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2004 8: 115Vision: The Journal of Business PerspectiveS. K. Graver

Product Market Competence: The New Paradigm

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VISION: The Journal of Business Perspective, January- June, 2004, pp. 115-128

Product Market Competence:The New Paradigm

S. K. Grover*

Product is at the core of any business activity. Product is a basis for satisfying the customer needsand wants. However, strategic product decisions extend beyond the customer needs and wants;they affect the way of competing and help define the business. Most Indian firms are multi-productfirms as a matter of competitive survival. The other two dimensions-the customer needs and wants,and the business definition - provide useful links to enhance such competitive dimension. Theproduct life cycle through product rejuvenation or withdrawal might mean continual life to reapcompetitive benefits, or might result in demise ofproducts. The present article attempts to determinecompetitive options - whether to find new market, new product and new competence, or to improveproducts packaging/design/positioning in the existing market, with existing product or existingcompetence. The combination of the two extremes brings us closer to a new paradigm forformulating, evaluating and deploying product strategies.

A product is defined as a bundle of utilities includingproduct features and accompanying services. The productdefinition has dimensions going beyond natural meaning the meaning of company's business domain and thecompetitors'. Further, product dimensions reflect upon thefirm's competitive advantages and its ability to differentiateitself from other firms in the market. Thus we see a linkbetween product (business domain and competitors) andmarket (customer needs), which is called the productmarket domain.

Customer needs are the basis for developing the productoffer. Product decisions are important because a strategicmarketer understands customer need-stated, real, unstated,delight and secret2 or existing, latent and incipient". Sincethe marketer provides appropriate satisfier in the form of aproduct to the customer, identifying a product- market inwhich a company has an offering defines both its customeroriented purpose(s) and the competition that affects theachievement of marketing goals. The former is achievedby providing satisfier of the customer needs being servedand the latter by identifying competitors for serving eachneed'. It is important that the identified product- marketdomain must send its intended customer delivered value.Customer-felt value becomes the basis for customer-needsatisfaction. Since competitive advantage has basis in thedelivery of superior customer-felt values, the role of productand value-added services become more important. Forexample, a company's software is becoming a critical source

*Reader, SBS (E) College, New Delhi.

of competitive advantaqes, However, there is no commonmeaning of the term competitive advantage - "distinctivecompetence" or "provision of superior customervalue", Thispositional and performance superiority could be due torelative superiority in the skills, resources and knowledgethat a business unit has, how it deploys them and the timingof such deployment. Resources and competencies of theorganisation make up its strategic capability7.

Thus, the product strategy can be a source of competitivesuperiority of a business unit. Therefore, the productmarket should be carefully selected with the specificcompetitive superiority and the underlying competencecapability paradigm.

BASIS FOR STRATEGIC CAPABILITY: THECOMPETENCE DIMENSION

Capabilities are operational skills, growth-enabling skillsand special relationships", They can be turned intosustainable competitive advantage by a market-orientedorqanlsatton". The attainment of competitive advantagecan lead to strategic capability, superior delivery ofcustomer value, and resultant better performance bystrategic business unit1°.ln addition, Day11 has referred tothree elements of a market-relating capability(relationship) orientation, knowledge and skills, andintegration and alignment of processes. The three elements



Product Market Competence : The New Paradigm

interact and reinforce each other, and separately constitutepart of sustainable competitive advantage (SeA). Thefarther they move along each vector, the closer they areto the capabilities that are needed for collaborativepartnering and the resultant customer value delivery. Thisis important as the move (collaborative partnering),comparable to competitor, makes the business unit betterthan its rivals, resulting into sustainable competitiveadvantage, having core capabilities at the base.

The capabilities, through product-competence-marketroute, become basis for any competitive edgel superiorperformance by the business unit. Kotter and Heskett12

suggest that core capabilities (distinctive and hard toimitate capabilities) should be, along with strategic vision,deciding the scope of strategy. Nevertheless, strategyshould not merely be dependent on portfolio of productsand markets. Thus, product-market dimension is notenough to decide about SCA,rathercompetence (includingresources) is a starting point for attaining SeA. Long andKoch13 suggest the equation for attaining core capabilities(core competence + strategic processes) and point outthe attending direction as: competence -> corecompetence -> strategic process -> core capabilities > SCA. Since a business takes presumptionslassumptions about core competencies, environment andmission to see its fit with each of the component, it musttest assumptions constantly and convey the changeswithin the orqanisatlon". Further, Long and Koch dividethe capabitities". Threshold and core capabilities'.Threshold capabilities are necessary to be in business services to support internal customers, and skills andsystems that are conditions for doing business in thespecific industry. However, they do not afford differentiatingedge that is provided by core capabilities. Core capabilitiesare critical core capabilities (providing today's competitiveadvantage), and cutting- edge core capabilities that willprovide tomorrow's competitive advantage. They help SBUto create itscompetitivevalue chain. Inaddition,a capabilitybased organisation seeks to create maximum customerfelt value by developing as broad array of products andservices as possible from the core capabilities developedover time".

Overall, the SBU must ensure that its competitive edgeemanates from its core capabilities (product-marketcompetence linkages) and the obtained competitiveadvantage must remain sustainable over time.

DEVELOPING PRODUCT STRATEGIES:THE FRAMEWORK

Product strategies can be enlisted in a variety of ways.One such classification of product strategies was submittedby Jain - product positioning, product repositioning, productoverlap, product scope, product design, productelimination, new product and product dlverslfication".However, this strategic product classification does not holdmuch of ground. When matched against the level ofmarketing and for their impact on competition, the answerto the product strategies fall more on existing! new productsort of classification with SBU and corporate dominancelevels, ignoring explicitly the competence dimension forformulation of product strategies. Further, of various typesof customer needs, existing need has been mostlyfocussed in Jain's framework. Other needs are coveredalmost indirectly or stated very rarely in the saidclassification.

