Strategies to crack well-guarded markets.
How can companies break into attractive markets, where incumbents erect many barriers to entry? To answer this question, the authors studied organizations that successfully entered the most profitable industries in the United States between 1990 and 2000. When they dissected the strategies that worked best, one common theme stood out: indirect assault. Smart newcomers don't duplicate existing business models, compete for crowded distribution channels, or go after mainstream customers right away. Instead, they attack the enemy at its weakest points; then gain competitive advantage; and later, if doing so meets their objectives, go after its strongholds. Recent battles in the soft drink industry--where brands, bottling and distribution capabilities, and shelf space are incumbents' main advantages--are a case in point. When Virgin Drinks entered the U.S. cola market in 1998, it advertised heavily and immediately tried to get into the retail outlets that stock the leading brands. Virgin has never garnered more than a 1% share of the market. Red Bull, by contrast, came on the scene in 1997 with a niche product: a carbonated energy drink. The company started by selling the drink at bars and nightclubs. After gaining a loyal following through these outlets, Red Bull elbowed its way into the corner store. In 2005 it enjoyed a 65% share of the $650 million energy drink market. Successful entrants use three basic approaches in their indirect attacks. They leverage their existing assets and resources, reconfigure their value chains, and create niches. These approaches may appear to be simple, but their magic lies in their combination. By mixing and matching them, Bryce and Dyer say, enterprises can defy half a century of economic logic and make money entering highly profitable industries. The authors use Skype, Costco, Skechers, and many other companies to illustrate their argument.
Bryce
David J
DJ
Brigham Young University, Marriott School of Management, Provo, Utah, USA. dbryce@byu.edu
Dyer
Jeffrey H
JH
D001628:Beverages; D003659:Decision Making, Organizational; D004465:Economic Competition; D006801:Humans; D007221:Industry / Q000458:organization & administration*; D007449:Investments; D040541:Marketing; D010934:Planning Techniques; D014481:United States