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EJM
46,10 Acquiring market flexibility via
niche portfolios
The case of Fisher & Paykel Appliance
1302 Holdings Ltd
Robert Hamlin and James Henry
Department of Marketing, University of Otago, Dunedin, New Zealand, and
Ron Cuthbert
School of Agriculture, Business & Technology, Olds College, Olds, Canada

Abstract
Purpose – This paper seeks to establish that the instability of niche markets, and their
predisposition to catastrophic collapse, makes market flexibility a prerequisite for long-term survival
among niche marketers. It describes the two ways by which a niche marketer can acquire this market
flexibility and demonstrates the advantages of the second of these two approaches, i.e. the
development of a portfolio of separated niches.
Design/methodology/approach – An in-depth discussion of niche instability/implosion, and how
niche market flexibility can be acquired to increase the survivability of such events, provides the
context for a single in-depth case study of a company employing a systematic niche market flexibility
approach. A multi-method approach was adopted drawing on both interviews and documentary
evidence.
Findings – Planning for flexibility is essential for long-term survival as a niche marketer. Two broad
approaches to achieve this exist – i.e. contingency and portfolio planning – which are not mutually
exclusive. The portfolio approach offers specific advantages and examples of its successful
applications exist.
Research limitations/implications – This is a single case study.
Practical implications – The article has significant implications for practice, as fragmentation of
markets and globalisation of production makes niche marketing desirable/essential for many players.
Originality/value – The area of planning for flexibility using a niche portfolio marketing strategy is
under-researched at present.
Keywords Flexibility, Niche, Portfolio, Strategic planning, Marketing strategy,
Uncertainty management
Paper type Case study