Thus, the concentration in Jain's classification frameworkis on the product strategies for existing or new productsonly, although the specific product strategies might notrest exclusively on one of the business competitivedimension. For example, a product-design strategy mightresult in increased market share. However, the increasedmarket share could be result of better. competitivestrategies adopted by the business units. Further, the newproduct strategy might result in gain of market share withexisting competence in new markets (through productimprovement) or new competence in existing market(through product rejuvenation),

The Ansoff Matrix

The products offered by a business unit constitute productportfolio - having different product lines and product itemscalled the product-mix. Product portfolio of a strategicbusiness unit is the starting point for understanding productstrategies. The existing products of a business unit canbe subject matter of strategic attention for respondingdifferently to the existing markets via market penetrationstrategy and new market via market development strategy,as seen in Figure 1.

To understand strategies for existing! new products, theAnsoff Matrix can be expanded to reflect Jain'sclassification, as can be observed in Figure 2. The product

116 VISION: The Journal of Business Perspective, January - June, 2004



Grover

- ProductDesign Strategy

-NewProduct Strategy

- ProductOverlap Strategy

• MarketPenetration Strategy

• ProductElimination Strategy

- Product

NewScope Strategy

- ProductMarkets-- Diversification

Strategy

ExistinMarkets

ExistinMarkets

NewMarkets

NewProducts

ExistingProducts

Figure 2 : The Expanded Ansoff Matrix

The new product options (in Figure 3) include 'with newcompetencies' and 'beyond current expectations' asadditional dimensions. But for existing products, noninclusionof the term 'with new competencies' and 'beyondcurrent expectations' is deliberate on their part - pointingto the non-relevance of new competence for existingmarkets. It is believed that the expressing of 'competence'as altogether new dimension in the product- market matrixcan mark new thinking for strategic product analysis. For

Consequently, the competitive capability and resultantcompetitive advantages are greatly ignored. Thisweakness in the product-market matrix is partiallycompensated by Johnson and Scholes who expresslyinclude competence into the product-market matrix, (seeFigure 3).

MarketDevelopmentStrategy

Existing ProductMarkets--Development

Strategy

Nevv DiversificationMarketSStrategy

NevvMarkets

NevvProducts

ExistingProducts

Figure 1 : The Ansoff Matrix

Existlnq__MarketMarkets Penetration

Strategy'

The Partial Competence Dimension

There are problems in Jain's classification as the productmarket criterion explaining every aspect of the basis forcapability development. For example, the Figure 2 doesnot include competence (which for our purposes includesresources, skills and know-how) as dimension that canseriously affect the root to product-market matrix.

positioning, repositioning and value marketing strategiesare not included as they impact the whole gamut ofsegmentation and targeting strategies, and not restrictedentirely to the product strategies. It is important to notethat the expanded Ansoff Matrix calls for choosingappropriate product strategies by moving along existing(products-markets), and new products-markets, todiversifying in entirely new products and markets.

VISION: The Journal of Business Perspective, January- June, 2004 117




PRODUCT DEVELOPMENT• On existing competencies• With new competencies• Beyond Current Expectations

MARKET DEVELOPMENT• New Segments• New Territories• New Uses• With new competencies• Beyond current Expectations

DIVERSIFICATIONNevi • On existing competenciesMarketS- • With new competencies

• Beyond Current Expectations

Existing---I

Markets

Nevv -Markets

NeviProducts

ExistingProducts

PROTECT I BUILDExisting~_.... • ConsolidatinMarkets • Market Penetration

Figure 3 : The Directions for Strategic Product Development

example, product improvement strategy relates to a casewhere new product is being offered in the new market butwith existing competence. Alternatively, productrejuvenation strategy in existing product-market requiresnew competence (discussed in the text of the article).

There is therefore a case when a business unit might enternew markets without acquiring new competence, like HLLgoing for 'Annapurna' salt with competence being alreadyacquired from selling soaps. Similarly, the missinq'competence' dimension might suggest that the existingproductcould be withdrawn from a market and rejuvenatedor new product (alternative technologies) could belaunched in the grab of old brand name without

'competence' being the point at centre stage. However,the reality is different. For example, Maruti 800 had to betemporarily withdrawn from existing market because ofSupreme Court orders. To continue to offer Euro Icompliant cars, Maruti Udyog Limited did not have therequiredcompetence like MPFI technology, trained workerto fit such kits, etc. The existing but modified productoffering requiring new competence continues to be thewinning car even when the company has withdrawn fifthgear feature.

Thus, a shrewd competitor must keep an eye on thechanging nature of competence requirements (and corecapabilities)to remain in competition. The strategic product

118 VISION : The Journal of Business Perspective, January - June, 2004



Grover

ExistingMarkets (E3)

NewMarkets (E2)

ExistingCompetence

NeviCompetence

ExistingMarkets (E1)

Market consolidation strategy requires deeper focus oncompetencies. Installation of new capacities along withsales promotion measures, etc. can be used for gainingcompetitive advantage. The only condition is that salesgrowth must be more than the industry is able to meet, asis happening in PC industry. If there is static marketopportunity, it becomes difficult to penetrate into theexisting market with existing products-competencies. Toaccomplish this, strategic marketers have to resort to costcutting measures, for example.

NevvMarkets (E4)

Figure 4 : Alternative Strategies forEXisting Products

performance, space and economy. The objective of suchstrategies is to increase overall market share for thebusiness unit and thereby increase profitability.

decisions are for the existing products and the newproducts, in conjunction with the third dimension competence. The following discussion is in the order alternative strategies for existing products and newproducts.

