Value propositions as market-shaping devices: A qualitative comparative analysis

Forward-looking firms are increasingly viewing markets as malleable and plastic systems that can be influenced. Hence, they are engaging in market-shaping to proactively augment existing business opportunities or to create new ones. One of the recurring themes in the emerging market-shaping literature is the importance of value propositions. Consequently, the purpose of this paper is to identify configurations of value proposition characteristics that are effective for focal firms engaging in market-shaping strategies. In our empirical study, we analyze market-shaping actions carried out by 21 case firms using fuzzy-set qualitative comparative analysis. We identify four characteristics of market-shaping value propositions: (1) enhanced resource integration and related support as the core content of market-shaping value propositions, and (2) collaborative value proposing process, (3) systemic and verified value promise, and (4) new representations used in communication as the design characteristics of market-shaping value propositions. Further, we show that even though value propositions can shape markets without displaying all four of these characteristics, none of these characteristics alone can create all the expected outcomes. Hence, we identify distinct configurations of value proposition characteristics that are successful in either changing the elements comprising the market system or inducing an overall system-level market change.     

Don't adapt,shape! Use the crisis to shape your minimum viable system – And the wider market

In addition to being resilient and adaptive, firms should also utilize shocks such as COVID-19 to generate new business opportunities. Two processes make markets and other economic systems more malleable during times of crises: (1) as the stasis of the market system is interrupted, it forces the system “into movement” - and it requires less effort to nudge an already moving system in a specific direction; and (2) as deeply-rooted mental models are challenged during crises, any market-shaping initiative which promises a credible end to current instability with a new equilibrium will appeal to the natural human craving for stability. This malleability, in turn, creates multiple opportunities for firms to shape their markets and hence drive the market's development in favorable directions. We outline a generic process of market-shaping, comprising eight steps: (1) determining whether to act now or actively wait, (2) deciding whether to be a shaper or a supporter, (3) developing a scalable vision for the future market, (4) recognizing the minimum viable system linked to this vision, (5) driving changes in market-level properties, (6) securing that value is quantified and shared, (7) inviting actor engagement for implementation, and (8) defending against possible retaliations from threatened market systems.     

Purchasing as market-shaping: The case of component-based software engineering

The efforts to address markets as socio-technical orders have hitherto focused on the role of marketing in shaping demand. However, in many markets the role of purchasing is just as important. This paper uses a case study to examine how a single buying company can attempt to shape an emerging market through its purchasing practices. As a result, the study identifies five types of market-shaping actions. Within each action type, the market-shaping behavior of a buyer in an emerging market can be very diverse and include internal actions as well as actions aimed at influencing other market actors. While agency on the purchasing side is often associated with large size organizations, namely government and public sector agencies, our case study shows that agencies on the purchasing sides can be deployed in a variety of ways rather than merely through raw bargaining power. The findings indicate that buying firms do not simply adjust their own purchasing processes according to existing offerings, but actively attempt to drive market evolution in particular directions.     

Unraveling firm-level activities for shaping markets

As the marketing literature increasingly construes markets as malleable entities, research studies of ‘market-shaping’ strategies have gained increasing attention in recent years. Those are proactive, deliberate initiatives which a firm takes with the aim of re-shaping an operating environment comprising direct customers, customers' customers, and other actors such as its competitors. Our study derives a theoretical framework for market-shaping from the existing literature and an in-depth case study of one market-leading firm in the steel industry, which has been working actively in the shaping of a market. Analysis of the responses of a range of experienced executive staff to unstructured and semi-structured interviews shows, among other things, that in order to shape the market, the firm performed many individual and aggregated activities at three levels of influence – system, market offer and technology – with various actors in the market in focus. These findings are the basis of a proposed activity framework for the proactive shaping of a market: that is, what firms can do in order to shape an existing market, drive growth and create sustainable competitive advantage.     

Playing dirty or building capability? Corruption and HR training as competitive actions to threats from informal and foreign firm rivals

Research summary : We examine why a firm takes specific competitive action in nonmarket and resource‐market spaces, particularly when it perceives threats from informal and foreign competitor groups, respectively. We address this question by combining insights from competitive rivalry, strategic groups, and nonmarket strategy literatures in an emerging economy context. Specifically, we theorize how threats from informal and foreign rival firms in an emerging market influence a firm's engagement in corruption activities and its investments in HR training, respectively. We also argue that the likelihoods of such focal firm actions against competitor group threats differ, contingent on the focal firm's market and resource profiles. Results from the empirical analyses, with survey data from the Indian IT industry, provide broad support to our hypotheses. Managerial summary : Based on a World Bank dataset on the Indian IT industry, this study finds that corruption and HR training are pursued by firms in emerging economies as mindful strategies against specific types of rivals—informal and foreign firm rivals, respectively, and are not pursued simply as culturally‐based practices. Multinational companies may need to understand that domestic firms in emerging countries will engage in corruption strategically to reduce their costs and time to market of their products/services. Therefore, multinational firms may need to devise suitable strategies other than corruption to reduce their costs and time to market if they wish to compete with firms in emerging economies for customers who don't care about ethical issues and will buy a cheaper product/service that is delivered quickly. Copyright © 2015 John Wiley & Sons, Ltd.     

