Capture New Markets and Outperform Competitors with Strategic Market Planning
All growth is not profitable.
Capturing new markets/customers or outperforming competitors are certainly growth drivers. However, pure revenue expansion for the sake of growth may be the absolute wrong goal. This article discusses the supply chain actions and value drivers that – when done efficiently and effectively – will contribute to profitable growth, and sometimes even create it.
Capture New Markets/Customers
Growth strategies are a means to counter stagnation, enhance performance, and increase revenue. The key to finding the right growth strategy is properly matching it to the company and its specific marketplace.
Typically, several combinations of strategies are used within a company’s strategic objectives.
Potential profitability should be examined before any type of growth strategy is deployed. The first step in developing a proper growth strategy is to examine all types: diversification, market development, product development and market penetration. The supply chain becomes a key focus in all aspects of growth. Two vital questions for each strategy are: (1) Can the existing supply chains be leveraged, and (2) can they handle the additional capacity the growth strategy promises to deliver?
High Risk
Diversification – New Products/Services Offered in New Markets
Diversification is a high-risk growth strategy, primarily because both the products/services and the market are unproven territory for the company. A diversification strategy often takes the form of a merger or acquisition. In this case, the company can quickly enter the market. The key is identifying the right diversification that closely aligns with the company. To achieve growth, an organization will need to understand the risks and clearly define the outcome of the acquisition.
Market Development – Existing Products/Services Offered in New Markets
A more common scenario is one in which a company attempts to develop a new market for their existing products and services. It may elect to broaden its geographic base to include new customers, either within its home country or in international markets. A company could also find new customer bases for its current product or service. This may occur by adjusting the packing or expanding the distribution channels. For example, Arm & Hammer marketed its baking soda as a refrigerator deodorizer. A market development growth strategy requires a working knowledge of the new markets and the ability to identify gaps in the marketplace that can be addressed with the company’s product or service.
Product Development – New Products/Services into Existing Markets
Another form of growth strategy is to introduce new products/services into existing markets, typically involving the use of existing channels of distribution to market new products. Companies will often add to current product lines to include new items that appear to have good market potential. A new product can be a product-line extension of a current product offering or a new product or service that has been acquired through a merger or acquisition. The advantage to this growth strategy is that these companies typically have significant contacts in the market to test their market acceptance and reduce risk.
Low Risk
Market Penetration – Existing Products/Services into Existing Markets
The lowest risk alternative is growing through a market penetration strategy – one that is designed to give a company a greater percentage of market share. This type of strategy usually seeks to gain a competitive edge through pricing, marketing, distribution, customer service or other initiatives. Additionally, market penetration can be achieved by increasing customer usage through loyalty programs and incentives targeting the existing customer base. A best practice supply chain will assure that the right products are available at the right time. A second step in the growth planning strategy is to develop a relevant filter process. A filter is typically used to support a business case to prioritize the suggested initiatives, and generally, the filter analysis is conducted in an executive session with appropriate facilitators. There are five relevant filters that can be used to focus the growth strategies (Figure 4):
1. Basic Values Filter: As many different areas as possible are tested for their "cultural fit" with the company. This can lead to an early exclusion of certain products or markets.
2. Market Filter: Potential opportunities are put to a market test by defining them in terms of size, market maturity, market cyclical dependencies, competitiveness and profitability.
3. Strategic Filter: The existing business model in the target areas must then be measured against the company's own strategy. A good choice of appropriate selection criteria helps the company not only define new areas of business but also more clearly define strategic guidelines of the existing business. Possible criteria include the degree of value creation (trade versus production versus services), similarity to existing key competences, the required human resources, and the breadth of the customer profile.
4. Supply Chain Filter: The supply chain filter allows a company to decide if it wants to use its distribution operations or if it needs to invest in new operations – or increase efficiency of current operations. A company will need to evaluate how the processes and procedures may change with the additional products or revenue.