European Journal of Marketing
Vol. 46 No. 10, 2012
pp. 1302-1319
q Emerald Group Publishing Limited
0309-0566
DOI 10.1108/03090561211248044
Introduction
Strategic flexibility is defined by Sanchez as “the ability to respond to various
demands from dynamic competitive environments” (Sanchez, 1995). Such
environments are often referred to as “turbulent” (Fürst and Schmidt, 2001; Glazer
and Weiss, 1993). Several articles have examined the issue of turbulence and flexibility,
and these articles have tended to address the issue by methods by which a single set of
highly specialised resources can be more effectively managed in order to respond to
environmental shocks (Johnson et al., 2003).
This article examines the potential for companies to acquire the strategic flexibility
that is necessary to deal with such turbulent environments by spreading the risk
among a larger number of smaller “niche” activities. This differs from the current Acquiring
mainstream approach of heavily investing in increasing the reactive flexibility of a market flexibility
single resource mentioned above, which effectively increases the investment (and
potential risk) that a company incurs with respect to a single specialist set of resources
(Johnson et al., 2003).
The philosophy that underlies the multiple activity/niche strategy is derived from
the financial services and investment literature (Maginn et al., 2007). It is driven by the 1303
assumption, based on considerable experience, that it is simply not possible to create
plans or systems that can reliably predict, avoid or mitigate the impact of individual
adverse events on a single investment/activity in turbulent business environments
(Reilly and Brown, 2005). However, it is possible to create and plan for a systematic
investment diversification, which establishes a portfolio of multiple
investment/activities that can reliably minimise the impact of an individual adverse
event upon the organisation. This activity/investment “portfolio” approach is well
established in financial investment literature (Reilly and Brown, 2005). It is this
dedicated niche portfolio strategy, and its’ potential to reliably endow strategic
flexibility upon an otherwise strategically inflexible organisation, that forms the
contribution and focus of this article.
While it offers superior reliability, a strategy of this type is not without its costs and
drawbacks. A small company will face the diffusion of its already limited resources.
However, even a large organisation that chooses to pursue such a multi-activity
portfolio approach will have relatively less resources to devote to each individual
activity than any of its similarly sized, but fully specialised, competitors. As a
consequence, it may well be compelled to adopt a niche strategy with regard to these
“larger” competitors. It will also have to adopt this strategy simultaneously in the
multiple markets that its portfolio covers.
The research and educational niche marketing literature is not especially helpful to
anyone who is considering this strategy. It has, to this point, concentrated on the single
niche and how companies approach the issues related to establishing and defending a
single niche position (Parrish et al., 2006). This is undoubtedly an important area of
research, and study is assisted by the high number of niche players that can be
identified and studied (Dalgic, 2006). There may be a number of reasons for this single
niche focus. There is still work to do in developing our understanding of single niche
strategies. The portfolio concept is also somewhat counterintuitive in that the strategy
simultaneously incorporates a high level of resource focus within individual niches and
a planned process of resource diffusion between them. However, probably the main
reason is a lack of raw material for the researcher. Niche portfolio strategists are hard
to identify, and they vary widely in their nature. This makes it extremely difficult to
undertake a programme of research based on a uniform sample of them. This does not
mean that the strategy is necessarily a poor one – it may just be novel.
Because of the scarcity of subjects, this article is based upon a single case study of
Fisher & Paykel Appliance Holdings Ltd., a high profile international niche portfolio
strategist based in New Zealand, that has not only survived, but has prospered by
adopting the niche portfolio approach (Davies, 2004). The first part of the article
examines niche portfolio strategy in detail, and this theoretical development is then
linked into a case study of the Company’s development from 1985 to the present day.
EJM Market turbulence and niche instability
46,10 The concept that most markets consist of a “mainstream” and a series of niches is well
established in the marketing literature. The strategies by which (relatively) small
companies can survive by inhabiting niches that are either too small for larger
companies to address, or that are not considered to be worth their while, is also well
developed (Shani and Chalasani, 1992; Hamel and Prahalad, 1990; Pravit, 1990; Jain,
1304 2005). The process by which these smaller companies identify, adapt to and fortify
these niches is collectively known as “niche marketing”. Niche marketing is primarily a
defensive strategy, which is used by weaker players to avoid stronger ones (Dalgic,
2006; Hezar et al., 2006; Bantel, 1997; Delaney, 1995; Jain, 2005; Dalgic and Leeuw,
1994). Some aggressive niche strategies do exist, of which “Shady Corners”, the use of
multiple niches to act as a springboard for an aggressive move into a mainstream
market, is the best-known method. The penetration of the North American market for
heavy machinery by the then small and aggressive entrant, “Komatsu”, is the
best-known example of “shady corners” (Gaudes, 2004).
A company that utilises the aggressive “shady corners” niche strategy is likely to be
a source of market turbulence. However, the majority of the literature concentrates on
defensive niche marketing. This research has led to a series of recommendations as to
how best to go about implementing a niche marketing strategy. These
recommendations are summarised in Table I, which owes a good deal to the recent
publication on niche marketing “A Handbook of Niche Marketing” (Dalgic, 2006). One
of the most striking aspects of these sources is the lack of emphasis on contingencies
for dealing with market turbulence, or even the more sedate process of market
development. The majority of the recommendations are highly “single niche
orientated”. The recommendations are heavily reliant on the assumption that
conditions within the niche will continue indefinitely or, at worst, will change only
slowly. As rapid and unpredictable market development is a fact of life in the modern
commercial marketplace, these nichocentric recommendations may be highly
dangerous if they are embraced too wholeheartedly. As they are small, and rely on
a degree of isolation, niches have the capacity to be highly volatile relative to the
mainstream market, and explosive niche collapse is not unknown (Cuthbert, 1995).
Therefore, market development/turbulence that may be merely an inconvenience to a
major player may be lethal to a company that has become overly adapted to a niche
that is suddenly radically modified, opened up or even eliminated by what may be
minor changes in the overall structure of a market.
The various ways in which events can conspire against a niche marketer are
summarised in Figure 1, together with some examples. As can be seen, even the most
highly adapted niche marketer can be undone by such “external” developments, and
unless they can react rapidly to their changing circumstances, and either find a new
niche rapidly, or find a new source of sustainable competitive advantage within their
(modified) existing one, they are unlikely to survive.

Acquiring strategic flexibility via niche portfolios

Such a rapid and costly response is unlikely to be possible unless some advance
planning has occurred. A niche marketer that does not keep abreast of the wider
market, and that does not seek to develop some degree of strategic flexibility via
contingency plans for the more likely negative, externally located developments within
 Acquiring
Authors Recommendations
market flexibility
Simon (1992, 1996) cited in Become an ultraspecialist:
Dalgic (2006) Follow a niche strategy – define markets very narrowly and create
your own market
Cultivate strong mutual interdependence between you and your
customer, built on economics and rationality (this helps create strong 1305
entry barriers)
Match internal competencies with external opportunities
Integrate technological orientation with marketing orientation
Avoid outsourcing core activities
Oviatt and McDougal (1994, Become a global player:
1995) cited in Dalgic (2006) Control (rather than own) assets particularly unique knowledge that
creates value in more than one country (2)
Importance of alternative governance structure to promote increased
concentration of limited resources on the primary sources of
competitive advantage (2)
Choose a product mix with demand that is of a global nature (3)
Maintain a global vision from inception (3)
Recruit internationally experienced managers with strong networks (3)
Sell a unique product with “preemptive” product attributes (3)
Maintain unique intangible assets such as tacit know-how to sustain
advantage (3)
Maintain a program of incremental innovation (3)
McKinsey (1993) cited in Maintain a strong customer orientation:
Dalgic (2006) Ed. (7), Shani Change with your customer (4)
and Chalasani (1992) Compete of value rather than price (4)
Strong customer focus and customize products to meet market
requirements (4,5)
Table I.
Dalgic (2006) Be a vocal local: Summary of
Differentiate based on local culture/lifestyle, products/services recommendations for
Establish a local identity implementing a niche
Market through public relations and publicity marketing strategy