Engagement-driven institutionalization in market shaping: Synchronizing and stabilizing collective engagement

Although recent literature on market shaping highlights the importance of actors' engagement dispositions and behaviors and their interplay with institutional work, little is understood about the mechanisms that facilitate the institutionalization of engagement dispositions and behaviors within the market-shaping process. Beyond this backdrop, this conceptual paper addresses how the engagement of multiple actors contributes to institutional change within market shaping. To answer this question, our paper considers the concept of synchronization as a mechanism that facilitates the alignment of multiple actors' engagement dispositions and behaviors to generate collective engagement within institutional work. Applying the emerging theory of Practice-driven Institutionalism as well as the concept of collective engagement, we develop a process model of engagement-driven institutionalization that consists of three stages: (1) the synchronization of collective dispositions and behaviors, (2) the development of temporal stability of these behaviors through self-reinforcing mechanisms resulting in practices, and (3) the ensuing institutional change for market shaping. By connecting this model to the market-shaping process, we demonstrate how our model contributes to a better understanding of the theoretically fuzzy processes of institutional change within market shaping and how it may help market shapers in their endeavors to shape markets successfully.     

Market Orientation and Innovativeness in Supply Chains: Supplier's Impact on Customer Satisfaction

As today's firms increasingly outsource their noncore activities, they not only have to manage their own resources and capabilities, but they are ever more dependent on the resources and capabilities of supplying firms to respond to customer needs. This paper explicitly examines whether and how firms and suppliers, who are both oriented to the same customer market, enable innovativeness in their supply chains and deliver value to their joint customer. We will call this customer of the focal firm the “end user.” The authors take a resource‐dependence perspective to hypothesize how suppliers' end‐user orientation and innovativeness influence downstream activities at the focal firm and end‐user satisfaction. The resource dependence theory looks typically beyond the boundaries of an individual firm for explaining firm success: firms need to satisfy customer demands to survive and depend on other parties such as their suppliers to achieve customer satisfaction. Accordingly, the research design focuses on three parties along a supply chain: the focal firm, a supplier, and a customer of the focal firm (end user). The results drawn from a survey of 88 matched chains suggest the following. First, customer satisfaction is driven by focal firms' innovativeness. A focal firm's innovativeness depends, on the one hand, on a focal firm's market orientation and, on the other hand, on its suppliers’ innovativeness. Second, no relationship could be established between a focal firm's market orientation and a supplier's end‐user orientation. Market orientation typically has within‐firm effects, while innovativeness has impact beyond the boundaries of the firm. These results suggest that firms create value for their customer through internal market orientation efforts and external suppliers' innovativeness.     

The venture capital entry model on game options with jump-diffusion process

This paper aims to apply game options to construct the optimal decision-making and management tool for venture capital (VC) firms. This model emphasizes the inferences with game options on the market structures formed by different competition and investment strategies of the two VC firms to reflect the investment returns. These market structures are classified into an entry-deterred game (specific monopoly), a leader's dominated strategies (duopoly), and simultaneous investment. It is considered how to select investment timing to avoid any potential competitive threats in order to provide the optimal expected threshold values for the investment decisions of VC firms.     

Taking industry structuring seriously: A strategic perspective on product differentiation

Given legal impediments to consolidation and collusion, firms often resort to product differentiation to attain market power. This paper provides a formal analysis of product differentiation as a tool for such industry structuring at both the firm and industry level. We examine: how industry structure differs when firms collaborate on their differentiation decisions, and when the profitability of such collaboration is greatest; how an individual firm's differentiation decisions affect subsequent market outcomes under price competition, such as margin, market share, and profit; how mere differentiation differs from a ‘differentiation advantage’; and how changing a firm's differentiation affects its rivals through both positive externalities (by restraining rivalry) and negative externalities (by shifting competitive advantage). Our results have implications for empirical research, strategy theory, and pedagogy.     

