This document outlines six boundaries that companies can look across to create new market space: 1. Substitute industries 2. Strategic groups within industries 3. The chain of buyers 4. Complementary products and services 5. Functional or emotional appeal 6. Looking across time to participate in shaping trends Examples are provided for each boundary to illustrate how companies like Home Depot, Intuit, Polo Ralph Lauren, and Cisco Systems created new market space by addressing customer needs in innovative ways beyond traditional industry boundaries.

1. Strategic Marketing & Planning
(MKT501C)
CCrreeaattiinngg NNeeww MMaarrkkeett SSppaaccee
Salman Ahmed (8519)
Fall 2011

2. Objective of the Article
Determining a systemic approach to value
innovation that can help companies to create
new market space via looking across six
boundaries of the existing competition

3. Shifting the Focus of Strategy
The Conventional
Boundaries of
Competition
HEAD-TO-HEAD COMPETITION
(Focus On)
CREATING NEW MARKET
SPACE
(Looking Across)
Industry Industry rivalry Substitute industries
Strategic Group
Competitive position within
strategic group
Looks across strategic
groups within industry
Buyer Group
Better serving the buyer
group
Redefines the buyer group
of the industry
Scope of Product &
Service Offerings
Maximizing the value of
product and service offerings
within the bounds of its
industry
Complementary product
and service offerings that
go beyond the bounds of
its industry
Functional-
Emotional
Orientation of
Industry
Improving price-performance
in line with the functional-emotional
orientation
Rethinks the functional-emotional
orientation of
its industry
Time
Adapting to external trends
as they occur
Participates in shaping
external trends over time

4. 1 2 3 4 5 6
Looking Across Substitute Industries
• Companies compete with companies within their
own industry as well as with those companies that
offer substitute products
• The space between substitute industries provides
the opportunity for value innovation

5. Looking Across Substitute Industries…Cont.
Examples:
•Home Depot
•South-West Airline
•Intuit (financial and tax preparation software company)

6. Looking Across Substitute Industries…Cont.
Home Depot:
•Created a market of do-it-yourselfers in the space
between
– choosing contractors
– going to the hardware store, buy tools, work themselves
•Experienced sales team
•Self-service warehousing
•Economies of scale
•Minimum stock-outs

7. Looking Across Substitute Industries…Cont.
Intuit:
• Created a new value curve for managing personal
finances by combining:
– low price and ease of use of pencil with
– speed and accuracy of “Quicken” software

8. Looking Across Substitute Industries…Cont.
Intuit:

9. Looking Across Substitute Industries…Cont.
Intuit:

10. 1 2 3 4 5 6
Looking Across Strategic Groups within
Industries
Strategic Groups:
•Companies within the same industry that pursue a
similar strategy
•Compete on Price and Performance
•Value innovators create new market space by
understanding what causes buyers to trade up or down
from one group to another

11. Looking Across Strategic Groups within
Industries….Cont.
Examples:
•Polo Ralph Lauren (Clothing Company)
•Toyota's Lexus
•Sony Walkman

12. Looking Across Strategic Groups within
Industries….Cont.
Polo Ralph Lauren:
•Fashion with no Fashion
•Compete with Haute Couture (High priced, Outdated fashion)
and Classic Lines (High priced, Long lasting Quality)
Lauren’s success factors:
•Designer name
•Elegance of stores
•Luxury of materials
•Updated price-captured classical look

13. Looking Across Strategic Groups within
Industries….Cont.
Toyota's Lexus:
•Provided the high quality of a Mercedes, BMW, or
Jaguar at a price closer to the lower-end Cadillac or
Lincoln.
Sony Walkman:
•Provided low price and convenient size portable
stereo market

14. Looking Across the Chain of Buyers
Rather than looking at a target customer, value
innovators pursue the chain of customers:
•Purchasers
•End Users
•Influencers
1 2 3 4 5 6

15. Looking Across the Chain of Buyers….Cont.
Examples:
•Bloomberg (Financial software company)
•Philips (Lighting Company)

16. Looking Across the Chain of Buyers….Cont.
Bloomberg:
•Compete with Reuters and Telerate (online financial
information providers)
•Upstream focus from purchasers (IT managers) to end
users (Accountants and Financial Analysts)

17. Looking Across the Chain of Buyers….Cont.
Philips:
•Downstream focus from purchasers to influencers
•Produced Alto (environmentally friendly light bulb)
•Promoted Alto to CFO's and public relations people
•Rapid sales growth
– traditional fluorescent lamps containing toxic mercury
were replaced in schools, stores and office buildings

18. 1 2 3 4 5 6
Looking Across Complementary
Product and Service Offerings
Idea:
•What happens before, during and after your product
or service is purchased
Example:
•Borders Books & Music and Barnes & Noble book
superstores

19. Looking Across Complementary Product
and Service Offerings….Cont.
Border and B&N Books Superstore:
Features & Benefits:
•Lifelong learning and discovery
•Pleasure of reading and Intellectual exploration
•Large selection of books
•Knowledgeable staff
•Armchairs, reading tables, sofas
•Coffee bars and Music

21. 1 2 3 4 5 6
Looking Across Functional or
Emotional Appeal to Buyers
Functionally Oriented Industries:
•Offer commodities or products with little emotions
Emotionally Oriented Industries:
•Offer extras that add price without enhancing
functionality of the product

22. Looking Across Functional or Emotional
Appeal to Buyers….Cont.
Examples:
Companies used Emotional Appeal:
•Starbucks
•Swatch (watch manufacturing company)
Companies used Functional Appeal:
•Body Shop
•Direct Line Insurance

23. Looking Across Functional or Emotional
Appeal to Buyers….Cont.
Starbucks:
•Introduced the concept of Coffee Bar
• Provide coffee drinkers with an emotional
experience:
– Gathering place
– Status
– Relaxation
– Conversation

24. Looking Across Functional or Emotional
Appeal to Buyers….Cont.
Body Shop:
•Provide customers with functional appeal
•Focus on product’s ingredients
•Cost saving through little spending on advertising

26. 1 2 3 4 5 6
Looking Across Time
Three critical principles….the trend must be:
•Decisive
•Irreversible
•Clear Trajectory
Example:
•Cisco Systems

27. Looking Across Time….Cont.
Cisco Systems:
Identified the trend of growing demand for high-speed
data exchange by producing:
•Routers
•Switches
•Other networking equipment

28. Conclusion
• Creating new market space and value curves is
critical in a demand-starved economy for both
small and large companies
• Maintaining profitable growth is only
sustainable by creating and recreating new
space, new markets and new value