Strategies for

New and Growing Markets

Exhibit 16.1

Categories of New Products Defined According to Their Degree of Newness to the Company and Customers in the Target Market

High

Low

Low HighNewness to the market

Source: New Products Management for the 1980s (New York: Booz, Allen & Hamilton, 1982).

New

nes

s to

th

e co

mp

any

26% 26%

20%New product

lines

Revisions/improvements to existing products

11%Cost

reductions

7%

Additions to existing product

lines

Repositionings

10%New-to-the

world products

Key question: Is it better to be a market pioneer, or a follower?

What are the advantages for pioneers?

First choice of market segments and positions Defines the rules of the game Distribution advantages Economies of scale and experience High switching costs for early adopters Possibility of positive network effects Possibility of preempting scarce resources to suppliers

What are the advantages for followers?

Ability to take advantage of pioneer’s positioning mistakes Ability to take advantage of pioneer’s product mistakes Ability to take advantage of pioneers marketing mistakes Ability to take advantage of pioneer’s limited resources

So, when and for whom does it make sense to pursue a pioneer strategy?

When and for whom does it make sense to pursue a follower strategy?

A pioneering firm…

…stands the best chance for long-term success in market-share leadership and profitability when:

The new product-market is insulated from the entry of competitors, at least for a while, by strong patent protection, by proprietary technology (such as a unique production process), by substantial investment requirements, or by positive network effects.

The firm has sufficient size, resources, and competencies to take full advantage of its pioneering position and preserve it in the face of later competitive entries.

A follower

…will most likely succeed when: There are few legal, technological, or financial barriers to inhibit

entry. It has sufficient resources or competencies to overwhelm the

pioneer’s early advantage.

If you want to be a pioneer, what are your strategic options?

Under what circumstances might each option be more likely to succeed?

Strategic options for pioneers

Mass-market penetration Niche penetration Skimming and early withdrawal

How might introductory marketing plans differ under each of these pioneering strategies?

Once a pioneer’s market becomes attractive to others, what are the pioneer’s strategic options?

Under what circumstances might each option be more likely to succeed?

Growth stage strategic options for pioneers

Fortress defense Flanker defense Confrontation Market expansion Contraction or strategic withdrawal

Exhibit 16.9

Strategic Choices for Share Leaders in Growth Markets

COMPETITOROR

POTENTIALCOMPETITOR

ContractionContractionor strategicor strategicwithdrawalwithdrawal

Market expansionMarket expansion

Flanker strategy - ProactiveFlanker strategy - ProactiveFlanker strategy - ReactiveFlanker strategy - Reactive

LEADER

Fortressor position

defensestrategy

ConfrontationConfrontationstrategystrategy

ProactiveProactiveReactiveReactive

Source: Adapted from P. Kotler and R. Singh Achrol, “Marketing Warfare in the 1980’s” Reprinted with permission from Journal of Business Strategy, Winter 1981, pp. 30-41. Copyright © 1981 by Warren, Gorham & Lambert, Inc., 210 South Street, Boston MA 02111. All rights reserved.

If you want to be a follower, what are your strategic options?

Under what circumstances might each option be more likely to succeed?

Strategic options for followers

Frontal attack Leapfrog Flank attack Encirclement

Exhibit 16.12

Strategic Choices for Challengers in Growth Markets

TARGETTARGETCOMPETITORCOMPETITOR

Flanking attack

Frontalattack

Encirclement strategy

Leapfrog strategy

Source: Adapted from P. Kotler and R. Singh Achrol, “Marketing Warfare in the 1980’s” Reprinted with permission from Journal of Business Strategy, Winter 1981, pp. 30-41. Copyright © 1981 by Warren, Gorham & Lambert, Inc., 210 South Street, Boston MA 02111. All rights reserved.

CHALLENGERCHALLENGER

Some Advice for Would-Be Pioneers First mover advantage is trumped by followers who are

better. Best beats first. Concentrate on being best. Being a pioneer without the basis for sustainable competitive

advantage is a trap!

Some Advice for Followers Differentiation is key for followers

Better benefitsBetter serviceLower price

Beware of competing on price, however, unless your costs really are lower than competitors’