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Strategic Marketing & Planning 
(MKT501C) 
CCrreeaattiinngg NNeeww MMaarrkkeett SSppaaccee 
Salman Ahmed (8519) 
Fall 2011
Objective of the Article 
Determining a systemic approach to value 
innovation that can help companies to create 
new market space via looking across six 
boundaries of the existing competition
Shifting the Focus of Strategy 
The Conventional 
Boundaries of 
Competition 
HEAD-TO-HEAD COMPETITION 
(Focus On) 
CREATING NEW MARKET 
SPACE 
(Looking Across) 
Industry Industry rivalry Substitute industries 
Strategic Group 
Competitive position within 
strategic group 
Looks across strategic 
groups within industry 
Buyer Group 
Better serving the buyer 
group 
Redefines the buyer group 
of the industry 
Scope of Product & 
Service Offerings 
Maximizing the value of 
product and service offerings 
within the bounds of its 
industry 
Complementary product 
and service offerings that 
go beyond the bounds of 
its industry 
Functional- 
Emotional 
Orientation of 
Industry 
Improving price-performance 
in line with the functional-emotional 
orientation 
Rethinks the functional-emotional 
orientation of 
its industry 
Time 
Adapting to external trends 
as they occur 
Participates in shaping 
external trends over time
1 2 3 4 5 6 
Looking Across Substitute Industries 
• Companies compete with companies within their 
own industry as well as with those companies that 
offer substitute products 
• The space between substitute industries provides 
the opportunity for value innovation
Looking Across Substitute Industries…Cont. 
Examples: 
•Home Depot 
•South-West Airline 
•Intuit (financial and tax preparation software company)
Looking Across Substitute Industries…Cont. 
Home Depot: 
•Created a market of do-it-yourselfers in the space 
between 
– choosing contractors 
– going to the hardware store, buy tools, work themselves 
•Experienced sales team 
•Self-service warehousing 
•Economies of scale 
•Minimum stock-outs
Looking Across Substitute Industries…Cont. 
Intuit: 
• Created a new value curve for managing personal 
finances by combining: 
– low price and ease of use of pencil with 
– speed and accuracy of “Quicken” software
Looking Across Substitute Industries…Cont. 
Intuit:
Looking Across Substitute Industries…Cont. 
Intuit:
1 2 3 4 5 6 
Looking Across Strategic Groups within 
Industries 
Strategic Groups: 
•Companies within the same industry that pursue a 
similar strategy 
•Compete on Price and Performance 
•Value innovators create new market space by 
understanding what causes buyers to trade up or down 
from one group to another
Looking Across Strategic Groups within 
Industries….Cont. 
Examples: 
•Polo Ralph Lauren (Clothing Company) 
•Toyota's Lexus 
•Sony Walkman
Looking Across Strategic Groups within 
Industries….Cont. 
Polo Ralph Lauren: 
•Fashion with no Fashion 
•Compete with Haute Couture (High priced, Outdated fashion) 
and Classic Lines (High priced, Long lasting Quality) 
Lauren’s success factors: 
•Designer name 
•Elegance of stores 
•Luxury of materials 
•Updated price-captured classical look
Looking Across Strategic Groups within 
Industries….Cont. 
Toyota's Lexus: 
•Provided the high quality of a Mercedes, BMW, or 
Jaguar at a price closer to the lower-end Cadillac or 
Lincoln. 
Sony Walkman: 
•Provided low price and convenient size portable 
stereo market
Looking Across the Chain of Buyers 
Rather than looking at a target customer, value 
innovators pursue the chain of customers: 
•Purchasers 
•End Users 
•Influencers 
1 2 3 4 5 6
Looking Across the Chain of Buyers….Cont. 
Examples: 
•Bloomberg (Financial software company) 
•Philips (Lighting Company)
Looking Across the Chain of Buyers….Cont. 
Bloomberg: 
•Compete with Reuters and Telerate (online financial 
information providers) 
•Upstream focus from purchasers (IT managers) to end 
users (Accountants and Financial Analysts)
Looking Across the Chain of Buyers….Cont. 
