There are many methods of penetrating a market. In order of excellence they are:
- Convince potential competition to not even try to compete with you.
- This has also been called FUD (Fear, Uncertainty, and Doubt) … a principle used with great success by IBM and Microsoft
- Cause the competition to never act in an unified manner.
- Japanese semiconductor vendors were highly successful in keeping United States DRAM suppliers from acting against them in the 1980s in a concerted manner.
- Compete with competitors on a feature by feature basis.
- This approach is often used by car manufactuers, i.e. we have air bags, you don’t.
- Compete head to head with competition which already owns the market. (Tends to promote frustration and impatience, which leads to severe losses).
- Both IBM and Kodak tried for many years to enter the high speed copier market against Xerox.
How to Engage Your Competitors
Consider how to convince potential competitors to not even try to compete with you.
- Suppose you have ten times the resources of the competitor. One can simply surround him with ten products to his one.
- This is the approach taken by Cisco, IBM, and other large technology companies, e.g. they offer very large and complete product catalogs, providing complete, one-stop products and support.
- Take care in examining local conditions. In the United States, such actions might eventually result in anti-trust suits, particularly when bundling products together.
- Another way you can view this statement is that if you are a small competitor, it is better to focus your resources on a smaller number of products.
- Suppose you have only twice the resources of your competitor. You provide two products, one which prevails on the basis of one set of features, the other on a different set of features.
- This apparently was the initial concept of Intel with its 80960 and 80680. (Of course, it subsequently dropped both products in favor of embedded x86 products).
- Equally matched. Duke it out with the competition.
- Slightly inferior. Try to avoid direct competition.
- Consider independent supermarkets competing against chains such as Safeway. They tend to provide higher quality merchandise, better service, or greater convience, as opposed to competting on the basis of size and price.
- Greatly inferior. Flee. Look for market niches where you can survive.
Three Strategic Errors to Avoid
There are three major methods for a CEO to bring misfortune upon their company:
- Making decisions which cannot be implemented by the company.
- Attempting to manage a company without knowledge of the conditions within it.
- Making inappropriate use of the personnel in a company.
Ability of Company to Execute a Plan
If decisions are made which cannot be implemented, less will be accomplished than if realistic decisions were made.
- Gould attempted to move from its slow growth business, to what it thought were high growth, higher profit opportunities. It was quite unsuccessful.
Ignorance of Conditions
Making decisions without knowledge of conditions in a company. Without such knowledge, a company cannot be either opportunistic or flexible in its decisions.
Give example of company which ignored sales reports from field.
- Calma used to own the CAD market for the layout of integrated ICs. It failed to recognize fundamental changes in the industry. Purchased by General Electric, its senior management did not seek to understand conditions within Calma.
Inappropriate Use of People
A company consists of people having a wide variety of skills. Placing people in positions for which they are unqualified will shake the confidence of other workers in the company.
- Cite example of Apple Computers.
Five Essentials for Success
A good CEO can succeed in the market under almost any condition. There are five essential factors that such a CEO takes into consideration to insure his success.
- Ability to use Inferior and Superior Forces
- Ability to Motivate Personnel
- Taking Advantage of Market Conditions
- Sufficient Resources and Authority
There is a market window for a product. Understanding the proper timing for a product is essential.
- Federal Express and Zap Mail
Ability to use Inferior and Superior Forces
It is possible to be successful with both large and small amounts of resources. It is the responsibility of the CEO to be versatile in using the resources available to achieve success.
- Tektronix in oscilloscope market, succeeding against Japanese.
Ability to Motivate Personnel
Success will occur when all employees share in the mission of the company.
- Everybody sells at Tandem Computers.
- Federal Express.
Taking Advantage of Market Conditions
By anticipating and being prepared for changes in market conditions, a company can take advantage of competitors who are not prepared.
- Studer-Baker anticipated automobile, insuring success when other horse and buggy manufacturers went bankrupt.
Sufficient Resources and Authority
A company can succeed when it has adequate organization and resources, and the board of directors does not interfere with the actions of the CEO.
- Need example of company having extensive second guessing from its board of directors.
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