Question

Choose a company/SBU that you follow (for example: Airbnb, Gymshark, iPhone, Grubhub, Diet Coke, etc.).

What kind of business strategy (Low-cost defender, differentiated defender, prospector, and analyzer) are they following?

What are the marketing advantages and disadvantages of following the specific business strategy?

Do you anticipate any issues with the company’s/SBU’s current business strategy?

Answer 1

Business strategies adopted by companies can be classified based on the degree of aggressiveness that they assume. Aggressiveness can be in terms of the risk taken, financial leverage, speed of decision making or the type of product changes and marketing strategies. On the basis of the degree of aggressiveness, strategies can be classified as prospector, analyzer, defender and reactor, of which the prospector strategy is the most defensive of the lot and is normally adopted early in the life cycle of a product, or in the growth stage of a technology or when there are few competitors in the market.

I have choosen Acer company,they follow prospector business strategy

This involves new product development, expansion into new market opportunities and increase of market share through offensive and aggressive marketing warfare strategies. Most entrepreneurial firms begin as prospectors and operate in domains where the technology and customer segments are not very well established. The risks include high leverage, chances of product failure and rejection of products by consumers and considerable capital investment in product development and marketing. Price skimming is a common strategy adopted where the products are priced relatively higher and then the prices are gradually dropped. Significant investments are made in the sales promotion, marketing and advertising the products.

Two crucial aspects of the prospector strategy are

i) R&D, Product design and engineering and

ii) Marketing research.

The advantages of the prospector strategy are

• Expansion in market share due to first mover advantage in the new market
• Increased opportunities, higher sales and hence more profits and margins
• Building customer loyalty and motivation and inspiration for your sales team.

It is my belief that succeeding in the new global economy will require an organization that is some variation of what professors Miles and Snow call a Prospector Organization. Miles and Snow’s definition of a Prospector Organization is that it “identifies a type of manufacturing organization that works well in a changing environment. Prospectors’ prime capability is finding and exploiting new product and market opportunities.” Prospectors, according to Miles and Snow, are very different than Defenders, and are described as follows:

1. Multiple markets. “Unlike the Defender, whose success comes primarily from efficiently servicing a stable, primary market, the Prospector’s prime capability is that of finding and exploiting new market opportunities.”

2. Market and competitor intelligence. “Prospectors maintain the capacity to monitor a wide range of customers, market conditions, trends and events. The Prospector, therefore, invests heavily in individuals and groups who can scan the environment for potential opportunities.” Prospectors have the ability to find new customers and markets on a continuous basis.

3. Product organization. “The logical extension of the Prospector approach is the product organization in which all resources needed to research, develop, produce and market related groups of products are placed in single self-contained organizational subunits. The company is decentralized into many divisions and subunits.” This decentralized organizational structure is a flat organization with many units, cells and teams.

4. Decentralized command and control. “Control is decentralized because the information needed to assess current performance and to take the appropriate corrective action is located in the operating units themselves, not in the upper echelons of management.”

5. Decentralized decision-making and communication. “Prospectors prefer short, horizontal feedback loops. Therefore, when a deviation in unit performance is detected, this information is not channeled to higher management for action, rather it’s fed directly back to the unit for immediate corrections.” This is truly an example of pushing responsibility and authority down to the people who do the work. This type of organization gives them the ability to quickly respond to customer demands.

6. Quick-response manufacturing (QRM). Customers continue to demand short lead times, particularly when the company is after new customers. The best way to shorten lead times is to change from a functional organization to a product-based organization, and to adopt QRM methods. QRM methodology fits the Prospector model very well, because it is an enterprise-wide strategy that goes beyond the shop floor. QRM also provides executives with a strategic view of time (the power of time) and helps them rethink decisions on capacity.

I did not anticipate with any issues with the Acer company's current strategy,because they are leading in the market and making high profits.

Another examples of companies that have successfully adopted the prospector strategy include Universal Music, Cathay Pacific, Macquarie Telecom, EBay, Cisco etc.