Market-scope strategy deals with the coverage of the market. A business unit may serve an entire market or concentrate on one or more of its parts. Three major alternatives in market-scope strategy are single-market strategy, multimarket strategy, and total-market strategy.
A variety of reasons may lead a company to concentrate its efforts on a single segment of a market. For example, in order to avoid confrontation with large competitors, a small company may find a unique niche in a market and devote its energies to serving this niche. Design and Manufacturing Corporation (D&M) is a classic example of a successful single-market strategy. In the late 1950s, Samuel Regenstrief studied the dishwasher market and found (a) high growth potential; (b) market domination by GE; and (c) absence of a manufacturer to supply large retailers, such as Sears, with their own private brand. These conclusions led him to enter the dishwasher market and to concentrate his efforts on a single segment: national retailers. The company has emerged as the largest producer of dishwashers in the world with over 25 percent of the U.S. market. A D&M executive describes the company's strategy in the following words: "Sam knew precisely what segment of the market he was going after; he hit it at exactly the right time; and he has set up a tightly run organization to take full advantage of these oppor-tunities."1
The story of Tampax also illustrates the success of the single-market strategy. Tampax had a minimal share of a market dominated by Kimberly-Clark's Kotex and Personal Product's Modess. Tampax (in 1997 Procter & Gamble purchased this business) could not afford to compete head-on with these major brands. To sell its different concept of sanitary protection—internal protection—the company found that newer, younger users were more open-minded and very brand loyal. Starting from a premise that had great appeal for the young user, that internal protection offers greater freedom of action, Tampax concentrated on reaching young women. Its single-market strategy has proved to be highly beneficial.2 Even today the company's advertising is scarcely distinguishable from the firm's first efforts.
In the competitive field of cosmetics, Noxell Corporation (a division of Procter & Gamble), marketer of the popular Noxzema and Cover Girl brands of makeup and skin cream, found success in a single segment of the $15-billion cosmetics industry that its rivals disdain: the mass market. Noxell's products are aimed primarily at teenagers and evoke the image of fresh-faced natural beauty. Widely distributed and heavily advertised, Noxell's brands are easily recognizable by their low price. Content to sell its products in chains such as Kmart and Wal-Mart, the company avoids more prestigious, but cutthroat, department and specialty store businesses. The determination to sell exclusively through mass merchandisers is based on Noxell's belief that distribution through department stores is unattractive: it requires leasing counter space, keeping large inventories on hand, and paying commissions to salespeople. Noxell's continued sales growth and healthy profit performance attest to the viability of concentrating on a single segment of the market.3
There is no magic formula for choosing a segment. A business should analyze the market carefully to find a segment that is currently being ignored or served inadequately. Then it should concentrate on the chosen segment wholeheartedly, despite initial difficulties, and avoid competition from the established firms.
New market segments often emerge as a result of changes in the environment. For example, the women's movement motivated Smith and Wesson Corp. to launch Lady Smith in 1989, a line of guns specifically designed for women. The result: sales to women jumped from 5 percent of the company's total to nearly 20 percent.4 Despite the cutthroat competition from mass merchandisers such as Toys "R" Us, FAO Schwartz continues to successfully operate by targeting upscale children.
The single-market strategy consists of seeking out a market segment that larger competitors consider too small, too risky, or just plain unappealing. The strategy will not work in areas where the market power of big companies is important in realizing economies of scale, as in the extractive and process industries, for example. Companies concentrating on a single market have the advantage of being able to make quick responses to market opportunities and threats through appropriate changes in policies. The single-market, or niche, strategy is often born of necessity. Lacking the resources to fight head-to-head battles across the board with larger entrenched competitors, winners typically seek out niches that are too small to interest the giants or that can be captured and protected by sheer perseverance and by serving customers surpassingly well.
As far as the impact of the single-market strategy is concerned, it affects profitability in a positive direction. When effort is concentrated on a single market, particularly when competition is minimal, it is feasible to keep costs down while prices are kept high, thus earning substantially higher profits. Although its growth objective may not be achieved when this strategy is followed, a company may be able to increase its market share if the chosen segment is large enough vis-à-vis the overall market.