their niche will sooner or later find themselves in trouble. They will not have a good
long-term chance of survival, regardless of the healthiness of their current position, and
the extent of their adaptation to their current micro-environment.
However, this requirement for strategic flexibility does set up a degree of tension
within the overall strategy of the niche marketer. Most companies adopt a niche
marketing strategy because their resources are highly limited both in relative and
absolute terms (Kotler, 1989; Shani and Chalasani, 1992; Campbell-Hunt, 1999; Ibrahim,
1992; Shuman and Seeger, 1986; Harling and Quail, 1990). Niche marketing allows
them to concentrate these resources on a small market to achieve critical mass in their
offer development, delivery and communications activities (Hezar et al., 2006). Any
diversion of resource to strategic flexibility planning therefore has the potential to
dilute and disrupt the effort of the company to the point where they fall below this
critical mass and therefore become vulnerable to established mainstream players or
new niche entrants (Dyer, 1998). Strategic flexibility planning also shares one of the
most serious problems of new product development, in that the strategic issues that it
EJM
46,10

1306

Figure 1.
Niche development and
typology of niche
breakdown
addresses are in the future and not immediately “in the face” of the company’s Acquiring
management. Frequently, this means that the activity is starved of attention and market flexibility
resources until the future scenario it was supposed to address actually occurs, by
which time it is, of course, too late (Anderson and Zeithaml, 1984; Harling and Quail,
1990; Verhees, 2004; Shuman and Seeger, 1986; Linneman and Stanton, 1991; Rice and
Hamilton, 1979; Harling, 1992; Hofer, 1975).
The issue is further complicated by the fact that the issue of strategic flexibility for 1307
niche marketing has not been addressed directly by articles in the literature. Dalgic and
Leeuw (1994) do give a series of steps/practical guidelines for the application of an
overall niche strategy, but flexibility is only mentioned obliquely in these steps as one
aspect of this strategy. As a consequence of this dearth of dedicated research, there is
no template that can be used to give the process of niche portfolio development
structure. Without this structure, the process does not have a reasonable chance of
acquiring the necessary resources to develop a portfolio capability prior to a crisis
occurring. This has been addressed in other areas of research. For example, the role of
systematically developing capabilities well before they are actually required is the
primary function of the New Product Development Process, as it is described in most
strategic innovation sources (Verhees, 2004; Anderson and Zeithaml, 1984).
How does one introduce strategic flexibility into a niche marketing company? There
appear to be two major routes by which this can be done:
(1) Systematic contingency planning. The company deploying this strategy
systematically scans the environment beyond its niche for threats and
opportunities, and develops potential capabilities that will give it the flexibility
to deal with these threats and opportunities. This activity is mentioned by
Dalgic and Leeuw (1994) in several of their recommendations for niche strategy
implementation. This process of market planning also has to be linked to a
series of financial plans that give the company the financial flexibility to rapidly
turn potential capability into actual capability, should the need arise. There are
a number of problems with this approach. First, it is very expensive in terms of
both management effort, and actual funds to maintain a range of potential
capabilities that may never actually be used, both of which may significantly
impact upon the viability of the company by detracting from its core niche
effort. Second, the contingency approach is by no means infallible, and
consequently, carries with it a high level of residual risk. The company is only
developing potential capabilities and, as a consequence, will still end up in a
position where it is reacting to events. If the contingency planning fails to see a
specific threat coming, or fails to correctly pre-select the response to one that it
does see coming, the chances of the company surviving will be low.
(2) Portfolio development. This approach is superficially similar to the multiple
niche strategy used by aggressive “shady corner” strategists. However, in this
case, the multiple niche approach is generally defensive rather aggressive. The
use of portfolios to reduce risk is well understood in the financial industry and
literature. A prudent individual does not generally invest all of their resources
into one instrument, but rather seeks to spread the risk and increase the
stability of their returns by investing in a “portfolio” of investments. The
“portfolio” also usually enhances the flexibility of the overall investment by
staggered maturities, risks and returns (Strong, 2005). A portfolio of niches has
EJM the same effect in niche marketing. A portfolio strategy allows the niche
46,10 marketer to spread their risk, and to increase their flexibility by developing a
large portfolio of niches. The use of multiple niches is mentioned by Dalgic and
Leeuw (1994), and is noted, via a figure, as a potential stage in establishing a
corporate niche strategy. It is also directly addressed as a way of addressing
vulnerabilities of over specialisation (hyper-segmentation) by the use of
1308 multiple niches (contra-segmentation), but the issue is not developed further in
their discussion.

