FOUR STRATEGIC POSITIONS

Over the past four weeks we have been looking at market leaders, followers and challengers. Today we turn our attention to the fourth and final strategic position for a firm, that of a market nicher. Although niching is typically associated with small companies, it is in practice a strategy that is also adopted by divisions of larger companies in industries where the competition is intense and the costs of achieving a prominent position are disproportionately high.

The advantages of niching can therefore be considerable since, if properly done, it is not only profitable but also avoids confrontation and competition. The attractiveness of a market niche is typically influenced by several factors, the most significant of which are:

1.It needs to be of sufficient size and purchasing power to be profitable

2. There is scope for market growth

3. The niche is of little immediate interest to the major competitors

4. The firm has the abilities and resources to be able to serve the niche effectively

5. The firm is capable of defending itself against an attack through areas such as customer loyalty.

It is specialisation that is at the heart of effective niching. Great global examples of powerful nichers/specialists are Bang & Olufsen for high-end audio and visual equipment, and car companies such as Porsche (often the world’s most profitable car company) and Ferrari.

Specialisation can, however, prove dangerous if the market changes in a fundamental way, either as the result of greater competition or an economic downturn, and the nicher is left exposed. Come to think of it; whatever happened to Stromberg and Zenith who made carburettors for European motor cars in a time past? Did they adapt to fuel injector technology, or did they go out of business?

THE SUPERNICHER

Simons (1996) speaks of the supernichers, who he claims dominate world markets for a limited range of products. These include Locktite with 80 per cent of the global market for superglues, and Steiner for 80 per cent of the military field glasses markets. Can’t afford those? Try WD-40, whose uses range from the original water dispersement objective to treating arthritis pains. Arthritis? Yes! Just ask a certain set of Jamaicans over the age of 60!

LESSONS FROM SUPERNICHERS

Although some of these markets might at first sight seem slightly esoteric, the attractions of being a (successful) market nicher are substantial, and include a depth of penetration that makes it difficult for others to attack effectively. Simon identifies 11 lessons that emerge from the supernichers:

1. Set and then aggressively pursue the goal of becoming the market leader in the chosen market.

2. Define the target market narrowly.

3. Combine a narrow market focus with a global perspective.

4.Deal as directly as possible with customers wherever they may be.

5.Be close to customers in both performance and interaction.

6.Ensure that all functions have direct customer contacts.

7. Strive for continuous innovation in both product and process.

8. Create clear-cut advantages in both product and service, and continually strengthen the selling propositions.

9.Keep core competencies in the company and outsource non-core activities.

10.Select employees rigorously and retain them for the long term.

11. Practise leadership that is authoritarian in the fundamentals and participative in the details.

Want a great example of what nichers can do in a small economy like Jamaica? Just look at what the alternative energy companies can do to JPS in that market segment.

STRATEGIC FATIGUE

It has long been recognised that competition between organisations can be seen in much the same way as a game, as the outcome in terms of an organisation’s performance is determined not just by its own actions but also by the actions and reactions of the other players, such as competitors, customers, governments and other stakeholders.

Business is not merely a game. It is a great game where leaders must defend, challengers must attack, followers combine the two strategies, and market nichers are brilliant specialists who know how to dominate. Like our Caribbean heroes Michael Holding, Vivian Richards and Brian Lara, who dominated the competition and won the hearts of the entire cricketing world.