Ishioka and Yasuda IAMOT 2006 1/8

Strategies for Competing in the Innovative Products Market

Masaru Ishioka1 and Kazuhiko Yasuda2

1
Department of Business, Ishinomaki Senshu University,
Ishinomaki, Miyagi, 986-8580, Japan
s454491@isenshu-u.ac.jp
2
Graduate School of Economics, Tohoku University,
Sendai-city, Miyagi, 980-8576, Japan
yasuda@econ.tohoku.ac.jp

Abstract
In the innovative product market, one of the most important keys to take the advantage
in the market is recognizing and introducing the innovative product to fit the
customers’ requirements with adding high and new technology. The purpose of this
paper is to introduce strategic approaches to the innovative product market. By
analyzing the Japanese digital camera market, the competitive factors are defined to
take the advantage in the market. The characteristics of market player and competitive
factors are analyzed by two major points, new product introduction rate and product
sales rank. Also, research covers the analysis of relations between these two factors
and actual sales results. The research results indicate, the organizations holding
higher level of both factors show successful business results.

1. Introduction

For taking higher competitive advantage in the innovative product market, it is important to
recognize the characteristics of competitive innovative products. One of the most important keys
to take the advantage in the market is recognizing and introducing the innovative product to fit
the customer needs and expectation with adding high technology and/or new product function.
The purpose of this paper is to introduce strategic competitive approaches to the innovative
product market. By analyzing the Japanese digital camera market, the competitive factors are
defined to take the advantage in the market. The characteristics of market player and
competitive factors are analyzed by two major points; 1. new product introduction rate, 2. product
sales rank. The research also covers the analysis of relations between these two factors and actual
sales results.

2. Conceptual back ground

2.1 Customer based innovation

There are several ways to recognize the innovation among the products in a market. Some
product innovation are defined by product makers, however some products innovativeness in the
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market are defined by customers.

In this paper, three factors are used to define the product innovativeness. Figure 1 shows
three factors of the innovativeness of the market offering. These factors are developed from the
customer’s viewpoints. In other words, the factors indicate how innovative products are defined
and recognized by customers. Following sections explain each factor in detail.

Figure 1. Components of innovativeness of the market offering

Influence for current products

Innovativeness of the
market offering
Product features and quality Product introduction speed

2.2 Product feature and quality (basic product performance and functions)

One of the simplest ways to recognize product innovativeness is finding new product feature and
quality from the customer’s point of view. Usually, customers recognize the product innovation
by watching, touching, and using them. If the customers find the large differences in product
features and quality from current competitive products in a same market, the new products are
defined as innovative products.
In this research, the factor of product features and quality is not in the strategy analysis.
Because this research focuses on market leading competitive organizations, their product features
and quality are satisfied or exceeded required standard technology. Because this factor is basic
factor to stay on the market, it is not the strong competitive factor for the organizations.

2.3 Scope of change (number of hit products)

After new competitive products are introduced to the market, the new products have much impact
on the other competitive products which are already in the market. Some of the products bring
large impact to the other competitive products. On the other hand, some of the new products do
not give any impact to the inline products. These differences on the level of impact to the inline
products are recognized as the differences of product innovativeness among the products in the
same target market.
The products, which having the impact on large area of same category products, have a higher
potential to be ranked in the higher sales products. It is closely related between the new products’
area size to be influenced and the products sales ranks.

2.4 Speed of change (number of new products)

The number of new products is one of the factors to be recognized as the innovative product. Not
all companies are able to produce large variety of new products at once. Several organizations
are developed and introduce to the market just a few types of new products. The other types of
companies introduce a few new products at first, then increase the number of products with short
or long period of time.
Ishioka and Yasuda IAMOT 2006 3/8

The number of new product variety is closely related with the companies’ abilities of new
product development. If the organization has higher abilities of introducing large number of new
products, it could be recognized as innovative products makers. However, if the organizations
are able to introduce only a few products all of the time, the organizations are hardly to be
recognized as innovative products makers in terms of the number of new products.

