Competitive Strategy Dont Play in the Middle of the Road

Being mainstream used to be a blessing for products. Now it is becoming a curse. Today, companies in most industries face slow-growing and fiercely competitive markets. Solid middle-of-the-road names like Olivetti and Holiday Inn are struggling against a lot of new competitors that strike from both above and below. Encircled by rivals offering either more luxurious goods or plain cheaper ones, companies with products in the middle are finding their market shares dwindling. They are striving to break away from the image of being 'just average'. 'Getting stuck in the middle is a terrible fate,' notes one advertising agency executive. '[You remain] a mass brand as the market splinters.'

Examples abound of products and services caught in the middle—adequate but not exciting— losing ground to more clearly positioned competitors at both the high and low ends. For example, swanky stores such as Timbcrland and budget outlets such as Aldi arc prospering, while bread-and-butter Argyll stores flounder. Haagen-Dazs, Ben & Jerry's and other 'super-premium' ice creams arc thriving - as are grocers' own bargain labels - while middle brands such as Crosse & Blackwel! are struggling. Travellers want either economy lodging at chains such as Travel Lodge or to sleep in the lap of luxury, leaving adequate but neither inexpensive nor plush hoteliers such as Novotel and Holiday Inn in the lurch. Thus brands in the 'murky middle' are facing increasing pressure from competitors at both ends of die spectrum. Notes the advertising executive: 'There's no future for products everyone likes a little.'

If a brand in the middle cannot sell on prestige, it has to compete on value. To make Sealtest stand out against own-brand ice creams, Kraft borrowed tactics from fancier brands. It recently added a layer of cellophane inside the carton. It also made the package's graphics cleaner and more modern. The idea is to keep die price about in the middle, but to come across as better value. Still, the product remains in that not-cheap, not-expensive limbo - a very tough sell.

An average image also haunts Sears in the United States, which has seen its middle-income customer defect either to discount outlets or to trendier speciality stores. It is scrambling to revitalize sales by stocking more national brands and running slicker, more stylish ads to project an image that's a step up from plain vanilla. Sears claims that this image-building programme has been successful, but consumer perceptions die hard. Sears has yet to establish a clear and distinctive position. As one image consultant suggests; 'Sears doesn't stand for anything consumers aspire to.'

For some, it finally gets to the point where the middle market is just not worth it. Marriott tried to string its Bob's Big Boy, Allic's and Wag's coffee shops into a single chain of casual restaurants. It was a vague niche that few consumers wanted. The restaurants were not as cheap or as appealing to children as fast food, nor could they please adults with an attractive dining-out atmosphere, Marriott ended up quitting the restaurant business. 'We were sandwiched in the middle,' a Marriott spokesman says.

In the hotel industry, where chains have spread rapidly, companies are trying to escape the middle by extending their reach to cover people needing smaller units or wanting higher-priced ones. Holiday Inn, which no longer has the casual family traveller all to itself, has added a more up-market Holiday Inns Crown Plaza.

Thus, to win in the marketplace, a company must gain competitive advantage by offering something that competitors do not. It might offer consumers the best price for a given level of quality or offer a differentiated product - one with unique features or higher quality for which consumers arc willing to pay a higher price. It might focus on serving the special needs of a specific market segment. Sadly, companies in the middle usually end up not being very good at anything. Some big losers finally have to seek protection from creditors in the bankruptcy courts. That

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12.3

happened to Germany's Klockner-Werkc, a high-cost, undersized steel and engineering group. The moral? Do not play in the murky middle of the road.

SOOT CBS: 'is efrere room for Volkswagen?^ The Economist ( (28 August 1993), p. 55; The Financiut Times -FT500 (10 February 199.3), arid portions adapted from Kathleen Deveny, 'Middle-price brands come under siege7, Wall Street Journal (2 April 1990), pp. Bl, B7.

and competing products obsolete. It is open to new ideas, relentlessly pursues new solutions, and works to reduce cycle times so that it can get new products to market quickly. It serves customers who want state-of-the-art products and services, regardless of the costs in terms of price or inconvenience. Examples include Nokia, Tefal and Nike.

Some companies successfully pursue more than one value discipline at the same time. For example. Federal Express excels at both operational excellence and customer intimacy in the US. However, such companies are rare - few firms can be the best at more than one of these disciplines. By trying to be good at all of the value disciplines, a company usually ends up being best at none.

Treacy and Wiersema have found that leading companies focus on and excel at a single value discipline, while meeting industry standards on the other two. They design their entire value delivery system to support singlc-mindedly the chosen discipline. For example, Benetton knows that customer intimacy and product leadership are important. Compared with other clothes shops, it offers good customer service and an excellent product assortment. Still, it offers less customer service and less depth in its product assortment than some other retailers do. Instead, it focuses obsessively on operational excellence - on reducing costs and streamlining its order-to-deli very process in order to make it convenient for customers to buy just the right products at the lowest prices.

Classifying competitive strategies as value disciplines is appealing. It defines marketing strategy in terms of the single-minded pursuit of delivering superior value to customers. It recognizes that management must align every aspect of the company with the chosen value discipline - from its culture, to its organization structure, to its operating and management systems and processes.

Competitive Moves

Businesses maintain their position in the marketplace by making competitive mows to attack competitors or defend themselves against competitive threats. These moves change with the role that firms play in the target market - that of leading, challenging, following or niching. Suppose that an industry contains the firms shown in Figure 12.3. Some 40 per cent of the market is in the hands of the market leader, the firm with the largest market share. Another 30 per cent is in the hands of a market challenger, a runner-up that is fighting hard to increase its market share. Another 20 per cent is in the hands of a market follower, another runner-up that wants to hold its share without rocking the boat. The remaining 10 per cent is in the hands of market nichers, firms that serve small segments not being pursued by other firms.

We now look at specific marketing strategies that are available to market leaders, challengers, followers and nichers. In the sections that follow, you should remember that the classifications of competitive positions often apply not to a market leader The,firm in an industry with the largest market share; it usually leads other firms in price changes, neve product introductions, distribution coverage and promotion spending.

market clialleuger A runner-up firm in an industry that infighting hard to increase its market shure.

market follower A runner-up firm in an industry that wants to hold its share without rocking the boat.

market nicher A firm in an industry that nerves small segments that the other firms overlook or ignore.

whole company, but only to its position in a specific; industry. For example, large and diversified companies sueh as P & G, Unilever, Nestle, Proeordia or Soeiete Generate de Belgique - or their individual businesses, divisions or produets I might be leaders in some markets and niehers in others. For example, Procter & Gambit leads in dishwashing and laundry detergents, disposable nappies and shampoo, but it is a challenger to Unilever in hand soaps. Companies' competitive strengths also vary geographically. Buying Alpo from Grand Metropolitan in 1994 made Nestle the challenger in the US pet-foods market behind Ralston Purina's 18 per cent share. However, in the submarket for US canned cat food, Nestle has a commanding 39 per cent share. By contrast, in the fragmented European petfoods market, Nestle Friskies languishes in fourth place behind Mars' Pedigree (47 per cent), Dalgety and Quaker. However, even wtth that low base, Nestle's Go Cat is Europe's top-selling dry cat food."

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