What market strategy should a medium-sized company pursue? The answer to this depends much on the particular circumstances of the company in question. We explore here the basic principles that CEO’s of mid-sized companies should follow when faced with the need to make strategic decisions about how to define their markets.
The need for differentiation and/or focus
Medium-sized players will struggle to compete head-on with large companies in mass markets. They will find it difficult to realise the economies of scale needed to compete on price and will often not have the relationships or “clout” to compete on other grounds. So success relies on avoiding the mainstream competition and/or identifying a niche market to dominate. In terms of Michael Porter’s Generic Strategies, medium-sized companies need to create either an industry-wide “Differentiation” or “Focus” on a narrow market niche. Only these strategies will generate higher than average earnings and deliver the cash needed to fuel further growth. More often than not, the most successful mid-sized companies will follow a “Focus” strategy because sources of differentiation can often be eroded.The winning strategy of mid-sized leaders
Our work has identified three lessons learnt from the strategies of market-leading mid-sized firms. These are as follows:- Focus on a micro-niche. Many of the most successful mid-sized companies operate within very tightly defined markets with highly specialised offerings. They seek to do one thing only and to be the best at it. They aim to dominate their sector, often with market shares in excess of 60%. Take a look at the following: Martin-Baker (ejector seats); Andor (scientific digital cameras); Vinten (accessories for TV cameras); De La Rue (money printing); Westwind (air bearings) and Xaar (industrial inkjet printheads). This is just a short list out of hundreds of such companies we could mention. They are all fascinating, successful, world leaders that are well respected in their field.
- Define your market by both customer and product. These market niches are usually defined by a combination of both customers and products, rather than one or the other. The approach is one of: “this is who we serve and this is how we do it”. This gives the company a clear route for growth: identify new customers that fit the ideal customer profile and develop new products/services to meet those customers’ needs more deeply than anyone else can. Often, this means developing value added services beyond the basic product.
- Expand Globally. By definition, micro-niche markets are limited in size. So, international expansion is a necessary route to growth. As an example, 80% of the above-mentioned Martin-Baker product’s are sold abroad. International expansion will be the subject of separate posts in this blog, but, suffice to say, global expansion is a critical part of a mid-sized firm’s strategy.
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