ALTERNATIVE STRATEGIES FOR EXISTINGPRODUCTS

A strategic business unit might protect and hold its currentmarket position within the parameters set by existingcompetencies. Strategic marketers can penetrate andconsolidate existing market by sustaining the product offer,by holding the quality, features, size, etc., of the currentproduct by adopting appropriate sales promotiontechniques; and by encouraging brand switching oradvertisement appeals directed at non-users.

The internal analysis of any business unit typically bringscompetence dimension to the tore", Core compete~ce

for balancingwith strategic 3Cs19 in turn, calls for assessingthe capabilities of the business unit20 to deliver superiorcustomer-felt value. Moreover, this superior customer-feltvalue can be deliveredby developing strategies for existingproductswithcompetence-marketdimension (see Figure4).

Existing Product-Existing Competence: ExistingMarket [EI][Market Penetration Strategyl Market ConsolidationStrategy(Sales promotion, brand switching, targetingnon-customers)

For example, bank customer can be persuaded to useInternet for their banking needs. Similarly, WagonR (a multiactivity vehicle) advertised its car to encourage brandswitching by challenging the prospective customer tocompare the overall drive performance of WagonR,Hyundai Santro, and Daewoo Matiz. Matiz has since beenwithdrawn from market from August 2002. Further, tocomplete the brand switching sequence, Maruti Suzuki.announced sales promotions - attractive gift hampers forparticipants, exciting fun-filled games and free T-shittsfor kids, and a free pollutioncheck-up for their existingvehicles.

Similarly, Tata Indica competitively targeted existinglpotential customers by encouraging brand SWitching withslogan like "more car per car" - more because of

In a growing market, market consolidation becomesdifficult if the firm shows complacency. The smallcompetitors may follow the firms' response to enter themarket and catch-up market share, thereby displacing the





market leader, as happened for Gits". The firm mistookthe markets' rapid growth (since its inception till 1980s)as belonging to them (not competitors) and becamecomplacent. Soon the firm realised that the market wasno longer skewed in their favour - the market for instantsoup mixes had seen regional competitors as Tarla Dalal,Bambino, EtMi, etc. In the meantime. Nestle establishedand invaded Gits' existing but growing market. Thecompany missed consolidation strategy as· the marketsituation changed and new entrants showed theirpresence. The Gits did almost nothing to scan marketchanges and find a fit between competition, customer andcompany. The company did not review, build, or dominateand consolidate its competitive position.

Existing Product-Existing Competence: New Market[E2][Market Development Strategy(segment! geographic! distribution expansion)]

Sometimes existing product-competence could be usefulin new markets through market development efforts segment expansion, geographic expansion and distributionexpansion. For example, IBM's manufacturing and sale ofcomputers to industrialmarkets could be expanded for homesegment. To sell IBM through direct marketing, it appointedauthorised agents and expanded distribution network. Acompany can also develop market by increasing the sizeof served (geographic) market from four metros - Delhi,Mumbai, Kolkata and Chennai - to the whole of India andother Asian countries and continents. Similarly,VSNL issuedadvertisements for expanding its market by offering fiveplans with extensive price cuts and free access at nightsand on Sundays, while DishnetDSL offered one-hour freeaccess to women and children, setting the trend for freeInternet access in near future,The advent of Internet has meant distribution expansionfor package products (where digitalisation is possible) likebanking operations, railway and airline ticketing, software,music, books, etc. The distribution of digital products couldbe by direct channels. This push to direct marketing hasopened-up tremendous opportunities for small-scalebusinesses since it is a cost-effective method ofconducting business activity. The Internet helps in placingthe product offer at relevant targets, though profits are notreportedly earned bye-business companies.

Existing Product-New Competence: Existing Market[E3][Product Withdrawal Strategy/Product Rejwenation Strategy(new brand/ logo/ packaging! new sizes! repositioning)]

The existing competencies through market penetration,consolidation or development strategies might be stretchedin existing markets to protect or build on the strategicmarketer'scurrent competitiveposition.However, the existingcompetencies might not possibly be further stretched, asthere could be barriers - the product scope strategy (productmix for existing product lines) might change, as the businessmission does not cover such change in the product scope.Further,there might be need for new competence to continuewnh the existing product offer.

Under the circumstances, the marketer must consolidateand rejuvenate the existing market with the newcompetencies provided the business unit has! can developthe new competence that is required for further developingthe existing product. The new competence could be - tobring out new package, package sizes, new logo, brandrepositioning, brand extension, etc. Overall, existingcapability deployment pattern might be reviewed to decideabout priorities - to acquire new competence and rejuvenateor to withdraw22. For example, Proctor and Gamble, U.S.A.,slashed the number of items sold to almost half in haircare (although fewer shapes, sizes, and packages meanless choice for consumers) - the market share and overallsales grew by nearty five points to 36.5% over the pastfive years23 • The company withdrew products, as thecurrent choice (competence) was no longer required forthe delivery of superior customer value. In effect, companywas able to redeploy the spared resources and skills inother strategic business units. Recently, the Indiancounterpart decided to withdraw its operations from therural market to the urban market.

Product rejuvenation concerns the existing product withnew brand/iogol packaging, new sizes and repositioning.The essence of product rejuvenation is to market theproduct without interference from R&D. If R&D is required,it is product improvement strategy (N2) or new productdevelopment strategy (N3). Rejuvenation is to restoreyouthful appearance and is 'product renaissance', acreative redesign of existing products>.

A variety of environmental and operational reasons - achange in the consumer preference that entails promisingopportunities or a mistake detected in the originalpositioning of the product - call for rejuvenating the product.Included are conditions when product positioning is nextto competitor's brand and the business unit does not havecompetence to withstand the competitive waves (forexample, local brands pitted against HLU P&G or Coke/Pepsi).