Philips: 
•Downstream focus from purchasers to influencers 
•Produced Alto (environmentally friendly light bulb) 
•Promoted Alto to CFO's and public relations people 
•Rapid sales growth 
– traditional fluorescent lamps containing toxic mercury 
were replaced in schools, stores and office buildings
1 2 3 4 5 6 
Looking Across Complementary 
Product and Service Offerings 
Idea: 
•What happens before, during and after your product 
or service is purchased 
Example: 
•Borders Books & Music and Barnes & Noble book 
superstores
Looking Across Complementary Product 
and Service Offerings….Cont. 
Border and B&N Books Superstore: 
Features & Benefits: 
•Lifelong learning and discovery 
•Pleasure of reading and Intellectual exploration 
•Large selection of books 
•Knowledgeable staff 
•Armchairs, reading tables, sofas 
•Coffee bars and Music
Creating new market space
1 2 3 4 5 6 
Looking Across Functional or 
Emotional Appeal to Buyers 
Functionally Oriented Industries: 
•Offer commodities or products with little emotions 
Emotionally Oriented Industries: 
•Offer extras that add price without enhancing 
functionality of the product
Looking Across Functional or Emotional 
Appeal to Buyers….Cont. 
Examples: 
Companies used Emotional Appeal: 
•Starbucks 
•Swatch (watch manufacturing company) 
Companies used Functional Appeal: 
•Body Shop 
•Direct Line Insurance
Looking Across Functional or Emotional 
Appeal to Buyers….Cont. 
Starbucks: 
•Introduced the concept of Coffee Bar 
• Provide coffee drinkers with an emotional 
experience: 
– Gathering place 
– Status 
– Relaxation 
– Conversation
Looking Across Functional or Emotional 
Appeal to Buyers….Cont. 
Body Shop: 
•Provide customers with functional appeal 
•Focus on product’s ingredients 
•Cost saving through little spending on advertising
Creating new market space
1 2 3 4 5 6 
Looking Across Time 
Three critical principles….the trend must be: 
•Decisive 
•Irreversible 
•Clear Trajectory 
Example: 
•Cisco Systems
Looking Across Time….Cont. 
Cisco Systems: 
Identified the trend of growing demand for high-speed 
data exchange by producing: 
•Routers 
•Switches 
•Other networking equipment
Conclusion 
• Creating new market space and value curves is 
critical in a demand-starved economy for both 
small and large companies 
• Maintaining profitable growth is only 
sustainable by creating and recreating new 
space, new markets and new value

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Creating new market space

  • 1. Strategic Marketing & Planning (MKT501C) CCrreeaattiinngg NNeeww MMaarrkkeett SSppaaccee Salman Ahmed (8519) Fall 2011
  • 2. Objective of the Article Determining a systemic approach to value innovation that can help companies to create new market space via looking across six boundaries of the existing competition
  • 3. Shifting the Focus of Strategy The Conventional Boundaries of Competition HEAD-TO-HEAD COMPETITION (Focus On) CREATING NEW MARKET SPACE (Looking Across) Industry Industry rivalry Substitute industries Strategic Group Competitive position within strategic group Looks across strategic groups within industry Buyer Group Better serving the buyer group Redefines the buyer group of the industry Scope of Product & Service Offerings Maximizing the value of product and service offerings within the bounds of its industry Complementary product and service offerings that go beyond the bounds of its industry Functional- Emotional Orientation of Industry Improving price-performance in line with the functional-emotional orientation Rethinks the functional-emotional orientation of its industry Time Adapting to external trends as they occur Participates in shaping external trends over time
  • 4. 1 2 3 4 5 6 Looking Across Substitute Industries • Companies compete with companies within their own industry as well as with those companies that offer substitute products • The space between substitute industries provides the opportunity for value innovation
  • 5. Looking Across Substitute Industries…Cont. Examples: •Home Depot •South-West Airline •Intuit (financial and tax preparation software company)
  • 6. Looking Across Substitute Industries…Cont. Home Depot: •Created a market of do-it-yourselfers in the space between – choosing contractors – going to the hardware store, buy tools, work themselves •Experienced sales team •Self-service warehousing •Economies of scale •Minimum stock-outs
