What type of business are you?

One of the first activities in the preparation of a marketing plan is to define the organisation that will carry out the plan. This process means outlining the organisation’s mission, goals, values and objectives. It means assessing the organisation’s stakeholders and members and its structure. There is a bigger question to be answered, particularly with businesses: You need to know what type of business the organisation is.

In every market there are a number of players. often the firm first into the market is believed to have prime-mover advantage. However, this belief of ‘first in is best dressed’ is a myth. The cliché of most people’s youth is that the cool kids are always half an hour late for the party.

The first into the market often bears the cost of developing the market and creating consumers attitudes towards that market. Developing a market costs. Add to that the cost of creating a market and ironing out issues with the products for that market, and first movers can find it hard to maintain profit margins and sales volume to enjoy significant profitability. Those that follow on the prime mover’s coat tails can avoid many of those costs and be more profitable.

Recently, at a Made UK conference, the broadcaster Andrew Neil spoke as to what he believed were the government’s intentions towards the UK manufacturing sector. He highlighted the end of cross-border supply chains, and that components would be created in the UK through the commercialisation of technologies like 3D printing.

Manufacturers of 3D printers will have to show that their technology is a better option than existing production processes. Why would a car parts manufacturer choose 3D printing over current injection moulding technologies. Injection moulding is fast. efficient and cheap. Currently, 3D printing is slow, expensive and inefficient.

I suspect manufacturing will find a place for 3D printing but I suspect it will be for specialist components and to allow service centres to print spare parts. I suspect that for mass production of simple components, existing technology is here for a significant time to come.

If we track a market’s life cycle we can see different types of businesses that populate each phase of the market’s life.

  1. Market Scopers: These are the market innovators. They build the product and they build the market and they may have prime-mover advantage. This is particularly the case in markets which involve patents and complex registration processes such as pharmaceuticals. These businesses shape the market and shape consumers’ expectations. Often, market scopers don’t have set plans. The market may develop through a series of happy accidents. Market Scopers can show what readiness there is in a market for a particular product or innovation; they can show how big a market is and what latent demand exists in a market; they indicate how a market wants to buy a product and they set the price level that a market will bear.
  2. Market Makers: These are the firms in the market that build the greatest market share. They may not be the first into the market but they create ‘best value’ in the market. They exist at the early growth stage of the market but as the market matures and fragments, they may not be agile enough to meet the requirements of different segments. These companies are driven by product development rather than tracking market activities. these are, in terms of the BCG matrix, the ‘Star’ companies of the life cycle growth stage.
  3. Market Exploiters: These companies follow technological advantages and pounce when the market fragments. They are ‘fast followers’. They aim to develop best value in particular market segments. This is often achieved not through the product but through leveraging brand values, service provision and alternative supply channels. These are either market followers or market challengers and a goal is to take market share from leaders.
  4. Market Changers: These businesses try to redefine the market. they force competitors to change their offer. For example, Tesla is a market leader in electric cars and the actions of Tesla are forcing existing car manufacturers to change their offer. the change is achieved through a price/quality analysis or by providing services unobtainable elsewhere.

So you need to decide what type of business you want to be, but you also need to take account of the stage of the market life cycle.

You need to know the rate of progress of the market taxonomy. You need to judge the speed at which the market accepts change and you need to assess what best value a fragmenting market will develop.