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1、IIDefiningtheMarketThispageintentionallyleftblank3WhatistheImpactonStrategy?Beforewecanmeaningfullydiscussmarketingdecisionmaking,itisnecessarytoanswerafundamentalquestion:Whatmarketisthefirmin?Althoughthequestionmayappeartrivialatfirstglance,theanswerisnot.Furthermore,theanswerh
2、asmajorimplicationsformeasuringperformance,designingmanagerialincentiveplans,choosingorganizationalstructure,andoptimizingresourceallocation.Theinformationcoveredinthischapterwillbeusefulwhenyouarefacedwiththefollowingtypesofdecisions:•Howshouldmyfirmdefinethemarketinwhichitspro
3、ductcompetes?•Whoarethefirm’scompetitors?•Shouldmyfirmdefineitsmarketbasedonthephysicalcharacteristicsofitsproductoronthebasisoftheproduct’sbenefits?•Whatdoesthedefinitionofthemarketimplyabouttheoptimalorga-nizationalstructureofmyfirm?•Howshouldthedefinitionofthemarketaffectthechoiceo
4、fmanage-rialincentiveschemes?Thefollowingtermswillbeintroducedinthischapter(seeglossaryfordefinitions):addressablemarketgamethesystemproductpositioningdefinitionofmarketpositioningservedmarket3940DEFININGTHEMARKET3.1InWhatMarketDoestheFirmCompete?Foranymarketingstrategytobeeffec
5、tive,thefirmneedstocorrectlydefinethemarketorindustryinwhichitoperates.Onecommonapproachistodefinethemarketasconsistingofallproductswithsimilarphysicalattributes.Thisapproach,althoughintuitive,canleadtostrategicerrors.Ontheotherhand,ifthefirmdefinesthemarketcorrectly,itcanachievesu
6、periorresultsExample1:Intheearlytwentiethcentury,railroadfirmsintheUnitedStateswereconvincedthattheycompetedintherailroadindustry.Theydidnotrealizethattheywereinthetransportationbusiness.Consequently,theyfailedtorecognizethegrowingcompetitionfromalternativemodesoftransport,incl
7、udingtrucks,airlines,andwatertransport.Thismyopicandnarrowdefinitionofthemarketbyrailroadfirmsledthemtomakestrategicerrorsandprecipitatedaseculardeclineintherailroadbusiness.Example2:Untilfairlyrecently,Coca-Coladefineditsmarketbasedonthephysicalcharacteristicsofitsbeverageproduc
8、ts.Thisledtoastrate-gicerror:Coca-Colaconcludedthatitwasinthe