  • 7. Looking Across Substitute Industries…Cont. Intuit: • Created a new value curve for managing personal finances by combining: – low price and ease of use of pencil with – speed and accuracy of “Quicken” software
  • 8. Looking Across Substitute Industries…Cont. Intuit:
  • 9. Looking Across Substitute Industries…Cont. Intuit:
  • 10. 1 2 3 4 5 6 Looking Across Strategic Groups within Industries Strategic Groups: •Companies within the same industry that pursue a similar strategy •Compete on Price and Performance •Value innovators create new market space by understanding what causes buyers to trade up or down from one group to another
  • 11. Looking Across Strategic Groups within Industries….Cont. Examples: •Polo Ralph Lauren (Clothing Company) •Toyota's Lexus •Sony Walkman
  • 12. Looking Across Strategic Groups within Industries….Cont. Polo Ralph Lauren: •Fashion with no Fashion •Compete with Haute Couture (High priced, Outdated fashion) and Classic Lines (High priced, Long lasting Quality) Lauren’s success factors: •Designer name •Elegance of stores •Luxury of materials •Updated price-captured classical look
  • 13. Looking Across Strategic Groups within Industries….Cont. Toyota's Lexus: •Provided the high quality of a Mercedes, BMW, or Jaguar at a price closer to the lower-end Cadillac or Lincoln. Sony Walkman: •Provided low price and convenient size portable stereo market
  • 14. Looking Across the Chain of Buyers Rather than looking at a target customer, value innovators pursue the chain of customers: •Purchasers •End Users •Influencers 1 2 3 4 5 6
  • 15. Looking Across the Chain of Buyers….Cont. Examples: •Bloomberg (Financial software company) •Philips (Lighting Company)
  • 16. Looking Across the Chain of Buyers….Cont. Bloomberg: •Compete with Reuters and Telerate (online financial information providers) •Upstream focus from purchasers (IT managers) to end users (Accountants and Financial Analysts)
  • 17. Looking Across the Chain of Buyers….Cont. Philips: •Downstream focus from purchasers to influencers •Produced Alto (environmentally friendly light bulb) •Promoted Alto to CFO's and public relations people •Rapid sales growth – traditional fluorescent lamps containing toxic mercury were replaced in schools, stores and office buildings
  • 18. 1 2 3 4 5 6 Looking Across Complementary Product and Service Offerings Idea: •What happens before, during and after your product or service is purchased Example: •Borders Books & Music and Barnes & Noble book superstores
  • 19. Looking Across Complementary Product and Service Offerings….Cont. Border and B&N Books Superstore: Features & Benefits: •Lifelong learning and discovery •Pleasure of reading and Intellectual exploration •Large selection of books •Knowledgeable staff •Armchairs, reading tables, sofas •Coffee bars and Music
  • 21. 1 2 3 4 5 6 Looking Across Functional or Emotional Appeal to Buyers Functionally Oriented Industries: •Offer commodities or products with little emotions Emotionally Oriented Industries: •Offer extras that add price without enhancing functionality of the product
  • 22. Looking Across Functional or Emotional Appeal to Buyers….Cont. Examples: Companies used Emotional Appeal: •Starbucks •Swatch (watch manufacturing company) Companies used Functional Appeal: •Body Shop •Direct Line Insurance
  • 23. Looking Across Functional or Emotional Appeal to Buyers….Cont. Starbucks: •Introduced the concept of Coffee Bar • Provide coffee drinkers with an emotional experience: – Gathering place – Status – Relaxation – Conversation
  • 24. Looking Across Functional or Emotional Appeal to Buyers….Cont. Body Shop: •Provide customers with functional appeal •Focus on product’s ingredients •Cost saving through little spending on advertising
  • 26. 1 2 3 4 5 6 Looking Across Time Three critical principles….the trend must be: •Decisive •Irreversible •Clear Trajectory Example: •Cisco Systems
  • 27. Looking Across Time….Cont. Cisco Systems: Identified the trend of growing demand for high-speed data exchange by producing: •Routers •Switches •Other networking equipment
  • 28. Conclusion • Creating new market space and value curves is critical in a demand-starved economy for both small and large companies • Maintaining profitable growth is only sustainable by creating and recreating new space, new markets and new value