Creating New Market Space

by W. Chan Kim and Renee Mauborgne

Most businesses concentrate on matching and beating their competitors, and their tactics tend
to converge on the same fundamental dimensions of competition as a consequence. Managers
should routinely look at them instead of looking at the agreed boundaries that define how we
operate. The author writes that this article will explain how businesses can systematically
seek value innovation by looking through conventionally defined market boundaries. It will
look at replacement markets, strategic groups, customer groups, complementary offers of
goods and services, an industry's functional-emotional orientation, and even time.

Home Depot has become a company worth $24 billion, generating more than 130,000 new
jobs in more than 660 stores. Salespeople rarely actively think about how clients make trade-
offs through replacement industries. The Quicken software from Intuit helps people to
coordinate, understand, and control their finances. Home Depot has turned the latent demand
for home improvement into actual demand by providing the benefits of both replacement
industries, the author says.

By looking around strategic groups within sectors, several businesses have sought fresh
market space. Ralph Lauren is the first design house in the U.S. to carry the brand worldwide
successfully. By offering quality at a price closer to the lower-end Cadillac and Lincoln,
Toyota's Lexus carved out a new space. Champion Enterprises merged all the housing
industry's most desirable elements and removed or decreased all else to build high-end
housing.

Competitors converge in most sectors on a shared idea of who the target client is. In fact,
however, there is a chain of "customers" who are involved directly or indirectly in the
purchasing decision. Challenging the traditional wisdom of an industry will contribute to the
discovery of new market space, writers claim. Companies may gain new insights into how to
redesign their value curves by looking through customer categories. "We're in a company that
doesn't need to be either-or," says Mike Bloomberg, Bloomberg 's founder.

Through zeroing in on supplements that distract from their product or service, companies
may generate new market space. In the United States, Borders and B&N have emerged as the
two biggest bookstore chains. The supermarkets are fitted with armchairs, reading tables, and
sofas to allow individuals to read books. They remain open until 11 at night, providing a
comfortable destination for a peaceful reading evening. The key is to identify when they
select a product or service, the total solution purchasers pursue.
When they question their industry's functional-emotional orientation, businesses also find
fresh market space. Consumers were won over by The Body Shop's emphasis on fresh
products and healthy living. Glamour and fashion, hopes and dreams are marketed by the
industry as often as it sells goods. Insurance, insurance, investment have depended heavily on
a broker-customer emotional bond. They are ready for change and could benefit from
improvements in the Body Shop design. Penguin Random House publishes the "Is the Body
Shop a Cosmetics Company?" graph, priced at $19.99.

All industries are subject to external factors that, over time, influence their companies.
Looking from the right viewpoint at these developments will unleash creativity that generates
fresh market space. In analysing patterns over time, three concepts are important. These
patterns have to be definitive for your organisation in order to form the foundation of a new
value curve. They must be irreversible, have a straightforward course, and they must be on an
irreversible, definitive course. The euro is evolving in a constant path as it replaces several
currencies in Europe. Enron 's business was focused on gas pipelines in the 1980s. Gas
market deregulation was on the horizon. Enron saw that deregulation would make a national
market possible where gas could be purchased where it was inexpensive. By looking at the
environment as it was and expecting a future that was impeded by sluggish data speeds and
incompatible networks, Cisco Systems generated a new market room in a similar manner.
More than 80 percent of all Internet traffic now flows through the products of Cisco, and its
margins are in the 60 percent range, says the source.

For the success and sustainability of even the world's largest businesses, market creation is
important. The Lexus accounted for approximately one third of Toyota's operating profit
within three years of its introduction in 1989. The Walkman was the biggest boost to the
sustainable growth of Sony and its reputation in the last 20 years. Profitable growth is not
sustainable in an overcrowded and demand-starved economy without creating markets.

Summary by:
Name: Syed Muhammad Mubashir Jafri
Registration ID: 20201-28216