Examining Proactive Strategic Decision‐Making Flexibility in New Product Development

While strategic flexibility is widely accepted as a prerequisite for a firm's success, its application in strategic decision making to a firm's new product development (NPD) activities is limited to only a few studies. Furthermore, many organizations still have difficulties creating proactive strategic flexibility in their decision‐making processes. Past research studies have largely ignored the relationship between strategic decision‐making flexibility and firms' resources and/or capabilities and success in the context of NPD. This study advances strategic flexibility by adopting the proactive approach of NPD decision‐making flexibility and by examining its role in translating organizational resources and capabilities into NPD success. This study draws upon the resources, capabilities (i.e., flexibility), and performance framework to show how proactive strategic decision‐making flexibility plays a crucial role in developing new products that can create new opportunities and comply with market needs. Therefore, this research aims to (1) develop an operational definition of strategic decision‐making flexibility and (2) propose a framework to understand the drivers and the subsequent new product performance outcomes of strategic decision‐making flexibility. This study adopts the proactive perspective of strategic decision‐making flexibility and defines it as a capability that enables firms to develop NPD strategies to respond to future changes in the environment. The analysis, based on data collected from 103 European firms, shows that that the effects of long‐term orientation, strategic planning, internal commitment, and innovative climate on proactive strategic decision‐making flexibility are significant. The findings indicate specifically the roles of both champions and gatekeepers, who infuse a firm's knowledge with a clear understanding of its resources, constraints, and market needs, thereby enhancing decision makers' motivation to behave proactively to precipitate transformation. The results also reveal a positive association between proactive strategic decision‐making flexibility and NPD performance outcomes. As such, strategic flexibility provides firms with an ability to adapt to changing environments and to create new market opportunities, product, and technological arenas, and to deliver successful new products. When firms open new market, technological, and product arenas, they can easily foresee their new demands and changes and successfully deliver new products, meeting customer needs/demands, and offering benefits such as quality, cost, and timeliness. This study therefore provides a valuable reference point for future research in strategic decision‐making flexibility in NPD.     

On the strategic value of risk management

This article examines how firms facing volatile input prices and holding some degree of market power in their product market link their risk management and their production or pricing strategies. This issue is relevant in many industries ranging from manufacturing to energy retailing, where firms that are rendered “risk averse” by financial frictions decide on and commit to their hedging strategies before their product market strategies. We find that commitment to hedging modifies the pricing and production strategies of firms. This strategic effect is channeled through the risk-adjusted expected cost, i.e., the expected marginal cost under the probability measure induced by shareholders' “risk aversion”. It has opposite effects depending on the nature of product market competition: commitment to hedging toughens quantity competition while it softens price competition. Finally, not committing to the hedging position can never be an equilibrium outcome: committing is always a best response to non-committing. In the Hotelling model, committing is a dominant strategy for all firms.     

Environmental dynamism,industry 4.0 and performance: Mediating role of organizational and technological factors

Industry 4.0 (I4.0) has gained a lot of consideration as it can address the challenges of today's dynamic manufacturing environment. This paper empirically examines whether environmental dynamism (ED) can drive firms to implement I4.0 technologies, and mediating effect of critical factors on this relationship. We adopt “Human-Organization-Technology” (HOT) theory to categorize the critical factors for I4.0. The paper also examines the effect of I4.0 on environmental and market performance. The proposed framework is tested by partial least squares (PLS) using the survey data from Indian manufacturing industries. The results show that ED drives firms towards I4.0, and positive effect of I4.0 on performance outcomes. Further, organizational and technological factors mediate the relationship between ED and I4.0. The findings can be useful for firms considering to make a transition towards I4.0. It can aid managers to formulate specific strategies for transitioning to I4.0, contribute towards sustainable development, and improve market performance.     

Product Change Intensity, Product Advantage, and Market Performance: An Empirical Investigation of the PC Industry

Product change decisions, such as the frequency of new product introductions, can impact product performance characteristics, sales, and market share of several generations of products and, therefore, a firm's long‐term survival and growth. The purpose of this study was to explore the impact of a firm's product change frequency, also referred to as product change intensity. A conceptual model linking a firm's product change intensity to its product advantage—and, in turn, to its market performance—with strategic product change orientation and technology competence as moderating effects, was used as a foundation for the study's hypotheses. These were tested using hierarchical and linear regressions, based on survey data collected from 55 U.S. companies in the personal computer (PC) industry. The analysis confirmed that a PC firm's product rate of change is positively associated with its product advantage and that its product advantage, in turn, is positively associated with its market share and growth performance. However, the hypothesized moderating effects were not confirmed. Rather, a firm's product change orientation and its level of technology competence are more likely to have a direct impact on product advantage. The implications of these findings are that, in general, firms that release new products frequently will have them viewed more favorably by the market than products with lower change intensities. Also, firms with higher levels of competence in the product technology domain tend to create products with greater market attraction. Finally, more radical changes to PC product architectures may pay off better than relatively minor changes. These results may not apply to other industries due to the specific design of personal computers and the nature of this fast‐paced market. Neither do the findings necessarily apply to all firms regardless of those firms' specific product and market strategies. More research is necessary to understand how a firm's adopted strategy, and the industry in which it operates, affect the relationships demonstrated in this study.     

