Competition and Product StrategyMichael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
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Chapter 1
Competition and product strategy
Product Strategy and Management
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
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Global competition
Agenda
Product Strategy and Management
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 1.*
twin concepts of Task specialisation and exchange.
Task specialisation increases productivity and value added,
but specialists must be able to exchange surpluses of
their output for other goods and services. The means of doing
this is through the establishment of markets – both real and virtual.
Technological innovation, entrepreneurship, the division of
labour and professional management increase both the
volume and variety of goods and services available for exchange.
International trade, based on the Theory of comparative advantage,
leads to global competition and further increases in productivity.
Product Strategy and Management
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 1.*
Firms go out of business not by closing factories
but by unprofitable marketing. Firms usually enter
a business by creating products (i.e. goods and
services) but stay in business only by creating
and retaining customers at a profit’.
[O’Shaughnessy]
Product Strategy and Management
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 1.*
eight factors which characterize the environment
facing management:
An emphasis upon the specialist.
Shortening strategic time horizons.
Scenario planning replacing forecasting.
A wider international outlook.
Product Strategy and Management
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 1.*
Demographics
outsourcing, re-engineering etc.
Ethical and ecological concerns
Product Strategy and Management
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 1.*
best sellers:
They stress the entrepreneurial values and
the moneymaking ethic so strongly challenged by the consumerist movement of the 1960s and 1970s.
Product Strategy and Management
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 1.*
They are based on the analysis, practice and procedure in firms or of people who are leaders in their field and manifestly successful.
They reduce the ingredients of success to simple catechisms or formulae.
They emphasise that the essential catalyst and hero of the piece is the manager.
Examples: In Search of Excellence, Iaoccoca,
One Minute Manager, The IBM Way,
Making it Happen.
Product Strategy and Management
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 1.*
A bias for action.
Close to the customer.
Product Strategy and Management
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 1.*
becoming increasingly risky not to innovate.
At the same time it is extremely expensive
and risky to innovate:
never reach the market.
Successful products have shorter life cycles.
Product Strategy and Management
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 1.*
more than 90% of all economic growth
and progress is due to innovation.
Product Strategy and Management
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 1.*
Most new products fail!
Product Strategy and Management
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
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The question we must answer later
is, will it help the innovator?
[Kenneth Boulding]
Product Strategy and Management
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
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Product Strategy and Management
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 1.*
Research weaknesses:
High-growth industries.
High-growth companies.
Product Strategy and Management
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 1.*
Semi-structured interviews with opinion
Funded by ESRC and IM
Project MACS
Product Strategy and Management
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 1.*
the top-level decision makers.
Product Strategy and Management
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 1.*
top-level decision-makers
Marketing responsibility is isolated in
general-purpose, support functions.
Product Strategy and Management
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 1.*
Quantify strategic objectives more frequently
Are more aware of the strategic relevance of forecasts of market share
Are more aware of the strategic importance of
liquidity and of continuous product and process development
Follow strategies of market penetration,
market and product development simultaneously
Product Strategy and Management
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 1.*
Invest more in in-house and external market research
Are more actively involved in undertaking customer surveys and field experiments
Are more committed to forecasting competitive activity
Collect internal information more frequently
Are involved in more types of market segmentation
Product Strategy and Management
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 1.*
Interact closely with customers/users in design and development stages
Have a higher technological content than rivals
Conduct continuous reviews of the environment
during and after product design
Make greater use of new and improved manufacturing techniques
Design is involved through to commercialization.
[Ughanwa & Baker, 1989]
Product Strategy and Management
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 1.*
as a source of competitive advantage
Constantly monitors consumer needs
Sees users as an important source of new product ideas
Makes little use of test marketing –emphasizes speed.
[Kheir-El-Din & Baker,1991]
Product Strategy and Management
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 1.*
Seven conclusions:
No ‘MAGIC’ factors
A customer orientation is key – but not at any price!
Production and selling are not dirty words
Be yourself – commitment and implementation
Product Strategy and Management
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 1.*
Vision directed with shared values and culture
Innovative, entrepreneurial
Flexible, learning
Customer focused
Product Strategy and Management
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 1.*
Build a better product at the market price.
Build the same product at a lower price.
Create a monopoly through a customer franchise.
Product Strategy and Management
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 1.*
The nature of this environment is determined by
a wide variety of factors usually summarised as:
Political and legal
Product Strategy and Management
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 1.*
supply is fixed but that demand will continue to grow.
As ‘Demand’ is determined by the size of the world’s
population it is clear that, if the former assumption is
correct, then the latter cannot be – an outcome
predicted by Malthus in 1797.
Fulfilment of Malthus’ prediction has been deferred
largely as a result of technological innovation – or,
in marketing terms new product and process
development
Product Strategy and Management
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 1.*
and a revolutionary process.
process whereby more successful species displace
less successful ones – the survival of the fittest.
However, this cycle may be punctuated by dis-continuities which have a major impact on the process.
A consequence of this is that all phenomena have a
Life cycle.
Product Strategy and Management
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 1.*
by the forces of competition.
These forces have been summarised by Porter(1979) as:
The threat of new entrants
The threat of substitution
Rivalry between current competitors
is the key to survival.
Product Strategy and Management
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 1.*
In competing with one another firms have only a limited number of strategic options available to them. These were identified by Ansoff (1957) in a Growth Vector Matrix.
Diversification
Market
development
Product Strategy and Management
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 1.*
pursued strategies of market penetration, market development
and new product development simultaneously.
In seeking to develop and maintain a sustainable competitive
advantage (SCA) firms compete through cost leadership or
differentiation.
Cost leadership is only possible for very large firms.
Differentiation is the preferred approach for the vast majority
and it is this that has resulted in the emphasis on innovation
and new product development as the favoured strategy.
Product Strategy and Management
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 1.*
Five alternatives are open to the firm when competing through products based on:
Product proliferation