The role of rejuvenation strategy becomes relevant whenthe product (firm being without new competence requiredfor marketing) looses its relevance in the present businessunit environment. Thus, rejuvenation is a condition.Rejuvenation can change the course of product sales withadded vigour. Rejuvenation strategies, compared to productimprovement strategies or new product developmentstrategies are relatively cheaper, easier and quicker forcreating profits and sustaining market share.

For example, Videocon was in the television and audiovisual market. With the advent of multimedia (convergenceof image, sound, text, and data), inclusion of computertechnologies into their product scope was obvious. Toovercome the change in product scope for the existingmarket, the company is slowly withdrawing from TVmarket, and has moved into personal computer market,introduced its first PC-TV to gain and maintain competitiveposition in the original television and audio-visual market.The company consolidated its position (rejuvenated itsexisting product TV to PC-TV) in the existing market byacquiring new competence and by combining technologiesas well.

Earlier Rasna fruit drink concentrate was targeted atmothers (being the decision-makers). Later Rasnaadvertised to include child (influencer). This meant thatRasna identified the real targets when children wereincluded into the appeal. The product was repositionedaccordingly.

Berenson and Mohr-Jackson25• (1994) have listed five stepsfor knowing the need for product rejuvenation and theopportunity lying underneath. First, supply chain problemor limited customer-delivered value could be the reasonsfor the product's abandonment or decline. Second, whethera rejuvenation strategy can be appropriate in the macroeconomic environment. Third, examine what the productname communicates to the customers. Fourth, explorepotential competitive segments to be reached. Finally,examine the probable value-creation for customers.

Once a firm senses the slow/ declining sales, the dyingproduct can be rejuvenated by adopting appropriaterejuvenation strategies. For it to happen, strategic marketerneed to look into characteristics of the product-market,present market penetration, present channels used andpresent demand patterns. Here comes the role ofinvestigation and market research.

Grover

Strategically, brand revltalisation is an acceptable andmostly feasible alternative for implementing productstrategies. A brand is an important dimension of productstrategy. The brand revitalisation means enhanced equityinvolving improved recognition, enhanced perceivedquality, changed association and expanded customer ease,and/ or increased loyalty26. Revitalisation of a brand issubstantially less costly and less risky than introducing anew brand. There are several brand revitalisation strategies;increasing usage; finding new uses; entering new markets;repositioning the brand; augmenting the product/service;obsolete existing products; and extending the brand.

Britannia rejuvenated its brands by revitalising its logodesign, colour scheme and its title 'Eat Healthy, ThinkBetter'. Similarly, Videocon rejuvenated its brand logo byadding two 'E's - 'from Electronics to Energy. The otherbrand rejuvenationattempts are by Coca-Cola Co. and PepsiCo. through change in logo design and colour schemes.

The product strategy through an appropriate rejuvenationstrategy must rest on the sustainable competitive advantagefor the business unit. However, if the industry is unattractive(stable and mature market but declining in growth, forexample), the strategic business unit must consider aselective withdrawal and rejuvenation strategy.

Existing Product-New Competence: New Market[E4][(Emerging New Opportunities (start afresh)]

The selective rejuvenation strategy might backfire as thecustomer perceived it to be a new offering from existingbusiness unit. The product rejuvenation (though requiredprovision of new competence in the existing market) mightresult into failure of product as new packages, sizes andrepositioning might mean change of market segment. Forexample, change of package by Gits was a success.Nevertheless, change of ad appeal (i.e., repositioning) byOnida (from danger devil to humorous depiction) meantfailure of Onida TV. Similarly, market development throughtapping of the unserved market, expanded geographic ordistribution channels, might mean too much stretching therole of existing competencies in the new marketconditions. For example, when IBM, a mainframe computercompany extended its operations to cover home segment,it had to reconsider the home requirements of productsuitability and durability. The standards for home segmentmight not be more stringent than for industry segment. To





start selling the personal computers was not easy. Thecustomer perceived the a mainframe computer companynot fit for selling personal computers, a perceptual problemof company- product fit. As a result, the lack of specificcompetence required to sell a computer to home segmentpushed the company image too far away. Customer dtdnot respond to such offers. Thus, business unit must havenew competence to respond to new market needs.

The requirement of new competence in the new market islikely to be more complex and challenging than operationof existing competence in new market (E2) and newcompetence in existing market (E3). The complexity andchallenge caused by new market-new competencerequirement leads to emerging new opportunities providedthe strategic business unit is ready to start afresh - reevaluate the role of new competence in new market. Forexample, customers did not expect Tata (a company knownfor selling commercial vehicles and trucks) to sell passengercars, and Tata Indica Car could not take-off in the very.beginning even though Tatawas selling Tata Estate,a salooncar at that point of time. Similarly, the advent of Internetand e-business has opened-up new opportunities for existingproducts as well as created new' opportunities for courierltransport companies to respond to the new competitiveenvironment in real time. Here, the marketer needs todevelop new competence - less responding time (skills),quicker Internet access instruments in place, entered andcomputerised transactions (resources), back office and largefleet of vehicles..

Take another example from banking industry. Banking cango on-line, and share transactions - purchase! sale, transferand dividend warrant among others - can take place online.Moreover, brsmess can commit product delivery morepromptly and counter growing competition on themarketplace and market space. With the Internet boom,every business - whether software providers, ISPs, ASPs,mobile operators, telecom giants or networking companies- seems to be jumping into the WAP, an emerging standardfor delivery of products (information and services) onhandheld wireless devices like mobile phones, pagers, palmtops and digital diaries. However; the new but basiccompetence for WAP is the wireless communicationnetwork, particularly developing WAP gateways.

