Review & Discussion

Too narrow definition of the market

prevents from foreseeing threats from
subsitution
Railroads didnt think about transportation in
general but only about trains
Hollywood film industry didnt consider the
whole entertainment market but only films

Porters 5 Forces: tool to list substitutes

direct & indirect competitors

Product oriented businesses

Example: Railroads, Hollywood
Define the market in terms of the product

Customer oriented businesses

Examples: DuPont; Cornings
Key to success: apply technical know-how
to create customer satisfying uses
Define the market in terms of the need

Growth

Need driven by

Apparent
customer need
No other
solutions = no
substitutes

Decline
Other solutions
to the need are
available
The need
decreases cuz
new tech

Growth Dry-Cleaning
woolen clothes
No other technical
solutions

Decline Dry-Cleaning
Synthetic fiber

replace wool = need

decreases!
Ultrasound tech
replaces chemical =
new solution!

When Market/Industry declines, companies

must strive to EXIT it

EXIT barriers can be Emotional:

Example corner store groceries beaten by

supermarkets: the companies with the courage

of their convictions [...] kept their pride but lost
their shirts

Other exit barriers:

When costs too high (layoffs cost)
When equipement cannot be reconverted/sold

Companies only capitalize on growth opportunities

Growing industries go into decay

Assume Growing demographics

= growing industry

Assume
No substitute possible for the
product

Why Growth-Decline cycle?

Faith in economies of scale

Assume optimizing
manufacturing is sufficient
(cost reduction, better quality)

HYPOTHESIS: If the number of consumers grow,

sales will also grow = growing industry
True only if no substitute for the need
Example of Oil Industry

Kerosene lamps substituted by light bulbs

Natural gaz substituting oil for heating, even cars (diesel)
Innovations come from outside the industry
Fail to recognize new opportunities: plastics

Focus on producing more at lower cost

Focus on selling more: market offering is
just the generic product/service
Neglect the marketing aspects:

The role of marketing is to listen to the

customer
Market Offering includes the 4Ps: Product,
Price but also Place & Promotion
How the product is made available?
When & under what conditions available?

SELLING

MARKETING

Focus:the selling
Objective: convert the
product into cash
Push strategy: salesmen try
to sell as much as they can

Focus: the customer

Objective: satisfy at best
customer needs
Pull strategy: salesmen
capture customer needs

Symptom: new models sell better than

the old ones

Problem: the producer doesnt know

what the customer wants - WHY??
Research of Customer Preferences limited
only to what already decided to offer
No listen to customer concerns: no attention
paid to customer needs about point of sale
or repair&maintenance

It is not the cost that sets the price

It is the price at which the product can be
sold profitably that drives the need to cut
costs

Mass production results from marketing

strategy, dosnt replace such

First, determine price for level of demand

Last, cut cost to be profitable at this price

Improving the Product wont save sales if another

substitute satisfies customer needs much better
Example: the buggy whip industry
Example: oil vs electricity

Creative destruction: when a new (tech) solution

fits better customer needs, the old one must be
abandoned
Example: gaz stations will become obsolete if new fuel last
much longer

Illusion: superior product will sell itself

False Hypothese: continuous growth is a
matter of product innovation

Note that if u replace product by

market offering the statement is true
Product Innovation focus: features of product
Market Offering focus: satisfy customer needs

 The organization Focus on how to do the product

view itself as
R&D
making things,
Neglect how to sell - marketing
not satisfying the
customer needs

Success factor:

the customer comes to tell them

what they need (military)
No need to research customer
needs

Identify
consumer needs

Physical delivery of
customer
satisfaction
Creating the things
that achieve the
satisfaction
Find the raw
materials to make
the products

Attributes of a Leader

Human organization

Will to succeed
Viewpoint: company
is creating customer
value & satisfaction
He knows where hes
going which road is
not important, only
the final destination

Redefining the firm

from product to
customer oriented
pays off (several
examples listed in
the conclusion)

 marketing mania : chasing

customers needs disregarding
costs (segmentation)

Expand to new segments

without effort to organize &
integrate new businesses

Bigger marketing department

doesnt automatically make
more results

Change organization from

functional to customer-oriented
without consideration of
company culture

Create great product but being

unable to educate the
customer how to take
advantage of it

Yes, definitely. However must understand

the relationship between customer need,
price, production, technical solution

The target is satisfy the need

But can it be done at reasonable price/cost?
Does it makes sense to produce in mass or not?
What technical solution(s)?

Must learn how to do SMART customerorientation

the product &

industry
lifecycle,
the needs of
the customer
(value chain,
the 7s
McKansey)

understand
the market
(Porters 5
forces)

Today,
much
more
tools to:

Slowing demographic
growth in the West

markets dont automatically expand with population

growth: growing demand vs sustanable development

Shorter product lifecycles: ex. electronics

Marketing is more
sophisticated :

deeper understanding,
Models and derived tools

New market rules:

ex. the internet

Not to forget, growing

importance of external
factors like

climate change, global economy,

scarce ressources, politics, culture&religion

The big success stories recognize the need

of customer orientation and take
advantage of it: Starbucks, McDonalds,
Coca Cola, Festo, Toyta

Example of Kodak: since they defined

themselves as being in the photo industry,
they didnt have problems going digital
and remained a leader. Others like Fuji or
Konica we dont hear about anymore!