COMPETITION AND

PRODUCT STRATEGY
Dr M R Suresh
SDMIMD

TWO RESPONSIBILITIES OF
PRODUCT MANAGERS
First, product manager is responsible for
planning activities related to a product or
product line. This involves analysing the market,
including customers, competitors, the external
environment, and converting this information
into marketing objectives and strategies for the
product
Second, the product manager must get the
organisation to support the marketing
programme envisaged. This would involve
coordination with other areas of the firm.

DIFFERENCES BETWEEN GENERAL

MARKETING (STRATEGIC) AND PRODUCT
MANAGEMENT
Product Managers are concerned with a single
product or product line and are not concerned on
day-to-day basis the overall business division in
which they operate
Nature of decision-making: largely tactical (e.g how
much should I spend on advertising, how to react)
etc
Time horizon. Product Managers face pressure on to
attain market share, profit targets in the short run
Formulation of product strategy and development of
new products in recent years in specific product
categories

COMPETITION AND PRODUCT

STRATEGY
In business primary and basic objective is to survive
To survive one must compete; hence product strategy
is fundamental to a firms competitiveness
Competition is the process by which invisible hand
of the market seeks to solve the basic economic
problem of maximizing satisfaction from the
consumption of scarce resources
Management of scarcity is the greatest challenge
facing humanity
Attempt to solve through organizational innovation,
social innovation, technological innovation

SUPPLY AHEAD OF DEMAND?

First manifestation of oversupply worldwide
depression in 1920s and 30s
Post second world war, reconstruction and
satisfaction of deferred demand kept major
industrial economies occupied till mid-1950s
Supply ahead of demand in USA leading to
increased emphasis on high-pressure selling and
vigorous promotion to boost sales that was
coming down
Marketing is the distinguishing, the unique
function of business (Galbraith 1954)

WHAT LINKS COMPETITIVENESS,

MARKETING AND PRODUCT STRATEGY?
Concept of marketing is concerned with mutually satisfying
exchange relationships- the idea that two parties can enter
freely into an exchange of objects and services of commercial
value in a manner that enables value for both of them
The sole end and purpose of production is consumption
( Adam Smith 1776)
Decisions on production, quantity, what, where, how etc based
on consumer demand. Hence customer orientation, market
driven are concepts that are part of modern business and seen
as essential for success
Emergence of global competition in the last 20 years or so, in
contrast to the (earlier)concept of comparative advantage
Nations based their production decisions on the creation of
goods and services where they enjoyed a natural advantage over
other potential producers and then engaged in international
exchange to the mutual benefit of exporter and importer

MICHAEL PORTERS VIEWS

Michael Porter challenges this idea and according to him
prosperity is created, not inherited and depends on the capacity
of a countrys industry to innovate
Factors most important to competitive advantage and in most
industries are not inherited but created within a nation, through
processes that differ widely across nations and industries
Firms create competitive advantage by perceiving or discovering
new and better ways to compete in an industry and bringing
them to market which is ultimately an act of innovation....
Innovation is broadly to include both improvements in
technology and better methods of doing things. It can manifest
in product changes, process changes, new approaches to
marketing, new forms of distribution, new forms of scope
What marketing managers refer to as NPPD (New
Product and Process Development). In other words the
entire gamut of Product Management

BAKER (2006) STUDY

Innovation occurs when firms identify a new market opportunity
or a segment neglected by those serving the market as they
understand it (e.g Japanese success in global auto business)
Innovation involves overcoming the inertia of established
approach to doing things. Hence often precipitated by outsider
Innovation represents an improved way of serving an existing and
known need. Thus vast majority of innovations are substitute
products which offer a more satisfying way of meeting consumer
need
Innovation will displace existing products or ideas if they offer
enhanced satisfaction
Condition of competitive success is: ones own product is
atleast equivalent to that of competitors... ultimate goal of
competition is usually seen as having a better product
than ones own competitors

ROGERS VIEWS
Better indicates combination of objective and
subjective factors Rogers (1962) definition of
relative advantage.
Prevailing preference is to resist change
In the real world one can improve ones position
by encouraging and accepting change. This
implies that enterprises must continuously
develop new products.
Otherwise the competitive advantage would be
eroded by other firms which seek new and
improved ways of satisfying the customer needs

CHANGES IN 1970S AND TWO

SEMINAL RESEARCH STUDIES
Growth of NIC in 1970s
Two seminal publications
Managing our way to economic decline (Hayes and
Abernathy, HBR, 1980)
In search of excellence by Peters and Waterman 1982
(Limitations;
General statements
Too much focus on organizational dimensions
Focus on specific industry
Studies at different points of time and different
environments
Focus mainly on successful companies)

BAKERS STUDY (1989)

Rigorous design, five set of factors to explain business performance:
environmental change, strategic factors, organisational factors,
marketing factors, managerial factors
Covered growth, mature and declining industries
Distinction between above and below average companies: long term
approach, specific strategic objectives, linking strategic plans closely
with market changes and a continuous commitment to new
product development are activities apparent in more successful
companies
continuous commitment to new product development present
irrespective of whether the companies were in sunrise or sunset
industries