ALTERNATIVE STRATEGIES FOR NEWPRODUCTS

New product strategies are vital to the continual survivaland growth of a business unit. The competence required

is continuous tracking of customer needs and theconsequent product offer. The new product becomesimportant once existing product, if any, becomes unfit inthe customer need-set. Alternatively, existing product isclose to maturity stage in PLC. In such a situation, thereare two options - product withdrawal or productrejuvenation. In marketing, the term 'new' product includesnot only new-to-the- world products (inventions) but alsothose products that might not strictly be inventlon" butcalled innovation or improvement. The new-to-the-worldproducts require good amount of efforts, money and arerisky (affect profits, market share, customer response,and so on) for the want of tested customer acceptance.The required competence might be rarely available for suchnew products. However, the term 'new' includes anyproduct that customer perceives to be as such.

The new product strategies range from product life-cyclestrategies to product improvement through concentric,horizontal and conglomerate diversification strategies including new product with emphasis on alternativetechnologies. Thus, the competence development is arelative term that may mean usagel stretch of existingcompetence or the development of new one. Figure 5explores the strategic options for new products.

New Product-Existing Competence: Existing Marlcet[N1l(Product life-cycle strategies)

Portfolio of products of a business unit are classified bythe maturity levels of its industry (business definition),and by the stage they are in. Further, life-eycle may be ofdifferent types: demand life cycle, demand-technology lifecycles, and brand life cycle28. Apart from the three lifecycles, the fourth is product life cycle. Product life-cycleis presented as cumulating of sales figures for differentbrands, from the new product introduction stage throughgrowth, maturity and decline stage until the product isfinally withdrawn or rejuvenated29 •

A strategic business unit formulates its marketingstrategies by taking into account life cycle of productsthey offerl intend to offer. During the life-cycle, a productcan be introduced as new for the first time, even if it mighthave been rejuvenated during its lifetime. The new productsmight be in the form of newproduct lines through aetivitieSIprocesses that supplement SBU's existing! establishedproduct lines by change in package sizes, flavours, etc.or bring additions to the existing product lines.




Grover

Development of new products (N3) mostly requiresseparate budgeted provision that considerably overloadsthe business - its resources - and put consnamts" in manyways. However, product improvement, strategy in the firstplace does not mean tide over the money and timeconstraints, and above all, it is less risky with leastrequirements for new competencies. Moreover, theprocess of product improvement is quick and easy andleads to timely bringing out of the new-look products,ensures ready market and acceptancel adoption of suchnew product. In all, existing product line is a foundationfor product improvement strategy. To ensure that thestrategic move is correct, the steps needed are :

Maruti revitalised most of models by fitting catalyticconverter in April 1996. It took next 3-years when .theSupreme Court compulsorily introduced Euro-I norms. Thecompany used product improvement strategy. Thus, achange in the existing product can be through new productdevelopment (N3), but also by changing existing productattributes to reformulate new quality levels/ new flavourslnew versions to enhance product performance calledproduct improvement strategy. Nevertheless, itsimplementation calls for repositioning of products fortargeting new market! segments, or else it might affectperceived value of the existing products. Usage of 'a newor different ingredient' is product improvement like low saltfood for high blood pressure patients. Moreover, afterproduct improvement, the existing product is oftenmarketed as 'new'. Thus, product improvement calls forphysically and effectively touching the inner core (soul) ofthe product under R&D scanner. Product improvementmight be necessary because of slipping profits, decline inmarket share, changing customer needs or absence of achange in product compared to competitors' offer.

ExistingMarkets (N3)

NevvMarkets (N2)

NevvCompetence

ExistingCompetence

ExistingMarkets (N1)

NewMarkets (N4)

Figure 5 : Alternative Strategies for New Products

In general, the PLC analysis studies competitive position- number of competitor might be from none, few, growingto many, stable number to declining number of competitors;and competitive position could be dominant, strong,favourable, tenable, weak or non-viable"

Whenever there is minor change, the newness of productsmay violate law of patents, trademarks, etc. Alternatively,the use of the term 'new' for such products might not beethical. Given the orientation, the discussion might becomecomprehensive (beyond the scope of the present work) tostudy of the Trade and Merchandise Act, 1958, the PatentAct 1970, the MRTPAct, 1969, orthe Consumer ProtectionAct, 1986, etc.

New Product-Existinig Competence: New Market [N2][Concentric Diversification Strategy/ ProductImprovement Strategy(Reformulation new quality levels, versions, flavouring)]

1. Finding existing product features, segments served,and positioning,

2. Tracking specific changes in the environment,Customers, competition, etc,

3. Causes of sales reversal; existing competencies ofthe strategic business unit,

4. Whether it can be 'stretched' for improving the existingproduct,

5. New potential targets identified,

6. In addition, in all, the customer value can be enhancedwith the deployment of product improvement strategy.





Here are some examples where the product improvementstrategy has given new lease of life to the old! dyingproducts.

1. To reverse almost to its initial levels of the maturity ofthe product, soap and detergent manufacturers useadded bleaches and whiteness to their existingproducts.

2. Toothpaste manufacturers have changed theprotective compounds and claimed new life to theirold products.

3. Multimedia into the personal computers has made itmandatory for manufacturers of TV, audio-visual,communication devices etc., to adopt convergencetechnologies - data, text, image and sound. Theoutcome is in the form of bigger and better digitaltelevisions; PC with multimedia as basic equipment;andcellcam.

4. Lissome Cosmetics rolled out a range of Mattei finishlipsticks and nail enamels that are reformulated withingredients that make them transfer- resistantand theycontain emollient, which help then retain moisture ofthe lips. Further, the nail enamels are enriched withresins to make them chip- resistant.

When new product bears ~ close relationship with theexisting competencies (marketing or technology) andcreates synergestic effect, it is a case of concentricdiversification. The diversification must add to customervalue. The new group of customers are the basis fordeploying firm's existing competencies, Hindustan LeversLimited's move into salt (Annapurna) is this type ofdiversification - salt has process linkages with soaps asone of the important ingredient. Moreover, the marketingof salt is synergestic as salt is like soaps, an FMCGcategory product and can be distributed through samechannels.