2.5 Strategy classification

Figure 2 shows the basic concept of new product development strategies. It is the chart with
“number of hit products” on the y-axis and “number of product variety” on the x-axis.
Number of hit products indicates the product number of higher sales rank products. Some of
the products are introduced to the market with successful growing their sales volume. The
products are ranked in the higher position among the competitive products. The higher sales
ranking products provide satisfaction to customers.

Figure 2. Strategy classification

Large
Challenging Leading
Innovator type I Innovator

Number of
hit products
Following Challenging
Innovator Innovator type II

Small
Small Large
Number of product variety
On the x-axis, it is “number of product variety” is indicated. The factor shows the number of
products in the market at the same period. Offering larger number of selection of products
increases the potential to satisfy the customer needs and expectation. However, producing larger
variety of products requires higher cost and skill.
Next, the level of innovativeness of the products is categorized in the each area of the chart.
Four types of innovators are indicated in Figure 2. Each innovator types roughly categorized
three levels of innovativeness. Highest innovative product makers are located in “leading
innovator”. Because the characteristics of the company located in this area provide higher
customer satisfaction with large variety of products, the products are recognized as innovative
products.
On the other hand, “following innovator” holds both low levels of the factors. The products
and/or product makers in this area, does not offer a good customer satisfaction with small number
of product variety. The target customers do not see any benefit in the offered products.
Moreover, the products do not have enough wide variety of product selection.
Two areas in the chart are recognized as medium level of innovative product makers.
Challenging innovation type I and II are second innovative product makers. In the case of the
factor of number of hit products is large and product variety is small, the higher customer
satisfaction is produced by only small number of products. In this case, it is difficult to keep the
Ishioka and Yasuda IAMOT 2006 4/8

higher level of customer satisfaction. Because successive innovative product makers introduce
new products continuously in the same market, the company needs to introduce variety of
products to keep competitive advantage.
In the case of only the factor of number of product variety is high, and hit products are small,
the company is introducing unwanted products with large variety of products. In this case, the
organization is facing difficulties of providing customer satisfaction. The company is not able to
define the customer expectation. It means that the introducing products are not good enough to
be recognized as innovative products in the target market.

3. CASE STUDY

The Japanese digital camera market is selected to apply the analysis. The strategy classification
process includes several major steps as follows. First, analyze the organizations’ each of two
factors, such as influence for current product, the number of hit product, and product introduction
speed, the number of product variety. Second, develop a strategy chart and classify organizations
into the four types of strategies. And, repeat first two steps for 5-year analysis, 1999 through
2003, and 3-year analysis, 2000 through 2003. Then, entry the market shares for each analysis.
Market share of year 2003 is for 5-year analysis, and year 2005 is for 3-year analysis. As the
final step, compare 5-year analysis and 3-year analysis, and analyze the relations between
movements of the organizations’ strategy locations and change in each organization’s market
share of each year analysis.

4. RESULTS

In this section, the results of the factor analysis and strategy classification are explained. The
factors of “number of product variety” and “number of hit products” define the each
organization’s product characteristics in the market. The strategy classification indicates the
relations between the each organization’s level of each factor and market share.

4.1 Speed of change

In Figure 3, all of the organization produces higher number of new product in the 3-year analysis
than that of the 5-year analysis. It means that the number of new product introduction during 3-
year analysis has a tendency of higher and/or faster product introduction rate if compare with
the number of the last 5-year.
Figure 3. Number of product variety (5-year, 1999-2003 and 3-year, 2000-2003）

Panasonic
Nikon
aker

Casio
Product m

Olympus
Canon
Sony
5-year
Fujifilm 3-year

0.0 5.0 10.0 15.0

Number of product variety
Ishioka and Yasuda IAMOT 2006 5/8

Sony has the highest number of product variety in the both analyses periods. Canon and
Sony significantly increase the number of new product introduction between the analyses. The
smallest increase is made by Olympus. Panasonic is the smallest number of product variety over
the analyses.

