Strategies for
New and Growing Markets
Exhibit 16.1
Categories of New Products Defined According to Their Degree of
Newness to the Company and Customers in the Target Market
Newness to the company
High
10%
20%
New-to-the
world products
New product
lines
26%
Revisions/
improvements to
existing products
11%
Low
Cost
reductions
Low
Additions to
26% existing product
lines
7% Repositionings
High
Newness to the market
Source: New Products Management for the 1980s (New York: Booz, Allen & Hamilton, 1982).
Key question: Is it better to be a
market pioneer, or a follower?
What are the advantages for pioneers?
First choice of market segments and positions
 Defines the rules of the game
 Distribution advantages
 Economies of scale and experience
 High switching costs for early adopters
 Possibility of positive network effects
 Possibility of preempting scarce resources to suppliers

What are the advantages for followers?
Ability to take advantage of pioneer’s positioning mistakes
 Ability to take advantage of pioneer’s product mistakes
 Ability to take advantage of pioneers marketing mistakes
 Ability to take advantage of pioneer’s limited resources

So, when and for whom does it
make sense to pursue a
pioneer strategy?
When and for whom does it make
sense to pursue a follower
strategy?
A pioneering firm…
…stands the best chance for long-term success in market-share
leadership and profitability when:
The new product-market is insulated from the entry of
competitors, at least for a while, by strong patent protection, by
proprietary technology (such as a unique production process), by
substantial investment requirements, or by positive network
effects.
 The firm has sufficient size, resources, and competencies to take
full advantage of its pioneering position and preserve it in the face
of later competitive entries.

A follower
…will most likely succeed when:
 There are few legal, technological, or financial barriers to inhibit
entry.
 It has sufficient resources or competencies to overwhelm the
pioneer’s early advantage.
If you want to be a pioneer, what
are your strategic options?
Under what circumstances might
each option be more likely
to succeed?
Strategic options for pioneers
Mass-market penetration
 Niche penetration
 Skimming and early withdrawal

How might introductory marketing
plans differ under each of these
pioneering strategies?
Once a pioneer’s market becomes
attractive to others, what are the
pioneer’s strategic options?
Under what circumstances might
each option be more likely
to succeed?
Growth stage strategic options for pioneers
Fortress defense
 Flanker defense
 Confrontation
 Market expansion
 Contraction or strategic withdrawal

Exhibit 16.9
Strategic Choices for Share Leaders in Growth Markets
Flanker strategy - Proactive
Flanker strategy - Reactive
COMPETITOR
OR
POTENTIAL
COMPETITOR
Confrontation
strategy
Proactive
Reactive
Fortress
or position
defense
strategy
Contraction
or strategic
withdrawal
LEADER
Market expansion
Source: Adapted from P. Kotler and R. Singh Achrol, “Marketing Warfare in the 1980’s” Reprinted with permission from Journal of Business Strategy, Winter 1981,
pp. 30-41. Copyright © 1981 by Warren, Gorham & Lambert, Inc., 210 South Street, Boston MA 02111. All rights reserved.
If you want to be a follower, what
are your strategic options?
Under what circumstances might
each option be more likely
to succeed?
Strategic options for followers
Frontal attack
 Leapfrog
 Flank attack
 Encirclement

Exhibit 16.12
Strategic Choices for Challengers in Growth Markets
Leapfrog strategy
Flanking attack
TARGET
COMPETITOR
Frontal
attack
CHALLENGER
Encirclement strategy
Source: Adapted from P. Kotler and R. Singh Achrol, “Marketing Warfare in the 1980’s” Reprinted with permission from Journal of Business Strategy, Winter 1981,
pp. 30-41. Copyright © 1981 by Warren, Gorham & Lambert, Inc., 210 South Street, Boston MA 02111. All rights reserved.
Some Advice for
Would-Be Pioneers
First mover advantage is trumped by followers who are better.
Best beats first. Concentrate on being best.
 Being a pioneer without the basis for sustainable competitive
advantage is a trap!

Some Advice for Followers
Differentiation is key for followers
 Better benefits
 Better service
 Lower price
 Beware of competing on price, however, unless your costs
really are lower than competitors’
