Market Leader Strategies

There are Three Main Strategies of a Market Leader (explained with examples) are:

1. EXPAND TOTAL MARKET

• New Users
E.g.: perfume:--> non-users (mkt-penetration strat)
 --> men (new market strat)
 --> other countries (geo-expan strat)
E.g.: J&J Baby shampoo: birthrate declining
--> ads target adults --> leading brand

• New uses
Cereals: as snacks --> increase frequency of use
OJ: “not for breakfast anymore”
Du Pont nylon: parachute-->pantyhose-->blouses & shirts --> auto tires -->seat belts -->
carpeting

Arm & Hammer: baking--> fridge deodorant --> quell kitchen grease --> carpet/pet deodorant
--> bath tub relaxant --> toothpaste --> ????• More usage:
Michelin: want French to drive more --> rate restaurants (best in south --Provence &
Riviera) --> publish guidebooks with maps and sights along the way

2. DEFEND MARKET SHARE

• decide where to defend
• continuous innovation along Mktg Mix
Position defense:
- purely defensive not enough
--> must take offensive counter-measure
Eg: Coke --> multi segments of cola mkt
 --> enter wine market
 --> acquire fruit drink companies
 --> desalination equipment
 --> plastics
Flanking defense:
- guarding territory not enough
- create outposts/flanks:
 --> protect weak front
 --> invasion base for counter-attack
Eg: Hyvee: supermkt still dominant yet facing challenges from other retailers
flanking strategy:
strengthening via superstore concept -->
• traditional foods - meat/canned/packaged
• non-traditional --> ethnic foods, wines
• prepared foods --> restaurant, take out, salad bar, bakery
• non-food retailing --> clothings, garden store, video rental, dry cleaning, photo developer,
• services: catering, party planning
Classic flanking failures: lack of commitment
Half-hearted design: GM: Vega and Ford: Pinto
flanking failed --> VW, Toyota, NissanPreemptive defense:
• attack BEFORE enemy starts offense
Eg: Microsoft: “Vapor-ware”
• guerrilla action: Seiko with 2300 watch models
• sends market signals but does nothing
 (3 Kingdoms: empty city strategy)
-- hears of competitor’s plan to build new factory
 --> “leaks info” of planned price cut and new factory plans
Failure to respond to strong attacks: fatal
Heinz did not respond to Hunt’s attack
--> Hunt now established rival brand
Counter-offensive defense:
- when attacked most mkt leaders will respond with counterattack
- cannot be passive in the face of continued attack
- price cut,
- promo blitz,
- product improvement,
- sales-territory invasion
options:
• “wait and see”
-- take time to understand motives -- ST vs LT
-- identify areas of weakness of competitor
• strong response:
-- detailed all-out offensive
Eg: BMW & Mercedes vs Lexus & Infinity
--> action when MS erosion was serious
• price cuts
• low end defense --> new models for under $45K segment
Mobile defense:
- more than aggressively defend
-- stretches domain over new territories
Strategies: Mercedes sees stagnant luxury mktMkt broadening: broaden generic defn
-- MB takes on SUV with own all-wheel drive
-- MB takes on new microcar segment
-- JV with Swatch in MB/Swatch car
CAUTION: Mktg Myopia --> Mktg Hyperopia
Mkt diversification:
Reynolds: from cigarettes --> beer, liquor, soft drinks, frozen foods
MB: shifts more resources into aeronautics, auto design equipment CAD/CAM,
Contraction defense:
- strategic withdrawal
 -- give up weak territories
-- concentrates strength at pivotal positions
Eg: Ford retires T-birds and Probe
Focuses on Contour & Taurus

3. EXPANDING MARKET SHARE

PIMS (Profit impact on mkt strategy) reports higher profits with higher mkt share
Argument: Profitability goes with high MS
Eg: MB high P because it a high MS holder in its served mkt (luxury segment)
Eg: 1 share point gain:
Coffee: > $80M
Soft drinks: $ 150M
CAUTION: gaining MS not necessarily gain P
- depends on strategy for gaining increased MS
-- cost of buying higher MS < revenues generated
3 critical considerations:
a. provoking antitrust action or anti-dumping charge
b. economic cost -- beyond optimal MS
,i.e. inverted “U” curve
WHY: legal costs, fight off competitors losing MS, PR problems, legal problems
c. wrong marketing-mix strategyRecent case: UPS strike reveals vulnerability
- buyers want multiple vendors
- unattractive mkt segments
strategy: selectively decrease MS in weaker areas
Conditions when MS and P go together:
a. Unit costs fall with increased MS
- real gains in economies of scale --
cost/experience curves,
Intel: significant improvements in both product and process innovations, and large capital
investment in new plants
b. Target Premium segment:
- premium price covers cost of offering higher quality
- MB/BMW strategy

Source: iastate.edu