Finding a market niche Harvard Business School professor Michael Porter argues that companies must choose among four different strategies in order to prosper:
INDUSTRY-WIDE COST ADVANTAGE Example: Procter & Gamble’s Ivory Soap
Introduced in the 19th Century as a premium quality, pure skin cleaner that was far different than the coarse, brown soaps of the era, Ivory Soap for decades was sold as a mass-market good that commanded a premium price. Ads featured women and babies bubbling up with the white soap that was 99 & 44/100th pure. Ivory even advertised a novelty that prevented the soap from getting lost in bathtub suds: It floats! Seventy years later, however, competitors forced a shift in strategy. By the 1950s, white soaps were commonplace and rival soap makers added perfumes and skin moisturizers to their bars. Procter & Gamble decided to change Ivory’s strategy instead of its formula. It cut the price and began peddling Ivory as an all-purpose, no-nonsense family soap. Sales and profits soared.
MARKET SEGMENT COST ADVANTAGE Example: La Quinta Motor Inns Inc.
America has legions of sales people and other business travelers who don’t need or want a swimming pool, restaurant or room service. They want a clean, quiet room where they can get a nights sleep without clobbering their expense accounts. La Quinta, a Texas-based company, focused on this market with a strategy aimed at cutting costs and room prices by paring away frills and using low-cost construction methods. The chain, which operates motor inns in 30 states, has prospered in by finding a niche that promises low prices to a select clientele that’s been overlooked by larger competitors.