L5: The Firm: Markey Pioneer or Market Follower Flashcards
What’s a market pioneer?
- They achieve the shortest ‘time to market’
- This can give them a ‘first mover advantage’ because they create a ‘temporary monopoly’.
- This advantage can be greater with products where there is a ‘network effect’.
What is the difference between risk and uncertainty?
- Risk is quantifiable
- Uncertainty is not - things you haven’t considered which may impact your business
- A business can manage risks in any new venture using market intelligence etc.
- But uncertainties present more of a problem - ‘unknown unknowns’
What is Market Leadership?
- Every business aspires to become the market leader,
- this can be achieved by being a pioneer or by being a follower.
What are the advantages to being a ‘market follower’?
Market uncertainties reduced
* Able to witness what customers like/dislike about pioneer’s product
* Customers are more accepting of new design/tech.
Technological uncertainties reduced
* Able to reverse engineer from pioneer’s product, reducing R&D costs
* Able to improve design by learning from pioneer’s mistakes
* Able to exploit pioneer’s bad reputation for any design/safety problems
Legal uncertainties reduced
* Authorities may attack the pioneer only
* Legislation more established, based on experience with pioneer
* Followers may be encouraged to avoid monopoly
What are the advantage to being a Market Pioneer
- Creating a Temporary Monopoly giving ‘Super-Normal’ profits.
- The existence of** Network Effects** where the more users there are, the more people want the product. (buzz)
- Higher brand loyalty, reducing promotion costs.
- Higher ‘Switching Costs’ for customers, also reduces promotion costs. E.g. Time, money, effort
- Broader product ranges that pre-empt competition.
- Reduced costs throught the **Experience Curve **and Economies of Scale
What are market followers
- Market followers/market laggers
- Can benefit by learning quickly from mistakes made by the market pioneers, as a result of market uncertainties, **technological uncertainties **or legal uncertainties.
What is the Market Adoption curve
A graph of Market adoption against Maturity (years)
Curve with very low initial gradient, eventually becoming steep, before levelling off. Eventually the curve drops off.
What’s Next Bench Syndrome?
if one engineer’s idea can appeal to another at the next bench, then the idea may appeal to the company’s customers as well
Life Cycle Costing for all units from the Original Equiptment Manufacturers viewpoint
- Cost of initial product design
- Cost to set up production
- Cost to manufacture
- Marketing and selling costs
- Distribution costs
- After market costs including service and warranty
- Product liability costs
- Costs to recycle the product
What is simultaneous engineering?
- An approach to product design -
- companies attempt to reduce the elapsed time to market by integrating design engineering, manufacturing engineering and other functions in the company.
- Sales, Design engineers, Man’f’ng Engineers, Purchasing all work together, talking to Suppliers and Customers
- Improves product designs by considering life cycle costs (including costs in manufacture, logistics, service and recycling)
Where can the Optimum Design for a product be found
At a place within the triangle which has Cost:Price, Functionality, and Quality at it’s points.
There will be Trade-Offs between Product Characteristics
Why can ‘Next Bench Syndrome’ be bad?
- Engineers design products to meet the needs of their fellow engineers instead of the real customer.
- Engineers must work with marketing to ensure that they fully understand the needs of the customer.
Many engineers are technophiles, therefore:
Many engineers are ‘technophiles’ and can understand customer needs for pioneering products, in the early stages of the market adoption curve.
What must design decisions consider?
The trade-offs between the product characteristics of cost/ price, quality and functionality.
