Download (market expansion strategy).

Chapter 9
Strategies for Growth Markets
2
Chapter Overview
1. Strategic Challenges
2. Opportunities and Risks in Growth Markets
3. Growth-Market Strategies for Market Leader
4. Share-Growth Strategies for Followers
Strategic Challenges
• Share maintenance: Primary objective of the early share leader in
a growth market
• Share-growth: Strategies that market challengers use under
different conditions
Opportunities and Risks in Growth Markets
•
•
•
•
Gaining share is easier
Share gains are worth more
Price competition is likely to be less intense
Early entry is necessary to maintain technical expertise
9-5
Gaining Share Is Easier
• Based on arguments
– Potential new users can be easily attracted by a new competitor
– Established competitors are less likely to react aggressively to market-share
erosion
Exhibit 9.1 - Market Shares of the Leader and
Followers over the Life Cycle of a Hypothetical Marke
t
Source: From Analysis for Strategic Market Decisions , 1st edition, by G. S. Day, 1986. Reprinted by permission of South-Western, a d
ivision of Thomson Learning:: www.thomsonrights.com. Fax: 800-730-2215.
Share Gains Are Worth More
• Depends on:
–
–
–
–
Existence of positive network effects
Future changes in technology or other key success factors
Future competitive structure of the industry
Future fragmentation of the market
Price Competition Is Likely to Be Less Intense
• When demand exceeds supply:
– Market exerts little pressure on prices initially
• When demand may not exceed supply:
– Penetration strategy is adopted and its initial prices are set relatively low
Early Entry
• Necessary for high-tech industries
– Critical for staying abreast of technology
– Experience gained in developing the first generation of products helps in
develop next generation of superior products
Growth-Market Strategies for Market Leaders
• Dynamics
– Increasing number of competitors
– Fragmentation of market segments
– Threat of product innovation from within and outside the industry
• Firm can maintain its current share position in a growth market:
– If its sales volume continues to grow
Marketing Objectives for Share Leaders
• Retain its current customers
• Stimulate selective demand among later adopters
Exhibit 9.3 – Marketing Actions to Achieve
Share-Maintenance Objective
Marketing Objectives
Possible Marketing Actions
Retain current customers by
•
Maintaining/improving
satisfaction and loyalty.
•
Increase attention to quality control as output expands.
•
Continue product modification and improvement efforts to increase customer
benefits and/or reduce costs.
•
Focus advertising on stimulation of selective demand; stress product’s superior
features and benefits; reminder advertising.
•
Increase salesforce’s servicing of current account; consider formation of national or
key account representatives to major customers; consider replacing independent
manufacturer’s reps with company salespeople where appropriate.
•
Expand postsale service capabilities; develop or expand company’s own service
force or develop training programs for distributors’ and dealers’
Exhibit 9.3 – Marketing Actions to Achieve
Share-Maintenance Objective
Marketing Objectives
•
Encouraging/simplifying repeat
purchase.
Possible Marketing Actions
•
Expand production capacity in advance of increasing demand to avoid stockouts.
•
Improve inventory control and logistics systems to reduce delivery times.
•
Continue to build distribution channels; use periodic trade promotions to gain more
extensive retail coverage and maintain shelf-facing; strengthen relationships with
strongest distributors/dealers.
•
Consider negotiating long-term requirements contracts with major customers.
•
Consider developing automatic recorder systems or logistical alliances.
Exhibit 9.3 – Marketing Actions to Achieve
Share-Maintenance Objective
Marketing Objectives
•
Reducing attractiveness
of switching.
Possible Marketing Actions
•
Develop a second brand or product line with features or price more appealing to
specific segment of current customers
(Flanker strategy – see Exhibits 9.4 and 9.5)
•
Develop multiple-line extensions or brand offerings targeted to the needs of several
user segments within the market (market expansion)
•
Meet or beat lower prices or heavier promotional efforts by competitors-or try to
preempt such efforts by potential competitors-when necessary to retain customers
and when lower unit costs allow (confrontation strategy).