4.2 Scope of change

In Figure 4, if compare the results of 5-year and 3-year analyses, the organizations are roughly
classified into three types; the first type, the organizations which have higher number of hit
products in 3-year analysis than that of 5-year analysis; the second type, the organizations which
have higher number of hit products in the 5-year analysis than that of 3-year analysis; the third
type, the organizations which have almost same number of hit products between the analyses.
The organizations, Sony and Canon, increase the number of hit products in 3-year analysis if
compare with 5-year analysis. Therefore, both organizations are more affecting the new product
concept of the other organization in the latter three years.
On the other hand, Fujifilm and Olympus are decreasing the number of hit products from 5-
year analysis through 3-year analysis. Therefore, both organizations’ products are not affecting
the other organizations’ new product concept in the latter three years.
Panasonic, Nikon, and Casio made small increase of the number of hit products between the
two analyses. The organizations provide small impacts to the other competitive products in the
same target market.

Figure 4. Impact to the other product

Panasonic
Nikon
Product maker

Casio
Olympus 5-year
3-year
Canon
Sony
Fujifilm

0.00 1.00 2.00 3.00 4.00 5.00 6.00

Number of hit product (Index)

4.3 Strategy classification

Strategy classification is indicated in Figure 5. Both 5-year and 3-year analyses results are
plotted in the chart.
In the chart, seven major organizations which are leading digital camera makers in the
Japanese market and allocated, and suggested four types of strategies are also located in the grid.
The beginning of the arrow of each organization indicates the result of 5-year analysis and the
end of arrow is the result of 3-year analysis. Then, the each circle in the chart indicates the
market share and each size of the circle are related with the level of the market share. The circle
of the beginning of the arrow indicates the organization’s market share of year 2001, and the end
of the arrow shows the market chare of year 2003.
Ishioka and Yasuda IAMOT 2006 6/8

Most of the organizations are concentrated in the two types of strategy, “leading innovator”
and “following innovator”. In terms of change between the two analyses, five organizations out
of seven increase both factors of “scope of change” and “speed of change” between the analyses.
However, two organizations increase only the factor of “speed of change”. The two organizations
decrease the market share also.

5. Analysis of the strategy classification chart

As a general trend of the chart, the organizations with higher number of “speed of change” and
“scope of change” hold higher market share. For example, Sony and Fujifilm have higher level
of both factors and hold higher level of market share among the competitive organizations. On
the other hand, Panasonic and Nikon have small number of both factors, and hold lower level of
market share. More detailed explanation of each strategy type is in following sections.
Figure 5. Product development strategies in Digital camera market（Comparison: 5-year and 3-year
analysis）
6.00 Challenging Leading
Innovator type I 1 Innovator
5.00
Scope of change

2 Fujifilm
4.00 Sony
1

3.00 3
3
Canon
2
5 Olympus
2.00 Casio
5

1.00 7 4
4
Nikon
Following 6 Challenging
Innovator
7 6
Innovator type II Panasonic
0.00
0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0
Speed of change

5.1 Leading innovator

In the case of the organizations with both higher levels of scope of change and speed of change,
the organizations are categorized into leading innovators. The organizations in this section are
holding higher skills of new product introduction speed and creating the higher sales rank
products. Especially, the good skill of introducing hit product to the market is closely related
with producing customer satisfaction. It means that the organizations which continuously
introducing several hit products are always able to satisfying the target customers.
The organizations in the category of “leading innovators” usually hold large market share if
compare with the other strategies, because the organizations are providing higher level of
customer satisfaction with frequent new product introduction. The number of new products is
large, and each product has a higher potential to produce customer satisfaction. Therefore, the
organizations in this category tend to hold large market share among the competitive
organizations in the same target market.
Ishioka and Yasuda IAMOT 2006 7/8

5.2 Following innovator

The organizations with both lower level of “scope of change” and “speed of change” are
categorized into “following innovator”. The organizations in this section are holding lower skills
of new product introduction speed and producing the lower sales rank products. Because of
lower skill of introducing hit products, the organizations have difficulty of obtaining customer
satisfaction from the target market. In this category, the organizations produce small number of
new products and the introduced products do not fit the target customer expectation such as
customer need and/or wants.
The organizations in the category of “following innovators” usually hold small market share
if compare with the other strategies, because the organizations are providing lower level of
customer satisfaction with slower rate of new product introduction. The number of new products
is small, and each product has a lower potential to produce customer satisfaction. Therefore, the
organizations in the category tend to hold small market share among the competitive
organizations in the same target market.