5. Company-specific Filter: In the event of a merger or acquisition, potential companies must be identified for integration. The criteria for the acquisition – target revenue, target profitability, target geographic focus, and culture, among others – must be established to determine the best fit.
Five Filters for Creating a Growth Strategy Business Case
Growth strategies are an important part of a company’s overall business strategy. Careful planning and due diligence will assure that the growth strategy will be successful and contribute to the company’s overall revenue and profitability. The most important planning involves evaluating the type of growth strategies to be considered and then applying a filter. The business plan will identify the addressable market, value proposition, competitive advantage, key factors for success, and entry options to further define the opportunity. Regardless of the type of growth strategy deployed, the supply chain will be a key focus for operational efficiencies.
Outperform Competitors
Top-performing companies often maintain a dual focus: meeting and exceeding profitable growth objectives and outperforming competitors. In order to achieve these goals, it is critical to have a strategic market plan and the supply chain capabilities in place to deliver superior results (surpassing the competition). It is also vital that this strategic market plan addresses both internal and external activities. Within this section of the paper, three key areas (market focus, communication and responsiveness) that enable companies to outperform competitors are examined.
Focus on the Market
The prime attribute of most top-performing companies is the most basic of business strategies: a focus on the market. Top-performing companies regularly develop and revisit a Strategic Market Plan (SMP) to ensure that they understand customers’ needs and wants better than their competitors. In support of an SMP, organizations need to continuously gather information about customers and markets, but this is just the starting point. Additionally, organizations should understand what is happening within the global environment. It is important to gather and track information on government regulations and policies (local, national, and international), industry technological advances, current and future industry trends, and last but not least, what direct competitors are doing.
Communication
Sources for this information include trade publications, industry conferences and events, corporate and individual networks, and internal and external research reports. A mountain of information is available, and there are numerous ways to attain it. Yet, the real value can only be unleashed if it is packaged and delivered in a meaningful manner throughout the company. This leads to the second key requirement in enabling companies to outperform their competitors: communication.
Companies that go through all the work of understanding customers, markets, operating environments, and competitors must also ensure that they have a way to communicate this information throughout the organization. There are various means of communication ranging from informal and low-cost alternatives – such as newsletters, e-mail blasts, and management Q&A forums – to more formal technology-driven solutions, such as market databases and CRM applications. But, the mode of communication is not nearly as important as consistently sharing business intelligence that employees can use to strategically respond to the market. Many of today’s global supply chain information technology applications support both the collection, as well as the dissemination, of this critical data in a timely manner.
In addition to being able to convey customer and market information to employees, strong internal communication also directly affects profitable growth through higher employee retention rates and getting more input from employees in ways that will improve the business. Furthermore, companies that outperform their competitors are the ones that coach and mentor managers to communicate effectively with employees, follow a formal communication process, and connect employees to the company’s business strategy.
Respond to What Has Been Learned
Lastly, top-performing organizations not only collect the best information and communicate it throughout the company, they also respond to what has been learned. Generating and communicating the information is one thing, but unless there are changes based on what is learned, nothing has truly been accomplished.
This step is the hardest one to implement because it crosses so many functions within a company. Having an integrated and responsive Sales, Inventory and Operations Process (SIOP), combined with more timely and accurate information than competitors, as well as a proven, consistent means to communicate that information throughout the company, is what enables top companies to consistently outperform competitors. Responses to changes in customer needs, wants, or market conditions may include updates to current products, new product introductions, entering new global markets, new distribution channels being opened, outsourcing of non-core activities, and shifting of inventory or components from one region to another, to name a few.
In summary, companies that achieve profitable growth and outperform competitors utilize a Strategic Market Planning process to deliver timelier, more robust, and better business intelligence than the competition. These same companies have proven means of using global supply chain technologies to share information throughout the organization to provide employees with business intelligence in a constant, clear, and succinct manner. Lastly, the companies that have proven SIOP processes in place – enabling them to take what has been learned and respond accordingly – will outperform their competition.
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Leveraging the Supply Chain for
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