Unlike the systematic contingency planning approach described above, a company

that concentrates of developing a portfolio of niches is investing in actual, rather than
potential capabilities, which carry with them two advantages. The first is that the
residual risk associated with developing a potential capability into an actual capability
in a hurry is eliminated. The second is that these actual capabilities in other niches will
be self-developing, and are self funding as the company develops and updates offers in
response to developments within these other niches, and subsequently draws revenue
from them as they are deployed.
A company employing a niche portfolio strategy can react in a much more flexible
manner to major negative developments within an individual niche within its portfolio.
As long as the portfolio is reasonably diversified, then the negative development is
likely to affect only that niche. The income derived from other niches in the company’s
portfolio gives it time in which to decide whether its position within the niche is
salvageable, and if it is, the other niches may well be able to provide the necessary
external resources to execute upon any decisions that it may make. Alternatively, a
relatively ruthless decision can be made to exit the niche if a solution to the problems
within it cannot be rapidly developed within the existing capabilities of the company.
The portfolio approach requires the company to think of itself as a niche marketer
first and foremost, and to reduce its attachment to any single mainstream market. The
diffusion of resources into multiple initiates may mean that some larger scale strategic
options, with regard to this mainstream market, may be eliminated if this approach is
adopted, although this is by no means inevitable. The issue of general dilution of effort
and over extension of restricted resources within the portfolio still remains. The niche
portfolio has to be carefully constructed, so as to offer maximum diversity, strategic
flexibility and reduction of risk, without committing the company to a series of
initiatives that lie beyond its specific and limited core capabilities. However, if this can
be done, then the outcomes in terms of risk reduction via increased flexibility can be
highly worthwhile.

Researching current practice in niche portfolio planning

Figure 1 summarised the range of negative events that may be faced by the niche
specialists as their market develops around them. Good examples of planning for
strategic flexibility by niche marketers that have survived these situations are quite
rare. The same can be said for appropriate corporate interview and survey
respondents. This is due to the fact that niche strategists rarely survive one of these
negative events, and the occurrence of such an event is often a requirement for
companies to learn that such events are possible, and are therefore worth trying to
avoid. The same can be said for potential corporate interview and survey respondents.
 For this reason, the researchers chose to explore the points made in the preceding Acquiring
sections with a single in-depth case study. The subject chosen for this was the New market flexibility
Zealand based white goods manufacturer Fisher & Paykel Appliance Holdings Ltd. This
company that has not only survived a full scale “niche implosion”, but has subsequently
developed strategic market flexibility by developing not one, but two international niche
portfolios. The history of this company, including its remarkable resurrection and
transformation from a highly-focussed single-niche strategist, to an international niche 1309
portfolio player, has been documented in the book by Davies (2004)[1].

Methodology
The methodology for this research was built on a multi-method approach, with
triangulation as a means to strengthen the study (Gummesson, 2000; Patton, 1990;
Ticehurst and Veal, 1999). A case-based approach has been taken so that insight can be
gained into the “how and why” a particular course of action has taken place. It also
allows for an explanatory, theory-building approach (Carson et al., 2001, p. 94). It is also
appropriate for understanding practical business situations (Yin, 1994, p. 23). The use
of a single case can be justified because it is both a critical one, in challenging and
extending a theory, and is such a rare example that finding a similar one would be
extremely difficult (Yin, 1994). The use of multiple perspectives during the qualitative
phase also adds strength. A review of secondary published material consisting of
Company Annual Reports and published media data was undertaken in the initial
phase to establish a base level of knowledge.
A variety of qualitative approaches were then used to obtain the data. Of these
methods, in-depth interviews were used to obtain information about behaviour, and
other specific characteristics (Aaker et al., 1997, p. 188; Hawkins and Tull, 1994, p. 306;
Patton, 1990, p. 278). A total of 11 current and former senior employees from Fisher
& Paykel Appliance Holdings Ltd. were interviewed. Much of the background material
in relation to the case was sourced from Fisher & Paykel Appliance Holdings Ltd.
Annual Reports from 2003 to 2007.

