do-it-yourselfers in the space
between
– choosing contractors
– going to the hardware store, buy tools, work themselves
•Experienced sales team
•Self-service warehousing
•Economies of scale
•Minimum stock-outs
• Created a new value curve for managing personal
finances by combining:
– low price and ease of use of pencil with
– speed and accuracy of “Quicken” software
Looking Across Substitute Industries…Cont.
Intuit:
Looking Across Substitute Industries…Cont.
Intuit:
Intuit:
Looking Across Substitute Industries…Cont.
Looking Across Strategic Groups within Industries
Strategic Groups:
•Companies within the same industry that pursue a
similar strategy
•Compete on Price and Performance
•Value innovators create new market space by
understanding what causes buyers to trade up or down
from one group to another
1 2 3 4 5 6
Looking Across Strategic Groups within Industries….Cont.
Examples:
•Polo Ralph Lauren (Clothing Company)
•Toyota's Lexus
•Sony Walkman
Looking Across Strategic Groups within Industries….Cont.
Polo Ralph Lauren: •Fashion with no Fashion
•Compete with Haute Couture (High priced, Outdated fashion)
and Classic Lines (High priced, Long lasting Quality)
Lauren’s success factors:
•Designer name
•Elegance of stores
•Luxury of materials
•Updated price-captured classical look
Looking Across Strategic Groups within Industries….Cont.
Toyota's Lexus:
•Provided the high quality of a Mercedes, BMW, or
Jaguar at a price closer to the lower-end Cadillac or
Lincoln.
Sony Walkman:
•Provided low price and convenient size portable
stereo market
Looking Across the Chain of Buyers
Rather than looking at a target customer, value
innovators pursue the chain of customers:
•Purchasers
•End Users
•Influencers
1 2 3 4 5 6
Looking Across the Chain of Buyers….Cont.
Examples:
•Bloomberg (Financial software company)
•Philips (Lighting Company)
Looking Across the Chain of Buyers….Cont.
Bloomberg:
•Compete with Reuters and Telerate (online financial
information providers)
•Upstream focus from purchasers (IT managers) to end
users (Accountants and Financial Analysts)
Looking Across the Chain of Buyers….Cont.
Philips:
•Downstream focus from purchasers to influencers
•Produced Alto (environmentally friendly light bulb)
•Promoted Alto to CFO's and public relations people
•Rapid sales growth
– traditional fluorescent lamps containing toxic mercury
were replaced in schools, stores and office buildings
Looking Across Complementary Product and Service Offerings
Idea:
•What happens before, during and after your product
or service is purchased
Example:
•Borders Books & Music and Barnes & Noble book
superstores
1 2 3 4 5 6
Looking Across Complementary Product and Service Offerings….Cont.
Border and B&N Books Superstore:
Features & Benefits:
•Lifelong learning and discovery
•Pleasure of reading and Intellectual exploration
•Large selection of books
•Knowledgeable staff
•Armchairs, reading tables, sofas
•Coffee bars and Music
Looking Across Functional or Emotional Appeal to Buyers
Functionally Oriented Industries:
•Offer commodities or products with little emotions
Emotionally Oriented Industries:
•Offer extras that add price without enhancing
functionality of the product
1 2 3 4 5 6
Looking Across Functional or Emotional Appeal to Buyers….Cont.
Examples:
Companies used Emotional Appeal:
•Starbucks
•Swatch (watch manufacturing company)
Companies used Functional Appeal:
•Body Shop
•Direct Line Insurance
Looking Across Functional or Emotional Appeal to Buyers….Cont.
Starbucks:
•Introduced the concept of Coffee Bar
• Provide coffee drinkers with an emotional
experience:
– Gathering place
– Status
– Relaxation
– Conversation
Looking Across Functional or Emotional Appeal to Buyers….Cont.
Body Shop:
•Provide customers with functional appeal
•Focus on product’s ingredients
•Cost saving through little spending on advertising
Looking Across Time
Three critical principles….the trend must be:
•Decisive
•Irreversible
•Clear Trajectory
Example:
•Cisco Systems
1 2 3 4 5 6
Looking Across Time….Cont.
Cisco Systems:
Identified the trend of growing demand for high-speed
data exchange by producing:
•Routers
•Switches
•Other networking equipment
Conclusion
• Creating new market space and value curves is
critical in a demand-starved economy for both
small and large companies
• Maintaining profitable growth is only
sustainable by creating and recreating new
space, new markets and new value