Untitled

Chapter 1: Competition and Product Strategy

• The chapter focuses on competition and product strategy in business.

Agenda

• The topics to be covered include global competition, marketing and competitive success, environmental change, life cycles and evolution, the nature of competition, and product strategy (its nature and importance).

Task Specialization & Global Competition

• Human Development relies on task specialization and exchange.
• Productivity and value increase with task specialization.
• Specialists must be enable to exchange surpluses for other goods and services.
• Technological innovation, entrepreneurship, division of labor and professional management boosts the variety and volume of goods for exchange.
• International trade, founded on comparative advantage, leads to heightened global competition and increased productivity.

Marketing and Business Success

• Business success relies on success in the market.
• Unprofitable marketing can cause business failure.
• Businesses enter markets through product creation, and remain through customer retention at a profit.

Environmental Factors Facing Management

• Environmental challenges identified by European CEOs:
• Demand for quality and advice.
• Move towards a service culture.
• Emphasis on specialists.
• Decreasing strategic time horizons.
• Scenario planning replacing forecasting.
• Reduction of head office functions.
• Wider international outlook.
• Tighter legislation.

The Changing Business Environment

• The business world is changing because of:
• Faster technology.
• Globalisation.
• Partnerships between Companies.
• Changes in population.
• Removing rules and selling government owned business.
• Changes in the way businesses are run to reduce costs.
• Paying attention to ethics and the planet.

Reasons for the Success of Management Best Sellers

• Management best sellers assert the superiority of the American management and systems.
• They emphasize entrepreneurial values and the moneymaking ethic, which were challenged by the consumerist movement.
• Success is analyzed by the practice and procedure in firms led by successful leaders.
• Formulas are used to reduce the complexity of success.
• Managers play as a key role as catalysts and heroes in business.
• Examples of managment best sellers: In Search of Excellence, Iaoccoca, One Minute Manager, The IBM way, Making it Happen.

Peters and Waterman's Eight Attributes

• A bias for action.
• Closeness to the customer.
• Autonomy and entrepreneurship.
• Productivity through people.
• Hands-on, value-driven approach.
• Focus on core competencies ("stick to the knitting").
• Simple structure, lean staff.
• Balancing control and flexibility ("simultaneous loose-tight properties").

Risk and Cost of Innovation

• Not innovating is risky in today's competitive environment.
• At the same time innovating is extremely expensive and risky.
• Most product ideas don't make it to the market.
• Many products that reach the market will fail.
• Successful products have shorter life cycles.

Importance & Failure of Innovation

• Over 90% of all economic growth stems from innovation at the national level.
• Most new products ultimately fail.
• The benefits of innovation to the world and a nation are universally accepted.
• Whether it will help the innovator remains a question.

Research into Competitiveness

• Research into competitiveness follows two main tracks: Popular and anecdotal, and Academic.

Research Weaknesses

• Research weaknesses includes:
• High-growth industries.
• High-Growth companies.
• Single factor focus.
• Operational Vagueness.

Project MACS

• Project MACS did an extensive review of the literature.
• Used semi-structured interviews with opinion leaders.
• Used matched samples of both successful and unsuccessful ventures.
• Sunrise and sunset ventures looked at.
• Structures interviews with 86 firms.
• The project was funded by ESRC and IM.

Characteristics of Above Average Companies

• Marketing personnel meet frequently with top-level decision makers.
• Marketing has its own sales and/or marketing department.

Characteristics of Below Average Companies

• Marketing personnel meet less often with top-level decision-makers.
• Marketing is left to the parent company.
• Marketing is in a general-purpose, support function role.

Strategies of Above Average Companies

• Conduct more strategic planning.
• Have long term plans.
• Frequently quantify strategic objectives.
• Understand the importance of market share forecasts.
• Understand the significance of both liquidity and continuous product/process development.
• Simultaneously use market penetration, market development and product development strategies.

Market Research in Above Average Companies

• Invest more in in-house and external market research.
• More actively participate in customer surveys and field experiments.
• Devote more resources to forecasting competitive activity.
• Collect internal information often.
• Use more methods of market segmentation..

Queen's Award Winners

• These winners have 'product champions' with considerable authority.
• They foster close interactions with users/customers during design and development.
• Their technological content surpasses rivals.
• Ongoing environmental reviews take place during and after product design.
• Manufacturing is improved by making the make use of new techniques.
• Design stays involved during commercialization.

Japanese Product Development

• Technology is strategically managed to create a competitive advantage.
• The constantly monitor consumer needs.
• They don't use external consultants very much.
• Users are seen as important source of new product ideas.
• Emphasis is on speed and less on test marketing.

Conclusions

• Marketing is good to implement.
• Distinguish between what's real versus what's just appearances.
• No standard "magic" factors exist.
• Situations determine correlates of successful companies.
• Customer focus is important, within reasonable limits
• Production and Selling are good.
• Be yourself: Commitment and implementation.

Qualities of Successful Business

• Clear goals, shared ethics and vision.
• Entrepreneurial, innovative and flexible attitude.
• Customer Focused.

Three Avenues to Competitive Success

• Offer a better product at the going rate.
• Offer the same product for less.
• Monopolise into a customers marketplace.

Environmental Change & PEST Analysis

• All firms compete within the same macro-environment.
• This environment is determined by a variety of factors:
• Political and legal
• Economic
• Social
• Technological
• These factors are summarized as PEST (Political, Economic, Social, and Technological) analysis.

Assumptions Based on Environmental Change

• Most predictions of environmental change are based on fixed supply and growing demand.
• Since "Demand" relies on the size of the world's population if the prior assumption is right, the latter can not be.
• This theory was predicted by Malthus in 1797.
• Technological advancement has delayed the fulfillment of Malthus' forecast, especially product and process in marketing.

Evolution of Technology

• Technological innovation is both evolutionary and revolutionary.
• Evolution has species displacing less successful ones which leads to survival of the fittest.
• This survival cycle is upset by discontinuities which significantly alter the process.
• The cycle leads to phenomena having a life cycle.

Competition Forces

• Business is determined by competition.
• The forces summarised by Porter are:
• The threat of new entrants.
• The threat of substitution.
• The bargaining power of suppliers.
• The bargaining power of customers.
• The current level of rivalry.

Ansoff's Growth Vector Matrix Strategies

• Ansoff (1957) showed strategic options available.
• With present products and present missions, you have market penetration.
• With new products and present missions, you have new product development.
• With present products and new missions, you have market development.
• With new products and new missions, you have diversification.

MACS Study: Competitive Advantage

• Successful companies used market penetration, market development and new product development at the same time.
• Sustain competitive advantage with either cost leadership or differentiation.
• Only large firms can focus on cost leadership.
• Differentiation is favored and results in innovation and new product development.

Ways Companies Compete Through Product

• Product proliferation.
• Value.
• Design
• Innovation.
• Service.