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What underlying conditions must be present before a company can make a strong commitment to a market?


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2009-11-24 19:26:46
2009-11-24 19:26:46

Strong-Commitment Strategy The strong-commitment strategy requires a company to operate in a market optimally by realizing economies of scale in promotion, distribution, manufacturing, and so on. If a competitor challenges a company's position in the market, the latter must fight back aggressively by employing different forms of product, price, promotion, and distribution strategies. In other words, because the company has a high stake in the market, it should do all it can do to defend its position. A company with a strong commitment to a market should refuse to be content with the status quo. It should foresee its own obsolescence by developing new products, improving product quality, and increasing expenditures for sales force, advertising, and sales promotion relative to the market's growth rate. This point may be illustrated with reference to the Polaroid Corporation. The company continues to do research and development to stay ahead of the field. The original Land camera, introduced in 1948, produced brown-and-white pictures. Thereafter, the company developed film that took truly black-and-white pictures with different ASAspeeds. Also, the time involved in the development of film was reduced from the original 60 seconds to 10 seconds. In 1963 the company introduced color-print film with a development time of 60 seconds; in the early 1970s, the company introduced the SX-70 camera, which made earlier Polaroid cameras obsolete. Since its introduction, a variety of changes and improvements have been made both in the SX-70 camera and in the film that goes into it. A few years later, the company introduced yet another much-improved camera, Spectra.
In 1976 Kodak introduced its own version of the instant camera. Polaroid charged Kodak with violating seven Polaroid patents and legally forced Kodak out of the instant photography business. The result: Polaroid has retained its supremacy in the instant photography field, a field to which it has been solely committed. Porsche continues to excel in the crowded auto industry by making a firm commitment to a well-defined market niche (a 40-something male college graduate earning over $200,000 per year). The company sells only about 6000 cars a year (each costing between $40,000 and $82,000), but does well in terms of profits. RCA pioneered color television in 1954, yet their product did not sell well since the vast majority of programs were broadcast in black and white. But RCA did not give up and made a long-term commitment to the business. It started broadcasting color TV programs through its NBC subsidiary at a time when the majority of consumers owned black-and-white TVs. RCA's persistence over ten years was rewarded with long-term market leadership of color TVs. The nature of a company's commitment to a market may, of course, change with time. Consider Levi Strauss & Co.
Its brand name is synonymous with rebellious youth. But while it retains its hold over the baby boomers who built the brand into mythic proportions, it has neglected the whims of the new generation of youth, and these are the future customers. This lack of commitment has cost the company dearly. Its sales have been declining since 1990, forcing it to close many factories. As a company executive put: "It was, in part, the classic corporate goof: taking your eyes off the ball. Projects during the last decade, such as expanding the casual clothing line Dockers and launching its upscale cousin Slates distracted executives from the threat to Levi's core jeans brand."22 Strong commitment to a market can be highly rewarding in terms of achieving growth, market share, and profitability. A warning is in order, however. The commitment made to a market should be based on a company's resources, its strengths, and its willingness to take risks to live up to its commitment. For example, Procter & Gamble could afford to implement its commitment to the Pittsburgh market because it had a good rapport with distributors and dealers and the resources to launch an effective promotional campaign. A small company could not have afforded to do all of that.

Strong-Commitment Strategy The strong-commitment strategy requires a company to operate in a market optimally by realizing economies of scale in promotion, distribution, manufacturing, and so on. If a competitor challenges a company's position in the market, the latter must fight back aggressively by employing different forms of product, price, promotion, and distribution strategies. In other words, because the company has a high stake in the market, it should do all it can do to defend its position. A company with a strong commitment to a market should refuse to be content with the status quo. It should foresee its own obsolescence by developing new products, improving product quality, and increasing expenditures for sales force, advertising, and sales promotion relative to the market's growth rate. This point may be illustrated with reference to the Polaroid Corporation. The company continues to do research and development to stay ahead of the field. The original Land camera, introduced in 1948, produced brown-and-white pictures. Thereafter, the company developed film that took truly black-and-white pictures with different ASAspeeds. Also, the time involved in the development of film was reduced from the original 60 seconds to 10 seconds. In 1963 the company introduced color-print film with a development time of 60 seconds; in the early 1970s, the company introduced the SX-70 camera, which made earlier Polaroid cameras obsolete. Since its introduction, a variety of changes and improvements have been made both in the SX-70 camera and in the film that goes into it. A few years later, the company introduced yet another much-improved camera, Spectra.
In 1976 Kodak introduced its own version of the instant camera. Polaroid charged Kodak with violating seven Polaroid patents and legally forced Kodak out of the instant photography business. The result: Polaroid has retained its supremacy in the instant photography field, a field to which it has been solely committed. Porsche continues to excel in the crowded auto industry by making a firm commitment to a well-defined market niche (a 40-something male college graduate earning over $200,000 per year). The company sells only about 6000 cars a year (each costing between $40,000 and $82,000), but does well in terms of profits. RCA pioneered color television in 1954, yet their product did not sell well since the vast majority of programs were broadcast in black and white. But RCA did not give up and made a long-term commitment to the business. It started broadcasting color TV programs through its NBC subsidiary at a time when the majority of consumers owned black-and-white TVs. RCA's persistence over ten years was rewarded with long-term market leadership of color TVs. The nature of a company's commitment to a market may, of course, change with time. Consider Levi Strauss & Co.


Its brand name is synonymous with rebellious youth. But while it retains its hold over the baby boomers who built the brand into mythic proportions, it has neglected the whims of the new generation of youth, and these are the future customers. This lack of commitment has cost the company dearly. Its sales have been declining since 1990, forcing it to close many factories. As a company executive put: "It was, in part, the classic corporate goof: taking your eyes off the ball. Projects during the last decade, such as expanding the casual clothing line Dockers and launching its upscale cousin Slates distracted executives from the threat to Levi's core jeans brand."22 Strong commitment to a market can be highly rewarding in terms of achieving growth, market share, and profitability. A warning is in order, however. The commitment made to a market should be based on a company's resources, its strengths, and its willingness to take risks to live up to its commitment. For example, Procter & Gamble could afford to implement its commitment to the Pittsburgh market because it had a good rapport with distributors and dealers and the resources to launch an effective promotional campaign. Asmall company could not have afforded to do all of that.


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