Strategic Marketing interests me a lot, and this topic was too tempting for me to explore further. My business acumen have enabled me to dig deeper and its gives me pleasure to unravel the real essence of subject, no matter how tiresome it seems.
My effort explores the discussion of generic ways to change the composition of the market with some relevant examples that a company takes to direct its path towards gaining a competitive advantage, differentiation and uniqueness.
The Market Orientation of a company and the emergence of Market Driving Vs Market Driven Constructs
Over the last 20 years three general perspectives regarding MO have emerged. The first perspective focuses on values and norms called as ‘Cultural perspective’ (Narver and Slater 1990). The cultural perspective is an organizational culture that creates superior value for buyers and superior performance for the business. The second perspective is the ‘Resource Capability’ by which a firm is able to grasp its external environment and is able to compete ahead of its competitors by anticipating urgent market needs. The third perspective defines MO as a ‘behavioral perspective’, in which a firm pertains to the organization wide intelligence systems with respect to the current and future customer needs. (Kohli and Jaworski 1990).
However, Jaworski, Kohli and Sahay in 2000 extended the concept of Market orientation to two main distinct approaches which are Market Driven and Market Driving
Market Driven
Market driven refers to a business or market approach that is primarily based on the understanding the specific features of the market and then reacting to those features and Behaviours of the players with in that market. This approach seldom thinks out of the box and only attempts to reshape or modify customer’s preferences in the wants and needs of the customer. Thus the success is linked to the superior ability to attract, serve and retain the customer
Driving Market
Driving market on the other hand influences the market structure in such a way that it enhances the competitive position of the business. It is more customer centric and focuses on finding a new market, something radically innovative and creative in terms of customer need & wants. The success in this case is associated with focus on high levels of learning to introduce competitive platform and quantum leap changes in the value proposition.
Market Structure, How Do I define It?
The conceptual framework of Market Structure is composed of two dimensions: ‘Market Structure’ and ‘Market Behaviour’. Market structure means, set of key players and their specific roles in accordance with “the value chain” (Porter 1985). For example, in a manufacturing company this would include players such as the Engineers, the company itself, distributors, sales force and the retailers. To accept the market structure as ‘Given’ means, YOU agree to the conditions of the systems on ‘as it is basis’. This does not change or modify the characteristics of the existing players, rather you agree to abide by the rules of the game and play in a predefined boundary with a submissive approach and just manage to get a fair piece of share important for your survival in the harsh environment- a market driven approach! On the contrary firms who ‘shape’ the market structure, challenge the rules of the game, take aggressive measures and would not hesitate to go an extra mile, even to eliminate their competitors. Driving markets refers to taking proactive and vigilant steps that change the composition of the market by, may be introducing a new product or player in the existing industry e.g. Apple smart phones are “in” vs Nokia is “out”
Market behaviour
Market behaviour refer to the typical behaviours of the players in the industry value chain. Accepting the market behaviour as ‘Given’ means you understand how and when customers are buying specific products. When should you offer promotions and when should you offer discounted prices. In contrast, ‘shaping’ the market behaviour entails making customers to focus on the niche attributes of the products previously unconsidered by the customers (e.g. part-time MBA programs, Smart phones, Online Shopping)
At the end of the day it’s all about “How well is the game, and how can I play it better”
Blue Ocean VS Red Ocean Strategies
“Jump in with everyone else or jump right!”
Red ocean vs Blue Ocean strategy is a concept that is based on a vast study of strategic moves that a firm might take to gain a competitive advantage. Kim and Mauborgne in 2005 came out with a conclusion that it’s not about battling your competitors that gives you success, rather it’s the innovation and uniqueness of your product that gives you an edge. The blue ocean strategy (that drives the market) focuses on creating an uncontested market space making the competition completely irrelevant by breaking the rules and stimulating new demand by offering differentiated and low cost products. However easier said than done, it’s risky, difficult and requires sound research to back one’s decision. For example, Nokia used to rule the world of cellular phones for decades but today its legacy has been taken over by a gust of smart phones that have completely revolutionized the way, a user and his smart phone interacts. Apple and Samsung have completely changed the cellular industry by taking into account the Latent and Manifest needs of the customers. These companies have reshaped the entire market composition directly and indirectly influencing behaviour through cognitive and in cognitive changes. Companies like Apple, Nike and Coca-Cola introduces a new offering every year, and radically innovates its products that heels off and it becomes difficult for the competitors to catch up in fragile time
Two Generic approaches to Shape the behaviour of the market
1. Shaping the market (Customer) behaviour directly
Building customer constraints: Many big and multinational companies play with customer’s buying behaviour directly, by building real or imagined constraints into their buying experience, eventually shaping customer’s expectations. For example, IKEA, a global retailer of furniture provides a beautiful display of its products in a pre-decorated ambiance so the customer does not need any sales associates. Plus the products are positioned in such an intelligent way that it enables the customers to self-bundle their store selection. Another aspects of IKEA worth mentioning is that it forces the customers to shop a particular route throughout the store and no matter how rigid one is at buying, he or she still ends up purchasing their products. These sets of retail tactics do not take the market shape as ‘given’ rather it shapes the consumer behaviour and encourages ‘bundling behaviour’ which may not have been judged by their counterparts
2. Shaping the Market (Customer) behaviour Indirectly
Creating new customer preferences: Shaping the customer behaviour indirectly, involves shaping the ‘perception of offering’ in the market place before it can have its effect on behaviour. This is possible by floating in, a totally new idea. Disneyland was a new concept in 1950s, which became the shout of every town. Virtual machines and haptic are today’s outstanding phenomena’s. Secondly it is also possible to introduce new benefits for the existing products. For instance, Power Pac room coolers with built-in air purifiers, Good Grips line of kitchen utensils that have introduced thick rubber-like grips which have made their products easy to handle and lighter to carry
Conclusion
It is not important to be the first to float an idea into the market, rather what matters is the extent to which that idea changes the composition of the market. Furthermore, a company can both be driving the market and be market driven at the same time and companies do possess dual strategies. Firms can simultaneously attempt to protect their sources of income (cash cows) while investing into new technologies to build their future business. However, as said before, driving the market involves making an effort in learning and innovation. How much can a market composition be shaped? It entirely depends on the Industry and variation across industries.
(Article is taken from Linkedin)
