Create New Market Space

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Presentation of Create New Market Space
By YZUIB Joyce, Sabrina, and Winnie

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  • 1. Creating New Market Space 967307 Winnie 967308 Sabrina 967311 Joyce
  • 2. Why? • Competing head-to-head can be cutthroat, especially when markets are flat or growing slowly • Innovation is the only way they can break free from the competitive pack • Creating new market space requires a different pattern of strategic thinking
  • 3. How? • How companies can systematically pursue value innovation by looking across the conventionally defined boundaries of competition – Across substitute industries – Across strategic groups – Across buyer groups – Across complementary product and service offerings – Across the functional-emotional orientation of an industry – Across time
  • 4. Looking Across Substitute Industries
  • 5. Looking Across Substitute Industries • A company competes not only with the companies in its own industry but also with companies in those other industries that produce substitute products or services • The space between substitute industries provides opportunities for value innovation • Keep the analysis at the industry level, not the company level
  • 6. Looking Across Substitute Industries • Example 1: Home Depot – The do-it-yourself market in North America – $24 billion business – Creating over 130,000 new jobs in more than 660 stores – Over 1,100 stores in 2000
  • 7. Looking Across Substitute Industries • Example 1: Home Depot – Why would customers choose to hire contractors or buy tools and materials and do the work themselves? Hire contractors Do-it-yourself Advantage Specialized know-how Save money Disadvantage Expensive Lack know-how
  • 8. Looking Across Substitute Industries • Example 1: Home Depot – Knowledgeable service • Recruit sales assistants with significant trade experience • Bolster the competence and confidence of customers – Eliminate costs • Employing a self-service warehouse format • Generating economies of scale
  • 9. Looking Across Substitute Industries • Example 2: Intuit – Quiken software allows individuals to organize, understand, and manage their personal finances – The pencil is a really tough and resilient substitute
  • 10. Looking Across Substitute Industries The Value Curve in Personal Financial Before Quicken 50 45 40 35 30 25 20 15 10 5 0 price ease of use optional speed accuracy features personal financial software the pencil
  • 11. Looking Across Substitute Industries
  • 12. Looking Across Substitute Industries • Example 2: Intuit Reduce What factors should be reduced well below the industry standard? Eliminate Create What factors should New What factors should be eliminated that be created that the the industry has Value industry has never taken for granted? Curve offer? What factors should be raised well beyond the industry standard? Raise
  • 13. Looking Across Strategic Groups Within Industries
  • 14. Looking Across Strategic Groups Within Industries • Strategic Groups – A group of companies within an industry that pursue a similar strategy Industry SG1 SG2 C1 C2 C6 C7 C3 C4 C5 C8 C9
  • 15. Looking Across Strategic Groups Within Industries • Example 1: Polo Ralph Lauren – Worldwide sales exceeding $5 billion – The first American design house to successfully take its brand worldwide – New market: high fashion with no fashion
  • 16. Looking Across Strategic Groups Within Industries • Example 1: Polo Ralph Lauren – Two strategic groups in high-end clothing market Haute couture Classical line Advantage Emotional value Lasting quality Disadvantage Rapidly outdated Lack of fashion
  • 17. Looking Across Strategic Groups Within Industries • Example 1: Polo Ralph Lauren – Its designer name – The elegance of its stores – The luxury of its materials – Its updated classical look – Price is more adequate
  • 18. Looking Across Strategic Groups Within Industries • Example 2: Toyota’s Lexus – The quality of the high-end Mercedes, BMW, and Jaguar – At a price closer to the lower- end Cadillac and Lincoln
  • 19. Looking Across Strategic Groups Within Industries • Example 3: Sony Walkman – Boom boxes • The acoustics and the cool image – Transistor radio • The low price and the convenient size and weight – Attract new customers like joggers and commuters
  • 20. Looking Across Strategic Groups Within Industries • Example 4: Champion Enterprises – Two strategic groups in the housing industry Makers of prefabricated housing On-site developers Advantage •Cheap •Offer variety •Quick •High quality Disadvantage Low quality •More expensive •Take longer
  • 21. Looking Across Strategic Groups Within Industries • Example 4: Champion Enterprises – Quick to build – Benefit from EOS and lower costs – Allow buyers to choose such high-end options as fireplaces, skylights, and vaulted ceilings – Attract more lower-to-middle-income consumers and some affluent people
  • 22. Locking across the Chain of buyers
  • 23. Locking across the China of buyers The roles in the chain of customers frequently hold different definition of value purchase user influence
  • 24. Locking across the China of buyers An industry typically converges on a Challenging an single buyer group industry’s conventional •Pharmaceutical wisdom about which industry Buyer Group to target •Clothing industry •Office equipment industry
  • 25. Example1 : Bloomberg • On-line financial information industry focused on purchasers- the IT managers • Bloomberg focused on users- the traders and analysts
  • 26. Locking across the China of buyers Example1 : Bloomberg • Bloomberg designed a system specifically to offer traders better value, one with easy-to-use terminals and keyboards labeled with familiar financial term • Added a built-in analytic capability that works with the press of a button
  • 27. Locking across the China of buyers Example1 : Bloomberg Buy focusing on users, Bloomberg was also able to see the paradox of traders’ and analysts’ personal lives • Purchasing service • Travel arrangements • Wine information
  • 28. Locking across the China of buyers Example1 : Bloomberg 50 45 40 35 30 25 20 15 10 5 0 price coverage of coverage of terminal on-line historical lifestyle price news ease of use analytics price data information quotes Bloomberg on-line financial information industry