Why Do Firms Enter a New Product Market? A Two‐Dimensional Framework for Market Entry Motivation and Behavior

What are the energetic forces that induce established firms to enter new product markets? While most previous research has explained the economic profits expected from a new product market as firms' distinctive motivation for market entry, some recent studies also emphasize interfirm competition and benchmarking activities as another important factor that motivates firms' new market entry. To explain the established firms' diverse new product market entry behaviors, this study presents a two‐dimensional scheme of entry motivation in terms of the degrees of target market profit focus and competitor focus. The first dimension captures the economic motivation of firms' new market entry that ranges from focusing on the direct expected profits from the target market to considering more strategic/indirect benefit incentives. The second dimension captures the degree of firms' external motivation for entry affected by competitors that ranges from independent entry decisions to fully competitor‐oriented entry decisions. Using multiple‐industry survey data, the current study empirically verifies that these two entry motivation dimensions explain a great portion of actual firms' new product market entry behaviors and that they are independent of each other. Subsequently, this study validates that firms' operational size and their environmental factors like perceived technological uncertainty and competitive intensity upon new market entry affect the degrees of the two dimensions of firms' new product market entry motivation. More specifically, large firms less emphasize target‐market profits than small firms, and when perceived technological uncertainty is high, potential market entrants become less target market profit focused but more competitor focused. Under a highly competitive new market condition, firms focus on both target‐market profits and competitors. Based on the analysis of new market entry motivation dimensions, the current study proposes a new typology of established firms' market entry behaviors. The suggested typology represents the four different types of new product market entrants and examines specific characteristics and entry strategies for each type of potential entrants. This entry‐motivation framework should provide a deeper understanding of the backgrounds of entry behaviors and assist firms in developing appropriate entry strategies and in advantageously responding to rival firms' actions with regard to entry.     

Market Vision and Market Visioning Competence: Impact on Early Performance for Radically New,High‐Tech Products*

Having the “right” market vision (MV) in new product scenarios involving high degrees of uncertainty has been shown to help firms achieve a significant competitive advantage, which can ultimately lead to superior financial results. Despite today's increased rate of radical innovation, and hence the importance of effective vision, relatively little research has been undertaken to improve our understanding of this phenomenon. The exploratory and empirical investigation undertaken herewith responds to this research gap by focusing on MV and its precursor, market visioning competence (MVC), for radically new, high‐tech products. MV is a clear and specific mental model/image that organizational members have of a desired and important product‐market for a new advanced technology, and MVC is a set of individual and organizational capabilities that enable the linking of advanced technologies to a future market opportunity. Based on samples of high‐tech firms involved in early technology developments, the measurement study indicates that five factors comprise MV (i.e., clarity, magnetism, specificity, form, and scope) and that four factors underlie MVC (i.e., networking, idea driving, proactive market orientation, and market learning tools). Structural equation modeling is used to demonstrate that MVC significantly and positively impacts MV and that each of these constructs significantly and positively influences certain aspects of early performance (EP) in new product development. This is the first empirical study to develop a comprehensive set of scales to measure these constructs and then to combine them in a model by which to examine their interrelationships.     

Emerging Market Firms' Internationalization: How Do Firms' Inward Activities Affect Their Outward Activities?

Research summary : In this study we examine how an emerging market firm's inward international activities (“inward activities”) are related to its outward international activities (“outward activities”) by focusing on the role of the firm's gain from its inward activities. On the one hand, drawing upon the organizational learning perspective, we propose that a firm's gain from inward activities may facilitate its outward activities through improving its resource fungibility. On the other hand, we draw upon the prospect theory to propose that a firm's gain from inward activities may hinder its outward activities by discouraging the firm's top managers from taking risks that are inherent in outward activities. With detailed data from a sample of manufacturing firms in China, we find empirical support for both lines of arguments . Managerial summary : Are emerging market firms with higher inward gain more likely to engage in outward internationalization activities? We argue that it depends upon how a firm uses its gain from inward activities. If the firm can improve its resource fungibility (particularly organizational resource fungibility) from its inward gain, it is more likely to engage in outward activities. If the firm cannot improve its resource fungiblity, the answer is no. Our findings suggest that for emerging market firms, internationalization is not just a path toward new markets; instead, it reflects how these firms exploit and explore what they have learned from their interactions with foreign firms at home in foreign markets. Therefore, managers must think more strategically on developing (organizational) resource fungibility from their inward activities . Copyright © 2017 John Wiley & Sons, Ltd.     