Fisher & Paykel Appliance Holdings Ltd. (F&P) 1996-2007: acquiring

strategic flexibility by niche portfolios
Historical context – Fisher & Paykel as dominant player in a protected niche
New Zealand has an unusual economy. It is ranked as an OECD country, but relies
very heavily on the export of primary produce to pay its way in the World. It is often
described as a First World society sitting on a Third World economy. Along with
many other primary produce-reliant countries, New Zealand has often found it difficult
to achieve a favourable balance of trade, and over the last century, the Government’s
usual reaction to this problem has been to restrict trade in some way. It was in this
environment that F&P was founded in 1934, as a license manufacturer/assembler of
white goods that were designed elsewhere, forming part of a Government sponsored
import substitution initiative. Until 1973, these trade restrictions formed part of the
network of agreements that existed within the British Empire and subsequent
Commonwealth. The entry of the UK into the European Economic Community in 1973
disrupted these agreements. The response of the New Zealand Government was to seek
to (successfully) establish a wider portfolio of primary produce export markets, while
balancing trade via an increasingly complex and restrictive network of trade restraints.
EJM F&P have always specialised in the development and production of what are
46,10 collectively known as “white goods”. This includes most major kitchen and laundry
appliances – cookers, washing machines, fridges, freezers, dishwashers, driers and the
like. They started to design their own products in the 1950s, and rapidly advanced to a
position of dominance within this artificially created white goods niche market.
Despite the very severe restrictions on imports into the country, New Zealand white
1310 goods continued to be a niche, rather than an entirely separate market. Even as trade
restraints really tightened up after 1973, some contact with the outside world was
maintained by F&P agreements with Kelvinator (USA) and Matsushita ( Japan). Some
level of competition was provided by two smaller local companies, “Champion”, who
were owned by a variety of corporates, including Sanyo (Japan), and the “Atlas
Majestic Company” who were owned by Email (Australia), and then by Electrolux
(Sweden). F&P also exported small quantities of white goods to Australia (c. 5 per cent
of turnover). However, the New Zealand white goods niche market continued to evolve
separately, and diverged from the mainstream market until, by 1985, it displayed
profoundly different consumer expectations and product offerings than other more
interlinked white goods markets across the globe (Davies, 2004). Typically, the New
Zealand consumer would pay relatively more for a major kitchen appliance than
consumers in more interlinked markets, and in return they would receive a well
engineered and constructed, but in design terms, marginally obsolescent machine.

1985, niche implosion

Despite the aggressive programme of centralised government economic control, the
New Zealand economy declined steadily into crisis. In 1985, the last “protectionist”
Government, led by Robert Muldoon, fell and was replaced by the Labour Government
of David Lange, which at the instigation of Roger Douglas, the then Minister of
Finance, demolished nearly all external trade barriers within a very short space of time.
“Rogernomics”, as it was called within New Zealand, seated the removal of these
import barriers within a wider range of aggressive internal, free market economic
reforms, which represented the most profound shock suffered by any Western
economy in recent times.
Rogernomics created literally hundreds of catastrophic niche implosions across the
New Zealand economy, and an even larger number of casualties among companies that
had become comfortably adapted to these niches. F&P were not among these
casualties, largely because they had a breathing space created by a second line of
defence that they had created within their niche. This second line of defence was a very
tight set of Exclusive Dealership Arrangements (EDA’s) that locked potential
competitors out of nearly all of the major white goods retailers. This (EDA) prohibited
the retailers from stocking or selling any other make or brand name of white ware
product out of the same store (Ahdar, 1991):
The EDA worked well for both parties. We got exclusive distribution and the retailers in turn
got products with full technical training and sales and service support (Former Senior Sales
Executive, F&P).
As F&P was still the dominant brand in the early years of Rogernomics, these
distributors decided that discretion was the better part of valour and, for a while, did
not stock other white goods brands, even though they were available. Such a policy
could only really be applied by a brand with an unusual degree of dominance in the Acquiring
eyes of both the public and channels as a senior executive recalls: market flexibility
In terms of market power it was a bold step to take based on the power of the F&P brand and
to show the other retailers where the company [F&P] stood (Senior Executive, F&P).
Even with such a strong brand, this situation could not continue indefinitely, and it was
eroded gradually by the emergence of small high-end specialist retailers who had no 1311
stake in the F&P brand. However, the development that finally opened the New Zealand
white goods niche up to the mainstream was an agreement in 1995 between the German
white goods manufacturer “AEG” and “The Warehouse”, a bottom end “Big Box”
retailer, that allowed AEG to put an alternative range of quality branded white goods in
front of the majority of consumers in the Nation. The AEG/Warehouse partnership was a
short-term stiletto penetration exercise, and AEG goods are no longer sold via this route.
The exercise was nevertheless an effective one for both parties. The Warehouse now
sells large volumes of cheap Chinese white goods, and AEG is sold in a wide variety of
outlets, along with the wide a range of other international white goods brands that are
typically available in any other major developed economy. Also, in 1996, a merger
between one of Fisher & Paykel’s main national dealers “Noel Leeming” (that accounted
for 16 per cent of turnover) with the competing national chain of “Bond and Bond”, that
sold imported Korean white ware, saw the company withdraw supply to protect its EDA
(Davies, 2004, p. 281). The events are recalled by another senior F&P manager:
This was the beginning of the end in terms of (Fisher & Paykel’s) market dominance in New
Zealand (Senior Executive, F&P).