5.3 Challenging innovator type I and II

In Figure 7, two types of challenging innovator are indicated, “challenging innovator type I” and
“challenging innovator type II”. The both types of challenging innovator indicate the
organization holding a middle of innovative skill among the competitive organizations in the
same target market. Because one of the factors such as “scope of change” or “speed of change”
is low level, the organizations in this category are defined as mid-level of innovative product
makers.
In the case of “challenging innovator type I”, the organizations hold higher level of “scope of
change” and lower level of “speed of change”, and are categorized into mid-level of innovative
product makers. The organizations in this section are holding higher skill of creating hit product;
however, the rate of new product introduction rate is in lower level. So, the organizations are
successfully introducing the products which fit the customer expectations, such as customer
needs and wants. However, the number of the new products is smaller than that of the other
organizations in the same competitive market.
The organizations in the category of “challenging innovator type I” usually hold mid-level of
market share if compare with the other strategies, because the organizations are providing higher
level of customer satisfaction with small amount of the new products. The number of new
products is small; however, customer satisfaction is created by the introduced products. In this
condition, the organizations in this category tend to hold mid-level of market share among the
competitive organizations in the same target market.
In the case of “challenging innovator type II”, the organizations hold higher level of “speed of
change” and lower level of “scope of change”, and categorized into mid-level of innovative
product makers. The organizations in this section are holding higher skill of introducing large
number of new product in a short period of time; however, the skill of creating hit product is in
low level. The organizations introduce the products very frequently and the number of the new
products is larger than that of the other organizations in the same competitive market, but the
organizations are not able to introduce the products which hit the customer expectation.
The organization in the category of “challenging innovator type II” usually hold mid-level of
market share if compare with the other strategies, because the organizations are providing large
number of new products to the market with lower level of customer satisfaction. The number of
Ishioka and Yasuda IAMOT 2006 8/8

new product is large, but each product does not fit the customer expectation. Thus, the
organizations in the category tend to hold mid-level of market share among the competitive
organizations in the same target market.

6. Conclusion

The research analyzes the linkage between the two factor analysis and actual sales results, market
share. Therefore, each organization is able to recognize the relations between their product
characteristics and market share. The organizations are able to define more effective ways to
develop new products.
In Figure 5, the organizations in the Japanese digital camera industry are plotted. The size of
each circle indicates the each organization’s market share size. Also, the starting point of the
arrow indicates the results of 5-year analysis and the end point of the arrow indicates 3-year
analysis. 5-year analysis explains long range characteristics of the each organization, on the
other hand, 3-year analysis indicates recent tendency of the characteristics of each organization.
By comparing and observing the movements of each organization’s characteristics from 5-
year to 3-year analysis, the characteristics are observed dynamically. Some of the organization
increase product introduction speed, and the others increase the number of higher sales products.
Moreover, some organizations are able to increase both factors.
However, one of the most important things is the linkage between the product characteristics
change and business results change. In this research, each organization’s market share is selected
to indicate the business results.
Several major characteristics are identified as follows; 1. most of organizations in the
Japanese digital camera market grow both factors between 5-year and 3-year analysis, 2. when
the organizations increase the level of both factor, the market share of the organization tend to
increase, 3. the organizations holding higher levels of both factors tend to keep higher market
share if compare with the organizations holding lower levels of both factors, 4. lack of growing
one of the two factors stops market share growth or decline the market share.
The four types of strategies are indicated in each quadrant in Figure 5. Each strategy holds
different characteristics. The characteristics are identified by the location of the organization in
the chart, and it provides clear ideas of the ways to react on the other competitive organizations.

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