  • 29. Locking across the China of buyers Example2- Philips Lighting Company Re- created its industrial lighting business by shifting downstream from purchases to influencers Traditionally Philips Influencers-CFOs Corporate purchasing and public relations managers- who care people- high about how much and disposal costs at how long the end of a lamp’s life
  • 30. Locking across the China of buyers Example2- Philips Lighting Company • Philips introduced the Alto, an environmentally friendly bulb • Promotes to CFOs and to public relations people, using those influencers to drive sales
  • 31. Looking Across Complementary Product and Service Offerings
  • 32. Looking Across Complementary Product and Service Offerings • Untapped value is often hidden in complementary products and service • The key to define the total solution buyers seek when they choose a product or service • A simple way to do so is to think about what happens before, during, and after your product is used BEFORE
  • 33. Looking Across Complementary Product and Service Offerings Example 1- Movie theater
  • 34. Looking Across Complementary Product and Service Offerings Example 2 -Borders Books & Music and Barnes & Noble • 1980s, the U.S. retail-book industry appeared to be in decline • The large chains of mall bookstores were engaged in intense competition
  • 35. Looking Across Complementary Product and Service Offerings Example 2 -Borders Books & Music and Barnes & Noble Borders and B&N created a new format- book superstore When either company enters a market, the overall consumption of books often increases by more than 50%
  • 36. Example 2 -Borders Books & Music and Barnes & Noble Purchasing a book also includes related (complementary)activities: searching and hunting, evaluating potential purchases, and actually sampling books The staffs were generally trained as Hired staff with extensive knowledge of cashiers and stock clerks book to help customers make selection In the smell stores, selection was limited, Superstore stock more than 150,000 titles, frustrating the search for an exciting title whereas the average bookstore contains around 20,000 Discourage browsing, forcing customers Superstore are furnish with armchairs, to assume a large part of the risk to buy reading tables, and sofas to encourage the book people not just to dip into a book but to read them through Home become less likely to be a peaceful Coffee bars, classical-music, and etc oasis where a person can enjoy a wonderful book
  • 37. Looking Across Complementary Product and Service Offerings Example 2 -Borders Books & Music and Barnes & Noble • Book superstores redefined the scope of the service they offer • Transformed the product from the book itself into the pleasure of reading and intellectual exploration
  • 38. Looking Across Complementary Product and Service Offerings 50 Example 2 -Borders Books & Music and 45 Barnes & Noble 40 35 30 25 20 15 10 5 0 Borders and Barnes & Noble mall bookstores independent bookstores
  • 39. Looking Across Functional or Emotional Appeal to Buyer
  • 40. Looking Across Functional or Emotional Appeal to Buyer Changing the functional-emotional orientation of their industry can find new market space • Functional : compete on price and function • Emotional : compete on feeling
  • 41. Functional →Emotional Example1 : Starbucks  Coffee by can → Coffee by bar  Turn Paper-thin profit margins and low growth to $3-per- cup price seemed reasonable
  • 42. Functional →Emotional Example2: Swatch  Turn watches budget into fashion accessories  Make repeat purchases → For fit their different moods and looks
  • 43. Emotional→ Functional Example1: The Body Shop  Emphasis on natural ingredients and healthy living  Spend less on packaging and advertising
  • 44. Emotional→ Functional
  • 45. Emotional→ Functional Example2 : Direct Line Insurance  Relationship business like banking ,insurance or investing  Emphasis on eliminating paperwork and paying claims rapidly  cost saving for lower insurance premiums
  • 46. Looking Across Time
  • 47. Looking Across Time Looking at future trends with the right perspective can unlock innovation that creates new market space Trends: new technology, the raise of a new lifestyle, or a change in regulatory or special environments
  • 48. Looking Across Time Example1 : Enron  Found a trend of the deregulation of the gas industry  Purchased regional gas-pipeline companies across the nation and tied them together  Bought on cheap price and sold on expensive price
  • 49. Looking Across Time Example2 :Cisco System  Found the growing demand for high-speed data exchange  Cisco’s routers, switches, and other net working devices were designed to create fast data exchange
  • 50. Conclusion
  • 51. The Conventional Head-to-Head competition Creating New market space Boundaries of Competition Industry Focuses on rivals within its Looks across substitute industry industries Strategic group Focuses on competitive position Looks across strategic within strategic group groups within its industry Buyer group Focus on better serving the Redefines the buyer group buyer group of the industry Scope of product and Focuses on maximizing the value Looks across to service offerings of product and service offering complementary product and within the bounds of its industry service offerings that go beyond the bounds of its industry Functional-emotional Focuses on improving price- Rethinks the functional- orientation of industry performance in line with the emotional orientation of its functional-emotional orientation industry of its industry Time Focus on adaption to external Participates in shaping trends as they occur external trends over time
  • 52. Discussion
  • 53. Question 1. For those companies that would like to focus on functional- emotional orientation to create new markets, like Starbucks or Swatch, what should they do in order to create new value from this approach? Any suggestions on their action plan? Educate the customer • Advertisement • Change the atmosphere in the store • Change the package style of the product • Train the clerk to service customer emphasize on function orientation
  • 54. Question 2. While demand is decreasing in the undergraduate education market in Taiwan, one of the suggestions is to promote students from Mainland China to study in Taiwan. Does this suggestion a good one according to the analytical framework provided in the case? Discuss. • To promote students from Mainland China is not a good suggestion→this is the old hand-to-hand competition • New suggestion: – Substitute → Virtual campus – Buyer group→ on-the-job graduate student – Strategy group→ hire famous professor
  • 55. THANK YOU FOR YOUR ATTENTION!