New Product-New Competence: Existing Marlcet [N3][{Horizontal Diversification Strategyl New ProductDevelopment Strategy (alternative technologies)]

Generally, new product is offered in new markets.Nevertheless, new product can also serve the existingmarket provided it related to the served market. Existingcustomers can be targeted with new product through newproduct development (NPD) (with alternative technology)or through horizontal diversification (unrelatedtechnology).It is important to capture distinction between product

improvement and new product development (alternativetechnologies) strategies. Under both strategies, R&Dscanner is required. However, major distinction is whetherthe competence required is already present or newcompetencies are necessary. The former is better knownas product improvement strategy while the later can belabelled as new product development strategy (alternativetechnologies) .

If a new product is launched in new market with newcompetencies, the product-market for such new productshas to be searched afresh. The new product (alternativetechnology) tag ensures that the product is not entirelynew to the market. The existing market becomes thelaunching pad for the new product Thus, the new product(alternative technology) ensures same! better level ofprofitability and market share.

Largely, new product development (NPD)' requiresdeployment of new competencies. Hence, NPD withalternative technologies, in terms of cost and risk, is thirdbesF strategy after brand! product rejuvenation strategyand product improvement strategy. For example, Maruti800 was not Bharat-I (equivalent ofEuro-l) compliant car.Today, Maruti 800 has car engine with MPFI technology,12-valves, and 5-gears compared to old engine that wascarburettor-mounted, with 8-valves and 4-gears. The MPFItechnology had to be learned to acquire the newcompetence. Thus, the company launched new productto retain and maintain the market share, brand positioning,etc. In all, the brand'name and current customer loyalty isretained, and the competitor is not made proactive.Incidentally, the new technology car has not been claimedas much. It is referred for as an improved version of Maruti800 for meeting legal requirements. Thus, the new productcan sustain in the old existing market when alternativetechnology (new competence) is the basis. Similarly, book,industry is aligning with the .electronic technology andproviding compact discs as an alternativel supplementaryform of presentation.

While new product (alternative technologies) must appealits existing customer, the new product offered might betechnologically unrelated to the existing product. Thehorizontal diversification strategy is useful when there isevidence of existence of unexploited scale economies inthe area of promotion and distributionso that the acquisitivenew competence can be offset by better utilisation ofavailable inter-relationships with marketing. For example,Maruti Udyog Limited not only produces passenger andcommercial cars, it has started Seconds Cars service and




car finance company. Similarly, some of the Indian Oil petrolpumps offering diesel and petrol, have been selling productsnotseen earlier- checking pollutionlevelsand tyre pressures;vehicle repairs and maintenance; phone and conveniencefacilities; and offering grocery and food items.

Horizontal diversification strategy is highly useful incompetitive situations where existing synergies in thevarious businesses are not properly established andaxploited'". This can be done by reduction in cost toenhance competitive advantages. The independence ofbusinesses is moulded for interdependence to sharecorporate resources (tangible and intangible) and enhancethe delivered value to the customer. The superiorcompetitive advantages of interdependence are34 like loweradvertising and promotion costs; cross selling of products;shared channels with higher bargaining and lowerinfrastructure costs; and common geographic markets.

New Product-New Competence: NewMarket [N4][Conglomerate Diversification Strategy]

The corporate decision to move into entirely new area ofbusiness operations means requirement of new productcompetence-market - to move into uncharted territories.To crystallise the idea of new and unrelated product, a lotof spade work needs to be in place. Since relateddiversification utilises existing markets or competencies,the competitive advantages are obvious to note and relate.However, several factors that might force the businessunit to go for conglomerate (unrelated) diversificationstrateqy>. These are industry unattractiveness; lack ofcapabilities and skills, etc.

Reliance Industries, known in textiles and chemicals,moved into info-com technologies and Sahara India intohousing, airline and news channels are examples ofconglomerate (unrelated) diversification. In fact, most ofIndian firms are into unrelated diversification. It is importantto note that company credentials have to do a lot with themain line of business. Use of unusual strategies into thenew and unrelated areas should be cautiously followed.Reliance in the info-com sector has started with aggressiv~ pricing (low) strategy while it is used to follow premiumprice strategy. The move might mean special care formarketing of such products or else failure might set in.

SUMMARY AND STRATEGIC IMPLICATIONS

The product-market-competence analysis provides a basis

for developing business/ corporate strategies that call 1continual analysis and responses to environmercompetitors, industry, customers and market selectic(segmentation, targeting and positioning). The produrmarket analysis provides insufficient referenceimbedded strategic dimensions of product and markrelation. The additional competence dimension bringsthe not-so-covered SBU and corporate level insights. Ttcompetence dimension can change the course of busine~strategies, for example. The question to withdraw c

rejuvenate a product can be easily guided. Produrejuvenation has been divided into two parts - no R&scanner or R&D required. The first is a case of rejuvenatinexisting product while second option takes us to the ne'product development related issues. Sirnllartjdiversification is not a question of mere new product-marksdomain. It has three sub-options - in the new marks(concentric diversification), with the new competenc(horizontal diversification), and with new marke1competence (conglomerate diversification). Thus, thlproduct-marketcompetence linkages have strateqtunderpinnings, which guide appropriate strategies to b.deployed.

The Strategies for Existing Products

The existing competencies can help marketers tcpenetrate into existing market by sustaining the producoffer. It can be achieved by keeping the quality, features;size, etc., of the current product through appropriate salespromotion techniques, encouraging brand switching oradvertisement appeals directed for non-users. Strategicmarketers might find their existing product useful in newmarkets. Market could be developed through marketdevelopment strategies by expanding distribution channelsor potential user groups with in the served market, or byexpanding the served market geographically.