The development of a niche portfolio

The Company had, however, used its breathing space to good advantage. Although the
niche that had provided it with a secure environment had finally imploded, F&P were
not without advantages when compared to the mainstream brands that now entered
the market in increasing numbers, and by 1995 these advantages were well understood
by the Company. They stemmed from the Company’s prior adaptation to the closed
New Zealand market, especially to its very small size, and to the difficult
manufacturing environment created within it by the lack of free imports of supplies
and components. The legacies of these adaptations were a highly flexible labour force,
well used to short run quality production situations, together with a highly ingenious,
flexible engineering, product development and senior staff cadre:
The company’s engineering focus has predominated and is a major difference between us and
the competitors as is the high focus on R&D (Senior Engineer, F&P).
Also, while the imploded niche had harboured a range of white goods that appeared to
be highly conservative, this conservatism was also reflected in a weight and standard
of build that had become increasingly rare in the larger overseas markets. In addition,
the rather conservative layout of the Company’s products concealed innovations that
led, rather than trailed, the global technology standard in white goods. As a senior
participant observed:
The basis of our strength is the high level of product innovation (Senior Development
Engineer, F&P).
EJM F&P started to systematically leverage these advantages in order to move from a
46,10 single, national niche position, defined by import controls, to a multiple, international
niche portfolio position defined by its technological, innovation and flexible production
competencies. The first target was Australia, and the Company officially launched the
F&P brand on the national market in Australia in 1987, despite the fact that low-level
imports had been proceeding for some time. A plant was constructed at Brisbane in
1312 addition to the existing F&P plants in East Tamaki (Auckland) and Dunedin (South
Island):
Refrigeration was a major strength. To expand into Australia it was decided to manufacture
in Australia as opposed to expanding the plant in Auckland (Senior Production Engineer,
F&P).
Sales in Australia climbed rapidly to over 30 per cent of total revenue – even though
this still represented a small share of the upper end of the Australian market. This
push was continued with a launch in Europe at the DomoTechnica Show in 1992:
We use the DomoTechnica Show to both showcase our products and to see what others are
doing. It is the premier show that all the leaders in the industry attend (Development
Engineer, F&P).
By the time that the stiletto penetration by the AEG/Warehouse alliance occurred in
1995, F&P’s sales were split roughly at: 50 per cent Australia, 30 per cent New Zealand,
20 per cent Rest of the World, thereby blunting the impact of the final niche implosion.
Indeed, although Rogernomics had been highly disruptive, the consumer boom that
followed the freeing up of the economy had allowed F&P’s total sales in New Zealand
to grow, even as its market share declined (Davies, 2004).
The company continued to innovate at a high rate. The nature of its innovations is a
feature of its niche positioning. F&P is a technical innovator with World leading
positions in the computer control of white goods cycles, and particularly in its power
plants. The Smartdrivee motor is a patented device that allows F&P to create
machines with capabilities that other companies cannot presently match. This level of
innovation is, however, not linked with an extreme top end styling and pricing position
similar to a manufacturer like Gaggenaue, which is somewhat inflexible. F&P adopts
a more flexible, “technology value” based positioning, that allows it to occupy a variety
of positions within its portfolio of niches ranging from “mid-range familiar” in New
Zealand to “mid-top end/special uses” in the USA. As a middle-ranking executive
noted:
The Quantum sub-brand range was launched to address the high-end of the market”. ‘Good
value for good money’ may be considered to be a point of commonality (Logistics Executive,
F&P).
The “Smartdrive” motor also made the development of the “DishDraw” dishwasher
possible. The DishDraw is the product for which the Company is best known
internationally. The DishDraw was developed in the mid-1990s, and first appeared in
its fully functional form at the 1997 DomoTechnica Show in Cologne. It was developed
from the outset to be a core competency identifying niche product for the Company. As
such it included several major innovations that amounted to design paradigm shifts
relative to both the company’s existing, mainstream dishwashing platforms and to
those of its competitors. The most notable of these innovations were the use of a draw
format for a dishwasher, and the inclusion of two completely separate draw-type Acquiring
dishwashers in the same standard sized unit: market flexibility
It was a completely new type of dishwasher that no one else had thought of. The design drew
upon F&Ps own engineering inventiveness and design expertise (Design Engineer, F&P).
While it was designed as a big-hitting, global niche product on the basis of space saving,
energy saving and convenience, its true value was only identified inadvertently. Israeli 1313
exhibitors at the show noted that the independent double draw design was also a unique
solution to the special dietary needs of Jewish people, who have to keep meat and dairy
products (and the utensils used to handle them) separate for religious reasons. This key
“special use” niche advantage allowed the product to gain presence and profile very
rapidly in many urban centres of the USA. This high profile penetration has
subsequently been used as a basis for leveraging other F&P branded products:
The DishDraw was pitched at the high end of the market other high end products were
developed to compliment and to expand the range such as the Titan range of cooking
appliances”. This range of cookers was designed especially for target niches in the North
American market on the basis of their other, non-religious, advantage (Development
Engineer, F&P).