Exhibit 9.3 – Marketing Actions to Achieve
Share-Maintenance Objective
Marketing Objectives
Possible Marketing Actions
Stimulate selective demand among later adopters by
•
Head-to-head positioning against
competitive offerings or potential
offerings.
•
Develop a second brand or product line with features or price more appealing to a
specific segment of potential customers (Flanker strategy).
•
Make product modifications or improvements to match or beat superior competitive
offering (confrontation strategy).
•
Meet or beat lower prices or heavier promotional efforts by competitors when
necessary to retain customers and when lower unit costs allow(confrontation
strategy).
•
When resources are limited relative to a competitor’s, consider withdrawing from
smaller or slower-growing segments to focus product development and promotional
efforts on higher potential segments threatened by competitor (contraction or
strategic withdrawal strategy).
Exhibit 9.3 – Marketing Actions to Achieve
Share-Maintenance Objective
Marketing Objectives
•
Differentiated positioning against
competitive offerings or potential
offerings.
Possible Marketing Actions
•
Develop multiple-line extensions or brand offerings targeted to the needs of various
potential user applications or geographical segments within the market
(market expansion strategy).
•
Build unique distribution channels to more effectively reach specific segments of
potential customers (market expansion strategy).
•
Design multiple advertising and/or sales promotion campaigns targeted at specific
segments of potential customers (market expansion strategy).
Exhibit 9.4 - Strategic Choices for Share Leaders in
Growth Markets
Source: P. Kotler and R. Singh Achrol. “Marketing Warfare in the 1980’s,” Journal of Business Strategy , Winter 1981. Reprinted with pe
rmission.
Exhibit 9.5 – Marketing objectives and strategies for
Share Leaders in Growth Markets
Share Maintenance Strategies
Situational
Variables
Primary
objective
Market
characteristics
Fortress or Position
Defense
Flanker
Increase satisfaction,
loyalty, and repeat
purchase among current
customers by building on
existing strengths; appeal
to late adopters with same
attributes and benefits
offered to early adopters.
Protect against loss of
specific segments of current
customers by developing a
second entry that covers a
weakness in original offering;
improve ability to attract new
customers with specific
needs or purchase criteria
different from those of early
adopter.
Relatively homogeneous
market with respect to
customer needs and
purchase criteria; strong
preference for leader’s
product among largest
segment of customers.
Two or more major market
segments with distinct needs
or purchase criteria.
Confrontation
Market Expansion
Contraction
or strategic
Withdrawal
Protect against loss of share
Increase ability to attract new Increase ability to attract new
among current customers by
customers by developing new customers in selected highmeeting or beating a head-togrowth segments by focusing
product offerings or line
head competitive offering
extensions aimed at a variety offerings and resources on
improve ability to win new
those segments; withdraw
of new applications and user
customers who might
from smaller or slowersegments; improve ability to
otherwise be attracted to
growing segments to
retain current customers as
competitor’s offering
conserve resources.
market fragments.
Relatively homogenous
market with respect to
customers’ needs and
purchase criteria; little
preference for, or loyalty
toward, leader’s product
among largest segment of
customers.
Relatively heterogeneous
market with respect to
customers’ needs and
purchase criteria; multiple
product uses requiring
different product or service
attributes.
Relatively heterogeneous
market with respect to
customers’ needs, purchase
criteria, and growth potential;
multiple product uses
requiring different product or
service attributes.
Exhibit 9.5 – Marketing objectives and strategies for
Share Leaders in Growth Markets
Share Maintenance Strategies
Situational
Variables
Fortress or Position
Defense
Competitors’
characteristics
Current and potential
competitors have relatively
limited resources and
competencies
Firm’s
characteristics
Current product offering
Current product offering
enjoys high awareness
perceived as weak on at least
and preference among
on attribute by a major
major segment of current
segment of current or
and potential customers;
potential customers; firm has
firm has marketing and
sufficient R&D and marketing
R&D resources and
resources to introduce and
competencies equal to or
support a second offering
greater than any current or
aimed at the disaffected
potential competitors.
segment.