Instead of limiting business to one segment and thus putting all its eggs in one basket, a company may opt to serve several distinct segments. To implement a multimarket strategy successfully, it is necessary to choose those segments with which the company feels most comfortable and in which the company is able to avoid confronting companies that serve the entire market. This point may be illustrated with reference to Crown Cork and Seal Company. The company is a major producer of metal cans, crowns (bottle caps), closures (screw caps and bottle lids), and filling machinery for beer and soft drink cans. The industry is characterized by a really dynamic environment: technological breakthroughs, new concepts of packaging, new materials, and threats of self-manufacture by large users are common. Crown Cork and Seal, as a matter of strategy, decided to concentrate on two segments: (a) cans for such "hard-to-hold" products as beer and soft drinks and (b) aerosol containers. Its new strategy paid off. The company outperformed its competitors both in sales growth and in return on sales in the 1980s and 1990s. As it should with any strategic choice, the company fully committed itself to its strategy despite the lure of serving other segments. For example, in spite of its 50 percent share in the motor oil can business, Crown Cork decided not to continue to compete aggressively in that market.5
The multimarket strategy can be executed in one of two ways: either by selling different products in different segments or by distributing the same product in a number of segments. Toyota Motor Corporation, for example, introduced its Lexus line of cars in 1989. The car was directed toward luxury car buyers who traditionally had looked to BMW and Mercedes-Benz. Toyota entered a different segment with a different product. In recent years, outdoor sports (e.g,. biking, backpacking, and hiking) have experienced terrific growth. Counting on the continued strength of this outdoor trend, Timex Corporation decided to introduce a line of rugged watches. The company decided to license Timberland Co., a well-established name in outdoor products, to sell its watches under the brand name Timberland. The company has introduced as many as 82 styles to keep the competitors at bay.6
In contrast, North Face, Inc., the leader in high-performance outdoor clothing, decided to broaden its market base by extending the business to the casual sportswear market. The company plans to increase the number of stores selling North Face after 2001 from 1,500 specialty stores up to 4,000 retailers, including such stores as Nordstrom and Footlocker.7
A company using the total-market strategy serves an entire spectrum of a market by selling different products directed toward different segments of the market. The strategy evolves over a great number of years of operation. A company may start with a single product. As the market grows and as different segments emerge, leading competitors may attempt to compete in all segments by employing different combinations of product, price, promotion, and distribution strategies. These dominant companies may also attempt to enter new segments as they emerge. As a matter of fact, the leading companies may themselves create new segments and try to control them from the outset.
A number of companies in different industries have followed this strategy. General Motors, for one, has traditionally directed its effort to securing an entire market: "A car for every pocket and taste." With its five auto lines (Chevrolet, Pontiac, Oldsmobile, Buick, and Cadillac), along with a variety of small trucks, the company attempts to compete in all conceivable segments.
IBM now also follows an across-the-board strategy. It has a system for meeting the requirements of all types of customers. In the mid-1980s, as the personal
Seeking Changes in Market Scope computer segment emerged, IBM was somewhat slow to respond but finally developed a personal computer of its own. Similarly, in the consumer products area, the Coca-Cola Company has Coca-Cola, Diet Coke, Tab, Sprite, Fresca, and Fanta to satisfy different drinking tastes. The company even has a brand of orange juice, Minute Maid, for the segment of consumers who drink juice rather than carbonated beverages.
The total-market strategy is highly risky. For this reason, only a very small number of companies in an industry may follow it. Embracing an entire market requires top management commitment. In addition, a company needs ample resources to implement it. Finally, only companies in a strong financial position may find this strategy attractive. As a matter of fact, a deteriorating financial position may force a company to move backward from an across-the-board market strategy. Chrysler Corporation's financial woes in the 1990s led it to reduce the scope of its markets overseas at a time when experts were anticipating the emergence of a single global market. The total-market strategy can be highly rewarding in terms of achieving growth and market share, but it may or may not lead to increased profitability.
There are only limited periods during which the fit between the key requirements of a market and the particular competencies of a firm competing in that market is at an optimum. Companies should not, therefore, tie themselves to a particular market strategy permanently. Environmental shifts may necessitate a change in perspective from one period to another. Consider the American Express credit card. At one time, it had potent snob appeal meant for upscale customers. But as competition in the credit card business intensified, many American Express card holders exchanged their cards for others that required no annual fee and provided revolving credit at modest interest rates. This forced American Express to redefine its market. In 1994, it began offering a number of new cards, each one targeted at a different segment of the consumer market. Some cards bore the exclusive imprimatur of AmEx with annual fee waived, others shared billing with other companies that offered a range of enticements, such as frequent-flier miles and car discounts. All offered revolving credit at competitive rates. Where business travelers were once AmEx's preferred clientele, every creditworthy American was now being wooed. Similarly, Gerber Products long dominated the U.S. baby food market, but declining birth rates forced it to seek growth elsewhere. The company has been planning to introduce foods for older people. In the mid-1990s as microbrewers became popular, the industry leaders, Anheuser and Miller, decided to introduce their own specialty beers with the mystique of the micros. For example Anheuser-Busch added Redhook Ale, Red Wolf, Elk Mountain, and Crossroads; Miller offered Red Dog, Icehouse, and Celis; and Coors came out with Sandlot and George Killian. They did so since future industry growth is dependent on specialty beers. While the U.S. beer industry continues to stagnate, the specialty beers have been growing over 40% annually.8
The J.C. Penney Company, after 75 years of being identified as a retailer of private-label soft goods to price-conscious customers, decided in the 1980s to change the scope of its market. The company transformed itself so that it occupied a position between a traditional department store and a discount store (something along the lines of a moderately priced department store with emphasis on higher-priced fashion) in hard goods, housewares, and especially apparel. The company continues to upgrade and has successfully been able to attract more upscale customers.
Disney's emphasis on the 5- to 13-year-old age market has been a phenomenon in itself. During the 1960s, this segment continued to grow, providing the company with opportunities for expansion. In the 1970s, however, this segment shrank; it declined further in the 1980s, leading the company to change its strategic perspectives. It began serving the over-25 age group by making changes in its current offerings and by undertaking new projects: Epcot Center, Disney MGM Studios theme park, and a water park are all attached to Disney World in Florida.9 Briefly, then, markets are moving targets, and a company's strategic perspectives must change accordingly.
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