An established niche portfolio player

Over the last ten years Fisher & Paykel Appliance Holdings Ltd. has developed from a
highly competent but relatively parochial single niche player into a highly
sophisticated global niche portfolio strategist. The current portfolio position is
summarised in Figure 2. It is not only the number of niches that is of interest, but the
number of different niche positions that are maintained by the Company within these
niches, which has the effect of spreading its risk and increasing its flexibility/options –
It is not simply a “top end” niche player in multiple identical niches. However, this
diverse portfolio is still maintained via the deployment of the narrow range of core
competencies of the Company mentioned earlier – applied internal technology and
high quality, short-run manufacturing capability being the two most important:
”Titan range was made possible through using the latest advances available to us in flexible
short-run manufacturing”. This was combined according to a procurement manger through
“the use of proprietary technology from a particular steel producer to produce a unique finish
on the steel that is only done for F&P” (Development Engineer).
F&P continues to maintain these core capabilities by acquisition and strategic alliance.
The Company now maintains a close reciprocal manufacturing alliance with
“Whirlpool”, which has seen the withdrawal of the F&P brand in the New Zealand
mainstream markets for some types of appliance, and its replacement with the
Whirlpool brand, distributed via F&P’s networks, as F&P continues to move towards
niche positions, even in its traditional home markets (Shaded in Figure 2). In return,
F&P now have access to Whirlpool’s international marketing and distribution
networks in a number of very significant global markets, and have quietly extended
their niche reach in some of these markets under Whirlpool’s brand:
F&P have deepened their technical cooperation, to the extent of constructing a factory
alongside Whirlpool’s existing plant in Clyde, Ohio for the manufacturing of components to be
used by both companies based on F&P’s proprietary technology (Procurement Manager, F&P).
EJM
46,10

1314

Figure 2.
Current F&P Whitegoods
niche portfolio ( June 2006)
F&P have also continued to add to their niche portfolio and niche related capabilities Acquiring
via strategic purchases. Speed is one of the major motives here: market flexibility
Strategic purchases allowed the company to “use an established high end brand as a rapid
entry platform for F&P technology into new high end market (Senior Executive, F&P).
The most recent purchases include the American company “Dynamic Cooking
Systems” (DCS) in 2004. DCS is also a small quality driven niche producer of cookware 1315
within North America, whose capabilities are highly complementary to F&P’s own
aspirations within the market. This new US asset has been complemented by the
acquisition, in June 2006, of the Italian company “Elba”, whose parent company,
“Delonghi”, has divested it in order to concentrate on its core activities of heating and
air conditioning products. Elba has a very similar history and culture to F&P with a
limited capacity of 400,000 units annually, but Elba distribute this modest output via a
highly internationalised niche portfolio that includes over 54 countries, with a strong
presence in UK speciality niche markets:
F&P is now working to integrate the three operations by exchanging components,
complementary products and expertise between the three groups (Procurement Manager
F&P).
Elba sell under both their own and other brand names specialising in short
high-quality runs, and the CKD, (completely knocked down kit) market for niches that,
like F&P’s own original “home” niche, lie behind manufacturing trade barriers.