Flanker
Confrontation
One or more current or
potential competitors with
sufficient resources and
competencies to effectively
implement a differentiation
strategy
One or more current or
potential competitors with
sufficient resources and
competencies to effectively
implement a head-to-head
strategy
Market Expansion
Current and potential
competitors have relatively
limited resources and
competencies, particularly
with respect to R&D and
marketing.
Contraction
or strategic
Withdrawal
One or more current or
potential competitors with
sufficient resources and
competencies to present a
strong challenge in one or
more growth segments.
Current product offering
No current offerings in one or
Current product offering
suffers low awareness,
more potential applications
suffers low awareness,
preference, and/or loyalty
segments; firm has marketing
preference, and/or loyalty
among major segment of
and R&D resources and
among current or potential
current or potential
competencies equal to or
customers in one or more
customers; firm has R&D and greater than any current or
major growth segments;
marketing resources and
potential competitor.
firm’s R&D and marketing
competencies equal to or
resources and competencies
greater than any current or
are limited relative to those of
potential competitor.
one or more competitors.
9-20
Marketing Actions and Strategies to Achieve
Share-Growth Objectives
• Steal away some of the repeat purchase or replacement demand
from:
– Competitors’ current customers
• Attracting a larger share of potential new customers
Exhibit 9.7 – Marketing Actions to Achieve Share-Growth Objective
Marketing Objectives
Possible Marketing Actions
Capture repeat/replacement purchases
from current customers of the leader or
other target competitor by
•
Head-to-head positioning against competitor’s
offering in primary target market.
•
Develop products with features and/or performance levels superior to those of the target
competitor.
•
Draw on superior product design, process engineering, and supplier relationships to achieve
lower unit costs.
•
Set prices below target competitor’s for comparable level of quality or performance, but only if
low-cost position is achieved.
•
Outspend the target competitor on promotion aimed at stimulating selective demand:
Comparative advertising appeals directed at gaining a more favorable positioning than the
target competitor’s brand enjoys among customers in the mass market.
Sales promotions to encourage trial if offering’s quality or performance is perceptively
better than target competitor’s or induce brand switching.
More extensive and/or better-trained salesforce than target competitor’s.
Exhibit 9.7 – Marketing Actions to Achieve Share-Growth Objective
Marketing Objectives
Possible Marketing Actions
•
Outspend the target competitor on trade promotion to attain more extensive retail coverage,
better shelf space, and/or representation by the best distributors/dealers.
•
Outperform the target competitor on customer service:
Develop superior production scheduling, inventory control, and logistics systems to
minimize delivery times and stockouts.
Develop superior postsale service capabilities. Build a more extensive company service
force or provide better training programs for distributor/dealer service people than those of
target competitor.
Exhibit 9.7 – Marketing Actions to Achieve Share-Growth Objective
Marketing Objectives
•
Technological differentiation from target
competitor’s offering in its primary target
market.
Possible Marketing Actions
•
Develop a new generation of products based on different technology that offers superior
performance or additional benefits desired by current and potential customers in the mass market
(leapfrog strategy).
•
Build awareness, preference, and replacement demand through heavy introductory promotion:
Comparative advertising stressing product’s superiority.
Sales promotions to stimulate trial or encourage switching.
Extensive, well-trained salesforce; heavy use of product demonstrations in sale
presentations.
•
Build adequate distribution through trade promotions and dealer training programs.
Exhibit 9.7 – Marketing Actions to Achieve Share-Growth Objective
Marketing Objectives
Possible Marketing Actions
Stimulate selective demand among later
adopters by
•
Head-to-head positioning against target
competitor’s offering in established market
segments.
•
See preceding actions.