Therefore product strategy (and innovation) lie at the

heart of overall competitiveness

14

of 43 excellent firms identified by Peter and Waterman were

in the decline in 1992

U K Committee of Science and Technology The introduction of new or
improved products which meets the needs of the customer, quickly,
reliably and at a competitive price, gives an edge over its competitors

BUSINESS FINDS PRODUCT

SOLUTIONS DESPITE PREDICTIONS
Club of Rome study (1967) and its predictions.
Solutions that business found:
Tapping of North sea oil and in Arctic
More economical use of oil through product and
process innovation
Alternative sources of energy

PRODUCT PHENOMENON
Bruce Henderson (HBR 1989) in The Origin of Strategy
states No two species can co-exist that make their
living in an identical way . Differentiate to survive
Phenomenon cannot find a way and goes into decline
Adjusts to barrier and establishes an equilibrium
(extended maturity)
Finds a way forward and initiates a new growth phase
Managing product decline is an important component
of product management
Product diversification has been consequently called
upon successfully by many executives to meet the
challenges of the changing industrial environment
(Thomas Staudt , HBR 1954)

WHY COMPANIES DIVERSIFY THEIR PRODUCT

RANGE?

Survival
Stability
Productive Utilization of resources
Adaptation to changing consumer needs
Growth
43 specific factors that stimulate companies to
diversify its product lines
Diversification appears most likely to be
successful when it capitalizes on unique knowhow .........human capabilities

PRODUCT JUGGERNAUTS
when the shouting is over one factor is clear,
what differentiates perennially great
companies from others is the products they sell
( Deschamps and Ranganath Nayak, 1993)
Five basic strategies for competing though products
Competing through product proliferation (Honda
vs Yamaha)
Competing through value (Toyota, IKEA etc)
Competing through design (Mac)
Competing though innovation (3M, Marico,
Samsung)
Competing through service (Maruti, Ashok Leyland)

PREREQUISITES FOR
BREAKTHROUGH (PRODUCT)
INNOVATIONS
Top management commitment of where and how
to innovate and the capability to communicate
and mobilize people to make it happen
A strong technological culture
A clear sense of the customer (though a
combination of market research and intuition)
and the ability to translate product concepts into
attractive saleable products
An ability to combine mutually reinforcing
innovations

PROCESS OF INNOVATION
(ROTHWELL, 1992)
Five stages
1950s to 60s: Basic science --- Design and engineering
Manufacturing--Marketing- Sales
1960 to 70s: Market need, ---development ---manufacturingsales
1970s to 1980s: consolidation and rationalization, pursuit of scale
and experience, focus on cost control, emphasis on success and
failure factors
1980s to 1990s: strategic networking, time to market, integration
of product and manufacturing strategy, regulatory responses
Fifth generation: strategic elements: Time based strategy (faster,
more efficient product development) development of focus on
quality and non-price factors, emphasis on corporate flexibility
and responsiveness, customer focus at the forefront of strategy,
strategic integration with primary suppliers, strategies' for
horizontal technological collaboration, IT integration, quality
control

PRODUCT A FEW DIMENSIONS

Product is the object of exchange process
For exchange to occur must have demand for the
object in question and inclined to exchange other
objects of value
Product classification into three categories
(copeland, 1923)

PRODUCT CLASSIFICATIONS AND

MARKETING STRATEGY (WINZAR
1992)
Marketers have often attempted to use product
classification schemes to provide a cookery book for
marketing strategy .product classifications are
shown to be contingent upon marketing mix
elements and assumptions about consumer response.
Leads to specific problems:
Ex post definitions and circular logic no hint about
how to classify products
Fuzzy sets product classification of the same
product differs across consumers and sometimes
the same consumer at different times
Generalizability of the classification in all physical,
market and social contexts

BOOZ, ALLEN AND HAMILTON (1982)

The point- it is the perception of novelty that
determines how prospective buyers will view
them. Booz, Allen and Hamilton identified six
kinds of new products:
New to the world
New product lines
Additions to existing product lines
Improvements and revisions to existing products
Repositioning
Cost reductions

OBJECTIVE AND SUBJECTIVE

CRITERIA
Most consumer buying behaviour models
recognise objective and subjective factors,
objective factors are measurable
For consumers to prefer one substitute product
over another , it is essential to discriminate
between similar products using criteriasometimes called performance factors
These include technical, non price and price
factors (as in Baker 2000)

ARE SERVICES DIFFERENT

Three schools of thought
products and services are two sides of the same
coin
Products and services are different and hence
require different marketing approach
Basic principles apply to both, but distinctive
nature of services call for extended marketing mix
Intangibility and inseparability
While it is possible to describe the nature and
performance of physical product using objective
criteria it is difficult in the case of services

JOHN AND STOREY (1998)

In services customer interactions are the very
essence
In products it may not be that essential
Repositioning as product augmentation
development
Product development focuses on modifying core
benefits while product augmentation involves
amending the interaction with the customer

CONTD.
Services are ideas and experiences: how are potential
users evaluating them?
Make some dimensions tangible, similarly in the case of
products intangible dimensions help consumers
distinguish the same
Buyers are concerned with both tangible and intangible
benefits- satisfaction is a combination of both
Shostack (1982) came up with the conceptualization of a
continuum of product dominant and service dominant
entities
Services require consumer involvement
Distinction between product and services would be useful
only if the extended marketing mix is developed