Concluding remarks
F&P was lucky to survive the implosion of its “home” niche, although it could be
argued that it made its own luck to a certain degree by having a second line of defence
in place to delay the process. However, its use of this breathing space, and its reaction
to its changed circumstances, has been impressive. F&P has not only survived, it has
prospered, and now stands as an established international niche player that is both
manufacturing and marketing in a number of significant developed markets (Hartley,
2006). Like all niche marketers it does not have the many of the strengths of its
mainstream competitors, yet it has leveraged two or three core competencies to create a
portfolio of niche positions that give it a degree of market flexibility that belies this
narrow set of competencies, and its restricted resources.
The acquisition of market flexibility by this diverse portfolio of niche positions has
endowed F&P with a degree of stability within its overall operations that gives it great
potential for survival, and for further growth, both of which make it an attractive
investment proposition. Therefore, while it seems that the F&P brand will almost
certainly survive and grow, whether the Company itself will survive as an independent
New Zealand owned and based corporate entity is rather more uncertain.
From a theoretical perspective, this discussion has two major implications. The first
is that with regard to strategic flexibility, the marketing discipline may well have
something to learn from the financial services and banking industries. Two insights
come from the portfolio philosophy that is so well established in these disciplines.
First, flexibility is a requirement that is dictated by turbulent environments. These
environments are, by their very nature, unpredictable, and as a result formal planning
for flexible response for a single investment/activity only works if the management
EJM happens to get it right. This may well not happen if the situation changes suddenly in
an unpredictable manner. Planning and investing in the wrong sort of flexibility within
46,10 a single investment/activity may make matters worse rather than better under such
circumstances.
Second, the portfolio approach also endows resilience, which is an under-researched
prerequisite of a reliable flexibility capability. In order to survive, the organisation has
1316 to be able to withstand the original shock of an adverse event for long enough for any
“flexible” response to it to take effect. Any organisation that over-invests in a single
resource is unlikely to have this initial resilience, and may well fail as a result. This
analogy can be taken beyond finance and into the engineering industry. A cutting tool
that is “dead hard” will cut better than any other – until it is subjected to an
unexpected impact – at which point, it will shatter. For this reason, all cutting tools are
hard, but all have a degree of softness/resilience built into them – a process known as
“tempering”. All business organisations should also have a degree of this “temper”
within them. Having a well-balanced portfolio of investments is a good way to acquire
it. Further research into how these portfolios can be systematically developed would be
most worthwhile.
The second implication is more relevant to the niche marketing literature than to the
flexibility planning research literature. Our reading during this research has led us to
draw the conclusion that most of the niche marketing literature assumes a static or
“slowly moving” target market. Research on planning to get into niches that have these
perceived characteristics appears to be well developed. We would suggest that these
niches may well develop faster than has been previously supposed, and that further
research on how to plan effectively to get out of a niche that is subject to rapid adverse
developments, would also be most worthwhile.

Note
1. The portfolio of niches developed since 1985 has been so extensive that the original company
Fisher & Paykel has been split into two separate companies (Davies, 2004). Fisher & Paykel
Appliance Holdings now manages the international portfolio relating to domestic appliance
engineering. The second company, Fisher & Paykel Healthcare, now covers the new range of
niches in medical engineering. Both portfolios were created by leveraging the core
competencies of the original whiteware single niche player. The case concentrates solely on
the portfolio developed by Fisher & Paykel Appliance Holdings Ltd.

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About the authors

Robert Hamlin has been a member of faculty at the Department of Marketing, University of
Otago, New Zealand, since 1992. Prior to this he trained and worked as an agricultural scientist,
and a consultant in the banking industry. His research and teaching interests include product
and brand management, low-involvement consumer behaviour, food marketing and the
application of the philosophy of science to marketing. Robert Hamlin is the corresponding author
and can be contacted at: rhamlin@business.otago.ac.nz
James Henry has been a member of faculty at the Department of Marketing, University of
Otago, New Zealand, since 1992. Prior to this he had a career in engineering and technical sales,
including a spell at Fisher & Paykel. His research and teaching interests include product and
brand management, pricing, sales, business to business marketing and channel management.
Ron Cuthbert is a member of faculty at the School of Agriculture, Business and Technology,
Olds College, Alberta, Canada. Ron has extensive experience in agribusiness research and
consulting, and is currently pursuing a PhD in the niche marketing of agricultural products.

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