V. How Do Competitive Strategies Differ From One Another?
A. Differences in Scope
Both the breadth and stability of a business’s domain are likely to vary with
different strategies. This, in turn, can affect the variables the corporation uses to
define its various businesses.
oAt one extreme, defender businesses, whether low-cost or differentiated, tend
to operate in relatively well-defined, narrow, and stable domains where both
the product technology and customer segments are mature.
oAt the other extreme, prospector businesses usually operate in broad and
rapidly changing domains where neither the technology nor customer
segments are well established. The scope of such businesses often undergoes
periodic redefinition.
oAnalyzer businesses, whether low-cost or differentiated, fall somewhere in
between the two extremes. They usually have a well-established core business
to defend, and often their domain is primarily focused on that business.
However, businesses pursuing this intermediate strategy are often in
industries that are still growing or experiencing technological changes.
As a result, managers must review and adjust the domain of such
businesses from time to time.
B. Differences in Goals and Objectives
The three performance dimensions of major importance to both business-unit and
marketing managers are:
oEffectiveness: Effectiveness is commonly measured by such items as sales
growth relative to competitors or changes in market share.
oEfficiency: Common measures of efficiency are profitability as a percent of
sales and return on investment.
oAdaptability: Adaptability can be measured in a variety of ways, but the most
common ones are the number of successful new products introduced relative
to competitors or the percentage of sales accounted for by products
introduced within the last five years.
It is very difficult for any SBU, regardless of its competitive strategy, to
simultaneously achieve outstanding performance on even this limited number of
dimensions because they involve substantial trade-offs.
Good performance on one dimension often means sacrificing performance on
another.
Prospector businesses are expected to outperform defenders on new product
development and market-share growth, but defender strategies lead to better returns
on investment.
C. Differences in Resource Development
Prospector—and to a lesser degree, analyzer—businesses devote a relatively large
portion of resources to the development of new product-markets. In portfolio terms,
they are “question marks” or “stars.”
Defenders, on the other hand, focus the bulk of their resources on preserving
existing positions in established product-markets. They are the “cash cows.”
D. Differences in Sources of Synergy
The sharing of operating facilities and programs may be an inappropriate approach
to gaining synergy for businesses following a prospector strategy. To a lesser extent,
this also may be true for both types of analyzer strategies.
oSuch sharing can reduce a SBU’s ability to adapt quickly to changing market
demands or competitive threats.
oIt is appropriate for such businesses to seek synergy through the sharing of a
technology, engineering skills, or market knowledge—expertise that can help
improve the success rate of their product development efforts.
Low-cost defenders should seek operating synergies that will make them more
efficient. The primary means of gaining such operating synergies is through the
sharing of resources, facilities, and functional activities across product-market
entries within the business units or across related business units.
VI. Deciding When a Strategy is Appropriate: The Fit between Business Strategies and the
Environment
Because different strategies pursue different objectives in different domains with different
competitive approaches, they do not all work equally well under the same environmental
circumstances.
A. Appropriate Conditions for a Prospector Strategy
A prospector strategy is particularly well suited to unstable, rapidly changing
environments resulting from new technology, shifting customer needs, or both.
Because they emphasize the development of new products and/or new markets, the
most successful prospectors are usually strong in, and devote substantial resources
to, two broad areas of competence:
oR&D, product engineering, and other functional areas that identify new
technology and convert it into innovative products
oMarketing research, marketing, and sales—functions necessary for the
identification and development of new market opportunities
B. Appropriate Conditions for an Analyzer Strategy
On one hand, analyzers are concerned with defending—via low costs or
differentiation in quality or service—a strong share position in one or more
established product-markets.
At the same time, the business must pay attention to new product development to
avoid being leapfrogged by competitors with more technologically advanced
products or being left behind in newly developing application segments within the
market.
This dual focus makes the analyzer strategy appropriate for well-developed
industries that are still experiencing some growth and change as a consequence of
evolving customer needs and desires or continuing technological improvements.
C. Appropriate Conditions for a Defender Strategy
A defender strategy is most appropriate for units with a profitable share of major
segments in a mature, stable industry.