•
Differentiated positioning focused on
untapped or underdeveloped segments.
•
Develop a differentiated brand or product line with unique features or prices that is more
appealing to a major segment of potential customers whose needs are not met by existing
offerings (flanking strategy).
Exhibit 9.8 - Strategic Choices for Challengers in Growth Markets
Source: P. Kotler and R. Singh Achrol, “Marketing Warfare in the 1980’s,” Journal of Business Strategy , Winter 1981. Reprinted with pe
rmission.
Exhibit 9.9 – Marketing objectives and strategies for
Challengers in Growth Markets
Share-Growth Strategies
Situational
Variables
Primary
objective
Market
characteristics
Frontal Attack
Leapfrog
Flank Attack
Encirclement
Guerrilla Attack
Capture substantial
repeat/replacement
purchases from target
competitor’s current
customers; attract new
customers among later
adopters by offering lower
price or more attractive
feature.
Induce current customers in
mass market to replace their
current brand with superior
new offering; attract new
customers by providing
enhanced benefits.
Attract substantial share of
new customers in one or
more major segments where
customers’ needs are
different from those of early
adopters in the mass market.
Attract a substantial share of
new customers in a variety of
smaller, specialized
segments where customers’
needs or preferences differ
from those of early adopters
in the mass market.
Capture a modest share of
repeat/replacement
purchases in several market
segments or territories;
attract a share of new
customers in a number of
existing segments.
Relatively homogeneous
market with respect to
customer needs and
purchase criteria;
relatively little preference
or loyalty for existing
brand; no positive network
effects.
Relatively homogeneous
market with respect to
customer needs and
purchase criteria, but some
needs or criteria not currently
met by existing brands.
Two or more major segments
Relatively heterogeneous
with distinct needs and
market with a number of
purchase criteria; needs of
small, specialized segments;
customers in at least one
needs and preferences of
segment not currently met by customers in some segments
existing brands.
not currently satisfied by
competing brands.
Relatively heterogeneous
market with a number of
larger segments; needs and
preferences of customers in
most segments currently
satisfied by competing
brands.
Exhibit 9.9 – Marketing objectives and strategies for
Challengers in Growth Markets
Share Maintenance Strategies
Situational
Variables
Fortress or Position
Defense
Competitors’
characteristics
Firm’s
characteristics
Flanker
Confrontation
Target competitor has
relatively limited resources
and competencies,
particularly in marketing
and R&D; would probably
be vulnerable to direct
attack.
One or more competitors
have relatively strong
resources and competencies
in marketing, but relatively
unsophisticated technology
and limited R&D
competencies.
Target competitor has
relatively strong resources
and competencies,
particularly in marketing and
R&D; would probably be able
to withstand direct attack.
Firm has stronger
resources and
competencies in R&D and
marketing and/or lower
operating costs than target
competitors.
Firm has proprietary
technology superior to that of
competitors; firm has
necessary marketing and
production resources to
stimulate and meet primary
demand for new generation
of products.
Firm’s resources and
Firm has marketing, R&D,
competencies are limited, but
and production resources
sufficient to effectively
and competencies necessary
penetrate and serve at least
to serve multiple smaller
one major market segment.
segments; firm has
decentralized and adaptable
management structure.
Market Expansion
One or more competitors
have relatively strong
marketing. R&D resources
and competencies, and/or
lower costs; could probably
withstand a direct attack.
Contraction
or strategic
Withdrawal
A number of competitors
have relatively strong
marketing, R&D resources
and competencies, and/or
lower cost; could probably
with stand ad direct attack.
Firm has relatively limited
marketing, R&D, and/or
production resources and
competencies; firm has
decentralized and adaptable
management structre.
Deciding Whom to Attack
• Market-share leader within its primary target market
• Another follower who has an established position within a major
market segment
• One or more smaller competitors who have only limited resources
Deciding Whom to Attack
• Avoid direct attacks on any established competitor