Sometimes, the existing competencies might not bepossible to be stretched because the SBU mission doesnot cover such change in the existing product scope, orthere might be need for developing new competence tocontinue with the product offer. If the SBU has! can developthe new competence that is required for the existingproduct, the marketer must consolidate/ rejuvenate theexisting market while stretching the existing product withthe new competencies. However, the capabilitydeployment needs to be reviewed to decide about priorities- to acquire new competence and rejuvenate or to withdraw.The new competencies might be in the form of bringing





out new package, package sizes, new logo, brandrepositioning, brandextension, etc.Rejuvenation strategiesare relatively cheaper, easier, and quicker for creatingprofits and sustainingmarket share. In revitalisinga brand,the goal is not only to generate sales levels but also tohave them based upon enhanced e.quity, a move whichoften involves improvedrecognition, enhanced perceivedquality, changed association, and expanded customerease, andl or increased loyalty.

When the business is preparing itself for marketdevelopment by covering the unserved market,expanded geographic or distribution channels, thebusiness needs to reconsider the role of its existingcompetencies in the new market conditions to grab newmarketing opportunities. The lack of specificcompetence required to sell for example, a computerto home segment might require development of newcompetence (like marketing skills) because customermight not respond to such offers.

The Strategies for New Products

Strategic marketers must carry product developmentto cater to the changing needs of the customers. Newproduct development is vital to the continual survivaland growth of the strategic business unit. Competencerequired is continuous tracking of customer needs andproduct development to satisfy those needs. When theexisting product becomes unfit in the customer needset or is close to maturity stage in PLC, there are twooptions - eliminatel withdraw the product or revitalise itby appropriate improvements! modifications. Then therecould be new product - called 'new' in marketing senseor 'new' as invention. The products that are entirelynew-to-the-world require good amount of efforts, moneyand are risky for want of tested customer acceptance.Thus, the competence development is a relative termthat may mean usage/ stretch of existing competenceor the development of new one. The PLC analysis callsfor studying competitive position at relevant point onthe product life-cycle stage as the number of competitormight vary. Each of the situations calls for deploymentof appropriate marketing strategies with specificobjectives.

A change in the existing product can be not only bynew product development process. It could also be by

using existing product attributes and then reformulatingthem so that new quality levels/ flavours/ versionscould be attained. Though the chances of new productsuccess are slim, the process of product improvementis quick and easy by timely bringing out of new-lookproducts. It is important to note that productimprovement mean redesigning of the existing productthrough R&D channels. Since, the basic requirementfor all such functions is that the existing product istempered with the existing competencies, after it worksthrough the R&D department, the new formulation leadsto re-introduction of the existing product.

The new product can also be served in the existing marketprovided the new product is related to the existing (served)market. This is possible by carrying out new productdevelopment (altemative technology)or through horizontaldiversification (unrelated technology). SBU can search fornew products that adapt alternative technologies; it canalso search for new products and appeal its existingcustomer even when the new product offered has nothingto dowith the existingproduct i.e.,technologicallyunrelatedto the existing product. The strategic purpose of servingexisting markets with new and alternative technology isthat the brand name has been retained, the currentcustomer loyalty is retained and the competitor is notthreatenedwith new product.The horizontal diversificationstrategy is desirable when competition is tough and entryof new products with the new technologies (competencies)would mean entirely new product being marketed. FromSBU point of view, the horizontal diversification strategyis more useful when there are unexploited scaleeconomies in the area of promotion and distribution.

The all-new product-market-eompetenceparadigm resultsfrom the corporate decision to move into entirely new areaof business operations. Since related diversification (tonew markets or with new competencies) utilises existingmarkets or competencies by getting support from theexisting SBU value-chain, the competitive advantages areobvious to note and relate. However, several factors mightforce the SBU and corporate decision makers to followconglomerate (unrelated) diversification strategy: thepresent industry is unattractive; the firm lacks capabilitiesand skills; and the corporationl SBU is interested inconsideration of risk reductionl diffusion from existingindustry.




Grover

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4

NOTES

Sidhu, et aI., (2000), p. 376.

2 Kotler (2003), p.21.

3 Jain (2000), p. 77.

4 Sudharshan (1995), p. 86.

5 Prahlad and Krishnan (1999), pp. 109-118.

6 Day and Wensley (1988). pp. 1-20.

7 Johnson and Schoks (2002), p. 18.

8 Baghai, et at. (1999), pp. 100-109.

9 Jaworski et al" (2000}, pp. 45-54.

10 According to Jain (2000), business unit is a unit comprising oneor more products having a common maiket base whose managerhas complete responsibility for integrating all functions into astrategy against an identifiable competitor, (p. 17). And strategicbusiness unit must look and act as a freestanding business,satisfying the following conditions: Have a unique andindependent business mission; Have a clearly defined set ofcompetitors; Be able to cany out independent integrativeplanning; Be able to manage resources in other areas; and Belarge enough to justify senior management attention but smallenough to serve as a useful focus for resource allocation,(p. 19).

11 Day (2000), pp. 27-29.

12 Kotter and Hasken (1992).

21 Ohmae, Kenichi (1989), The Strategic Triangle' in Cook, at el.(eds.) (1989), p. 53.

22 Porter, Michael E. (1987), 'From Competitive Advantage toCorporate Strategy', Harvard Business Review, pp. 43-59.

23 Prahalad, C. K. and Gary Hamel (1990), 'The Core of theCorporation', Harvard Business Review, May-June, pp. 79-91.

24 Prahlad, C. K. and M.S. Krishnan (1999), liThe New Meaning ofQuality in the Information Age", Harvard Business Review,Sept.-Oct., pp. 109-118.

25 Schewig, Ehos E. (1974), New Product Development (Illinois:The Dryden Press).

26 Sidhu, Jatinder S" Edwin J. Nijssen and Harry Ro Commandeur(2000), 'Business Domain Definition Practice: Does it AffectOrganisational Performance', Long Range Planning, Vol. 33,pp. 376-401.