A defender strategy works best in industries where the basic technology is not very
complex or where it is well developed and unlikely to change dramatically over the
short term.
Differentiated Defenders
oTo effectively defend its position by differentiation, a business must be strong
in the functional areas critical for maintaining its particular competitive
advantages over time.
oMarketing activities that track changing customer needs and competitive
actions and communicate the product offering’s unique advantages through
promotional and sales efforts to maintain customer awareness and loyalty are
particularly important.
Low-Cost Defenders
oSuccessful implementation of a low-cost defender strategy requires the
business to be more efficient than its competitors.
oA combination of low margins and heavy investment can be prohibitive
unless the parent corporation can commit substantial resources to the business
or unless extensive sharing of facilities, technologies, and programs with
other business units is possible.
oThe low-cost defender’s need for efficiency forces the standardization of
product offerings and marketing programs across customer segments to
achieve sales effects.
oSuch a strategy is usually not effective in fragmented markets desiring
customized offerings as it is in commodity industries.
VII. How Different Business Strategies Influence Marketing Decisions
The SBU’s strategy influences the amount of resources committed to marketing and
ultimately the budget available to an individual marketing manager within the business
unit.
The SBU’s choice of strategy influences both the kind of market and competitive situation
that individual product-market entries are likely to face and the objectives they are asked to
attain.
A. Product Policies
The product policies concern the breadth or diversity of product lines, their level of
technical sophistication, and the target level of product quality relative to
competitors.
Because prospector businesses rely heavily on the continuing development of
unique new products and the penetration of new markets as their primary
competitive strategy, policies encouraging broader and more technically advanced
product lines than those of competitors should be positively related to performance
on the critical dimension of share growth.
Differentiated defenders compete by offering more or better choices to customers
than do their competitors.
oA policy of high service quality is appropriate for differentiated defenders
because it offers a way to maintain a competitive advantage in
well-established markets.
The appropriateness of an extensive service policy for low-cost defenders, though,
is more questionable if higher operating and administrative costs offset customer
satisfaction benefits.
B. Pricing Policies
Success in offering low prices relative to those of competitors should be positively
related to the performance of low-cost defender businesses—for low price is the
primary competitive weapon of such a strategy.
Such a policy is inconsistent with both differentiated defender and prospector
strategies.
C. Distribution Policies
Some observers argue that prospector businesses should show a greater degree of
forward vertical integration than defender businesses.
Attempting to maintain tight control over the behavior of channel members is a
more appropriate policy for defenders who are trying to maintain strong positions in
established markets.
Because prospectors focus on new products where success is uncertain and sales
volumes are small in the short run, they are likely to devote a larger percentage of
sales to trade promotions than are defender businesses.
D. Promotion Policies
Because prospectors must constantly work to generate awareness, stimulate trial,
and build primary demand for new and unfamiliar products, high advertising and
sales promotion expenditures are likely to bear a positive relationship to the new
product and share-growth success of such businesses.
Differentiated defenders, on the other hand, are primarily concerned with
maintaining the loyalty of established customers by adapting to their needs and
providing good service.
Differentiated defenders are likely to have higher salesforce expenditures than their
competitors.
Low-cost defenders are likely to make relatively low expenditures as a percentage
of sales on promotional activities.
VIII. What if the Best Marketing Program for a Product Does Not Fit the Business’s
Competitive Strategy?
If a business unit is focused on a single product category or technological domain, the ideal
solution might be for the whole SBU to change its strategy in response to shifting industry
circumstances.
oThe problem is that effective implementation of different business strategies requires
not only different functional competencies and resources, but also different
organizational structures, decision-making and coordination processes, reward
systems, and personnel.
oBecause such internal processes are hard to change quickly, it can be very difficult
for an entire SBU to make a successful transition from one basic strategy to another.
In view of the implementation problems involved, some firms might form new prospector
SBUs to pursue emerging technologies and industries rather than expecting established
units to handle extensive new product development efforts.
Some firms that are technological leaders in their industries may divest or license
individual product-market entries as they mature rather than defend them in the face of
increasing competition and eroding margins.