Thursday, February 16, 2012

Using Market Footholds to Confuse the Competition
A niche in a new market can be a base for growth — or a way to keep rivals off guard.

Title: Competitor Analysis and Foothold Moves
Authors: John W. Upson (University of West Georgia), David J. Ketchen (Auburn University), Brian L. Connelly (Auburn University), and Annette L. Ranft (Florida State University)
Publisher: Academy of Management Journal, vol. 55, no. 1
Date Published: February 2012

I thought this was an interesting article well worth the read. It talks about a different type of approach than the norm of positioning your company/business/product vs. competition.

Establishing a foothold in a new market can be a potent weapon against rivals, according to this paper, which finds that the value of footholds far exceeds their small size and the costs of their maintenance. The reason, this paper says, is that footholds deter competitors and make it more difficult for them to predict their rival’s next move. 
The authors define a foothold as a tactical or strategic move in which a firm purposefully establishes a small position in a market — by branching out into an untapped geographic area, for example, or introducing a new product. From the foothold, firms can attack (by acquiring a smaller firm, launching a promotional campaign, or simply opening more branches, for instance), withdraw (by stopping the sale of products or services in the market), or maintain a wait-and-see approach. 
IKEA’s strategy for international expansion is an example: By opening a single store in each targeted country, IKEA has a foothold for establishing its unique brand in the market before spreading to more locations….. 
…..Establishing a small position in a new market can give firms the ability to affect the behavior of their rivals and gain a competitive advantage that isn’t always about aggressive expansion. Although costly to maintain, footholds can pay off by discouraging aggression from competitors and by keeping them guessing about a company’s next move. 

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