27 Smallwood, John E. (1977), 'The Product Life-cycle: A Key toStrategic Marketing', in Spitz (ed.) (1977), pp. 249-256.

28 Spitz, A. Edward (ed.) (1977), Product Planning (New York:Petrocelli/Charter).

29 Sudharshan, Do (1995), Marketing Strategy: Relationships,Offerings and Timing & Resource Allocation (Englewood Cliffs,New Jersey: Prentice Hall).

30 Various issues of The Economic Times.

Aaker, David A. (1991), Managing Brand Equity: Capitalizing onthe Value of a Brand Name (New York: The Free Press).

Ansott, Igor H. (1957), 'Strategies for Diversification', HarvardBusiness Review, Sept, - Oct., p. 114.

Berenson, Conrad and Iris Mohr-Jackson (1994), 'Pro~uct

Rejuvenation: A Less Risky Alternative to Product Innovation',Business Horizons' Nov.-Dec., pp. 51-56.

Booz, Alien and Harmilton (1982), New Products for the 1980s(New York: Booz, Alien & Harmilton).

Boutboul, Alain c. ( 1986), , A Framework for AnalysingAcquisition and Divestitures Decisions', unpublished master'sthesis, Sloan School of Management, MIT, quoted in Hax andMajluf (1996), p.230.

Cook, Victor J" Jean-Claude Larreche and Edward C. Strong(eds.) (1989), Readings in Marketing Strategy (C.A., U.S.A.:The Scientific Press).

7 Day, George S. (1994), 'The Capabilities of Market-DrivenOrganisations', Journal of Marketing, Vol. 58, October, pp. 40-42.

8 Day, George S. (2000), 'Managing Market Relationships',Journal of the Academy of Marketing Science, special issue on"Serving Customers and Consumers Effectively in the21 S' Century: emerging Issues and Solutions", Vol. 28(1),pp. 27-29.

9 Day, George S. and Robin Wensley (1988), 'AssessingAdvantage: A Framework for Diagnosing CompetitiveSuperiority', Journal of'Marketing, Vol. 52, pp. 1-20.

10 Drucker, Peter F. (1994), 'The Theory of Business" HarvardBusiness Review, September-October, pp. 100-101.

11 Dyck, Kenneth Van (1965), "New Products from Old: A Shortcut to Profits', in Spitz (ed.) (1977), pp. 267-270.

12 Hax, Arnold C. and Nicolas S. Majluf (1996), The StrategyConcept and Process: A Pragmatic Approach (New Jersey:Prentice Hall), p. 306.

13 Jain, Subhash C. (\993), Marketing Planning and Strategy(Cincinnati: South-Western Publishing Company).

14 Jain, Subhash C. (2000), Marketing Planning and. Strategy(Cincinnati: South-Western College Publishing).

15 Johnson, Gerry and Kevan Scholes (2002), Exploring CorporateStrategy: Text and Cases (New Delhi: Prentice Hall of India).

16 Kotler, Philip (1994), Marketing Management: Analysis, Planning,Implementation, and Control (New Delhi; Prentice Hall of India).

17 Kotler, Philip (1997), Marketing Management: Analysis, Planning,Implementation and Control (New Delhi: Prentice Hall of India).

18 Kotler, Philip (2003), MarketingManagement (New Delhi:Prentice Hall of India).

19 Kotter, John and James Heskett (1992), Corporate Culture andPerformance (New York: The Free Press).

20 Long, Carl and Mary Vickers-Koch (1995), "Using Core Capabilitiesto Create Competitive Advantage', Organisational Dynamics,Summer, pp. 7-22.

3

REFERENCES :





13 Long and Vickers-Koch (1995), p. 12.

14 Drucker (1994), pp. 100-101.

15 Long and Vickers-Koch (1995), p. 13-15.

16 Day (1994), pp. 37-52.

17 Jain (2000) pp 358-408

18 See Prahalad and Hamel (1990), pp. 79-91.

19 Ohmae (1989), p. 53.

20 Johnson and Scholes (1997), p. 139

21 For further details see The Economic Times dated 27 -11-1996

22 Johnson and Scholes (1997), pp. 282-283

23 The Economic Times dated 1q 10.1996.

24 Dyck (1965), p. 267.

25 Bereoson and Mohr-Jackson ( 1994), pp. 51-56. See also Kotler(1997), p. 361.

26 Aaker (1991), p. 242.

27 Booz, Allen and Harmilton (1982)

28 Kotler (1997), pp. 344-345.

29 Products can be rejuvenated at any stage ofPLC and is affectedby relative competitive position of the SBU.

30 Hax and Majluf (1996), p. 306.

31 Constraints like time and money limit.

32 The next alternative (conglomerate diversification - N4) is stillmore risky and costly.

33 See Ope Cit .. Jain (1993). p. 415: andOp. Cit.. Hax and Mailuf(1996). p. 225.

34 Boutboul (1986) quoted in Ibid. Hax and Majluf (1996), p.230.

35 It is important to understand that unrelateness of new prodactmarket-competence in its definition does not go to extreme (i.e.,any business). It is a question and degree of relatedness whereit turns out that the new business is unrelated (because corporatelSBU think them as such).

ACKNOWLEDGEMENT

The author is greatly indebted to Dr. Sanjay K. Jain, Professor of Commerce,Department of Commerce, University of Delhi for his untiring capacity to propagate,expose and deliberate ideas and help bring them into desirable practical shape. Theauthor is especially thankful to him for his initial observations on earlier drafts includingthe final one. No less is the contribution of the blind referees who helped in bringingabout the article in the present form.

128 VISION : The Journal or Business Perspective, January - June, 2004