Multi-dimensional analysis of perceived switching costs

The creation of switching costs for customers is an important aspect of strategic planning in today's competitive environment. These costs enable firms to address variations in customer preferences and competitor influence in attempting to gain their customers' loyalty. Although the recognition of the importance of such switching costs has long existed in a variety of contexts, the conceptualization and measurement of the construct is lacking in clarity and consistency. This study proposes that perceived switching costs (PSC) constitute a higher-order construct made up of six dimensions that reflect the customers' perception of the time, effort, and money involved in the switching process. The study also proposes that each of the six dimensions has a distinctive set of antecedents and outcomes. The test of the model is an empirical study in the Spanish insurance sector. The results confirm the validity of the higher-order formative construct of PSC and provide insights for specific strategies to address the perceptions of various customers with regard to switching costs.     

Using DEA window analysis to measure efficiencies of Taiwan's integrated telecommunication firms

Taiwan's telecommunication firms are faced with an important challenge arising from a situation in which the growth rate of telephone subscribers has gradually decreased owing to limited market size and the policy of continuous deregulation propagated by the government. To deal with the challenge, several acquisitions among telecommunication firms have taken place and have caused the three currently leading firms to capture a market share of more than 80%. Considering how acquisitions and related strategies might affect the firms, this paper uses data envelopment analysis (DEA) under constant and variable returns-to-scale to measure firms’ efficiencies over the period 2001–2005. Because there are only three firms, DEA window analysis is employed to increase the number of decision-making units so that discriminating power can be increased. According to the results, the first finding shows that the acquisitions are justified by exhibiting higher scale efficiency (but lower pure technical efficiency) in the short run. The second finding indicates that adjusting the strategies such as enlarging market share to improving financial portfolios helps firms to achieve better scale size. The third finding justifies government efforts to privatize state-owned enterprises and liberalize the market to strengthen competitiveness.     

Marketing Ignorance and the Validity of Narver and Slater's MKTOR Scale in High‐Tech Russian Firms

A firm's market orientation is an important factor influencing its ability to successfully develop and introduce new products. To measure market orientation, Narver and Slater's MKTOR scale has been accepted in the literature as a valid and reliable scale. In fact, it can be considered state of the art. This study, though, challenges the validity of that scale in high‐tech industries and transition economies. As part of a larger study, the scale was used to measure the market orientation of 10 Russian high‐tech small‐ and medium‐sized enterprises, next to other measures of market orientation. These were the respondent's perceptions of their market orientation; the firm's philosophy on selling goods/services or solving customer problems; and in‐depth interview questions on goals, strategies, network ties, targeted market segments, and competitive advantage. It was found that the firms obtained high scores on the MKTOR scale but that these scores were accompanied by ideas and behaviors reflecting a low or even lacking market orientation. On a scale from 1 to 7, the firms average 6.2 on customer orientation, but at the same time, they are not aware that they do not have customer‐focused strategies and do not fully understand the chain in which they operate. Further, the average on competitor orientation is 5.4. Some firms have competitor‐oriented characteristics, but others are ignorant of their competition and believe in their technological superiority as a source of competitive advantage. Analyzing these anomalies, it is concluded that the scale requires a minimum level of marketing knowledge of respondents. Without such knowledge, the MKTOR scale is susceptible to the respondent's unconscious incapability, thereby producing invalid results. In the 10 Russian cases, the respondents did not have much experience or education in marketing, which explains why they were incapable of adequately answering the items of the MKTOR scale. The results of this study help to explain the ambivalent findings in the literature about the effect of market orientation on innovation and new product development in high‐tech sectors and transition economies. The paper concludes with suggestions on how market orientation could be better measured in such contexts. It is suggested to replace the Likert‐scale by a semantic differential scale, where statements reflecting product, production, and sales orientations are confronted with statements reflecting a market orientation. Given the importance of experience and education in marketing as positive antecedents, measures of these factors should be included in the scale as well. With these adaptations, measures of market orientation will be more factual, will require less knowledge of marketing terminology, will reduce bias caused by respondents' perceptions, and will prevent ambiguity in terminology.