Three strategies for strong small-and-mid-sized firms navigating the low-growth era
Hideo Yamada, Cheongrim Publishing
First,
the author organizes his views throughout the book by constantly comparing them with Philip Kotler. I don't quite get it. Why not just state your own opinion without roping in a famous scholar? As someone who majored in marketing, maybe it's his own little strategy? Feels very Japanese somehow. Anyway, that's my own prejudice, and there are good passages, so I'm posting the related content.
The differences between experts the author talks about
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Philip Kotler Expand total market size -> Maintain market share -> Expand market share Matsuaki Shimaguchi Expand peripheral demand -> Homogenization strategy -> Non-price response -> Maintain optimum share |
The author's explanation of Matsuaki's keywords
Expand peripheral demand - grow the market: (in Japan?) if people usually only brush their teeth in the evening, run ad copy that says you can brush both morning and evening.
Homogenization strategy - copy the #1 player's strategy so that the majority of customers feel comfortable with it.
Non-price response - don't do the sales that everyone else is doing.
Maintain optimum share - share and profit rate are different.
In other words, the cost of going from 40% -> 45% share is different from the cost of going from 80% -> 85%, and so is the profit.
In the latter case you have to serve unwelcome customers too, and that can frustrate your core customers.
Matsuaki seems to describe strategies modeled on small-and-mid-sized strong firms, not conglomerates. In other words, these are strategies targeting the universal majority of small-and-mid-sized firms. It's useful information for the universal majority, but for the ordinary large companies that make up most of the market economy, these strategies may be awkward or useless. But since I'm part of the universal majority, the author's words feel tempting.. Maybe this is the book self-employed folks need.
The overall flow of the content is: keep it moderate.
For us? The most direct example in today's reality might be the craft makgeolli and craft beer market. When Shinsegae opened its first Devil's Door - a large craft beer pub - at the Gangnam Express Bus Terminal, that market became a hot potato. A shark had entered a well that was just big enough for small self-employed shops to share. Thanks to that, the market grew a little, but the self-employed folks' share shrank and many shops shut down.
To prevent unfortunate situations like this (the craft beer example is just my personal one, though), the author says you must not fight. But he still describes three strategies that allow you to grow your business despite that.
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1. Splitting the market 1) Niche strategy: operate in a market that doesn't use the management resources the leading firm holds.. Even though it's in Korean, this is a tough sentence.. maybe because of the translation? If I re-translate it in my own words, operate targeting a market the leader isn't in, not because they can't, but because they're not interested. - e.g., the table-tennis-ball market, the old-days craft beer market 2) Dilemma strategy: take a strategy that isn't blocked by the leading firm's resources or strategy (a "contradiction-inducing" strategy).. Same thing here.. If I re-translate it, go in the opposite direction of what the others - the big firms - are doing. - e.g., selling insurance without a sales force, running a shopping mall that uses everyday people as models. 2. Cooperation strategy Figure out the #1 firm's value chain and take on a role of either outsourcing part of it, or integrating the #1 firm's product into your own value chain. - e.g., banks + ATM-specialist banks (Seven Bank) - e.g., bundler snack boxes that sell a famous competitor's product alongside yours |
As he explains, the author says there are similar concepts that sometimes get confused in the market, so he compares them. The difference comes down to whether you're using it as a weapon to steal the leader's pie, or as a wall to keep from fighting.
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Differentiation strategy Highlight the difference from the leader, a strategy meant to take their share away. Niche strategy Not a strategy to take over the leader's position; a strategy to operate only in parts the leader isn't interested in. |
More specifically, a niche market is
a strategy of intentionally limiting the size of the market so that big firms don't feel the need to enter, he says.
The leading firm has more fixed costs than the underdogs. With that size, it naturally costs more to make the same thing. Of course, this is relative, and we shouldn't forget that: because more money goes in, they can be much faster and higher-performing. But having the capability doesn't mean they can just do it. They have the destructive power but also the risk, so they can't move carelessly. Hence, in segments with low profit margins or growth rates, they are forced into a conservative stance on investment.
Here the author says there's no need to rush, deliberately or otherwise, to recoup your investment.
The niche strategy, on the other hand, prioritizes profit over revenue. Even so, you have to constantly check how people outside your market view your profit margins. The craft beer market mentioned above is exactly such a case. SMBs and self-employed folks judged that it wasn't a market the big firms would enter, and they got blindsided. But as with everything in life, never forget: you can make judgments, but so can the other side. So stay alert at all times, he seems to say.
And, the symbiotic value-chain strategy
is explained with examples like these:
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1. Layer master A strategy of stepping inside another company's value chain, forming a monopoly there, and taking profit. - e.g., installing your own ATMs at other banks 2. Competence provider A strategy of placing yourself inside your own value chain while competing with others, and at the same time, based on your core competence, cooperating with competitors by taking on tasks they outsource to you. - e.g., installing snack boxes in offices |
And from the book, quotes I want to remember:
Differentiate in the invisible parts; standardize in the invisible parts.
Even in a small market, it's important to create it yourself and take the top spot first.
It's important to strengthen software development to boost information analysis capability.
