The American Legal System

• Constitutional Law is based on a formal document that defines broad powers. Federal constitutional law originates from the U.S. constitution. State constitutional law originates from the individual state constitutions.
• Statutes and Ordinances are legislation passed on the federal, state, or local levels.
• Common Law is based on the concept of precedence - on how the courts have interpreted the law. Under common law, the facts of a particular case are determined and compared to previous cases having similar facts in order to reach a decision by analogy. Common law applies mostly at the state level. It originated in the 13^th century when royal judges began recording their decisions and the reasoning behind the decisions.
• Administrative Law - federal, state, and local level. Administrative law is made by administrative agencies that define the intent of the legislative body that passed the law.

The sources of law have both vertical and horizontal dimensions. Vertical dimensions include federal authority, state authority, and concurrent authority. Federalism refers to this form of government, in which there is national and local authority. Federal authority covers laws related to patents, pensions and profit sharing, and labor issues. State authority covers business association, contracts, and trade secrets. Concurrent authority covers security law, tax law, and employment law. Note that employment law refers to non-union relationships; labor law refers to union relationships.

The horizontal dimension is related to the separation of power between the executive branch, which creates administrative law, the legislative branch, which creates statutes, and the judicial branch, which creates common law. The judicial system in the U.S. has a pyramid structure consisting of fewer higher level courts and more lower level courts:


-- Supreme Court --
--------- Appellate Courts ---------
-------------------- Trial Courts ---------------------

Actually, there are two pyramid structures - one for federal courts and one for state courts. State courts may use different terminology; for example, trial courts may be called courts of common plea, appellate courts may be called superior courts or commonwealth courts.

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Dynamic Product Management Strategies

Two fundamental issues of product management are whether to pioneer or follow, and how to manage the product over its life cycle.

Order of market entry is very important. In fact, the forecasted market share relative to the pioneering brand is the pioneering brand's share divided by the square root of the order of entry. For example, the brand that entered third is forecasted to have 1/√3 times the market share of the first entrant (Marketing Science, Vol. 14, No. 3, Part 2 of 2, 1995.) This rule was determined empirically.

The pioneering advantage is obtained from both the supply and demand side. From the supply side, there are raw material advantages, better experience effects to provide a cost advantage, and channel preemption. On the demand side, there is the advantage of familiarity, the chance to set a standard, and the choice of perceptual position.

Once a firm gains a pioneering advantage, it can maintain it by improving the product, creating a standard, advertise that it was the first, and introduce a new product in the market that may cannibalize the first but deter other firms from entering.

There also are disadvantages to being the pioneer. Being first allows a competitor to leapfrog the early technology. The incumbent develops inertia in its R&D and may not be a flexible as newcomers. Developing an industry has costs that the pioneer must bear alone, and the way the industry develops and its potential size are not deterministic.

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Multi-Product Resource Allocation

The most common resource allocation methods are:

• Percentage of sales
• Executive judgement
• All-you-can-afford
• Match competitors
• Last year based

Another method is called decision calculus. Managers are asked four questions:

What would sales be with:

1. no sales force
2. half the current effort
3. 50% greater effort
4. a saturation level of effort.

From these answers, one can determine the parameters of the S-curve response function and use linear programming techniques to determine resource allocations.

Decision algorithms that result in extreme solutions, such as allocating most of the sales force to one product while neglecting another product often do not yield practical solutions.

For mature products, sales increase very little as a function of advertising expenditures. For newer products however, there is a very positive correlation.

Portfolio models may be used to allocate resources among major product lines or business units. The BCG growth-share matrix is one such model.

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Marketing Research for Strategic Decision Making

The two most common uses of marketing research are for diagnostic analysis to understand the market and the firm's current performance, and opportunity analysis to define any unexploited opportunities for growth. Marketing research studies include consumer studies, distribution studies, semantic scaling, multidimensional scaling, intelligence studies, projections, and conjoint analysis. A few of these are outlined below.

Semantic scaling: a very simple rating of how consumers perceive the physical attributes of a product, and what the ideal values of those attributes would be. Semantic scaling is not very accurate since the consumers are polled according to an ordinal ranking so mathematical averaging is not possible. For example, 8 is not necessarily twice as much as 4 in an ordinal ranking system. Furthermore, each person uses the scale differently.

Multidimensional scaling (MDS) addresses the problems associated with semantic scaling by polling the consumer for pair-wise comparisons between products or between one product and the ideal. The assumption is that while people cannot report reliably which attributes drive their choices, they can report perceptions of similarities between brands. However, MDS analyses do not indicate the relative importance between attributes.

Conjoint analysis infers the relative importance of attributes by presenting consumers with a set of features of two hypothetical products and asking them which product they prefer. This question is repeated over several sets of attribute values. The results allow one to predict which attributes are the more important, the combination of attribute values that is the most preferred. From this information, the expected market share of a given design can be estimated.

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The Case of Barco

In late 1989, Barco N.V.'s projection systems division was faced with Sony's surprise introduction of a better graphics projector. Barco had been perceived as a leader, introducing high quality products first and targeting a niche market that was willing to pay a higher price. Being a smaller company, Barco could not compete on price, so it traditionally pursued a skimming strategy in the graphics projector market, where it had a 55% market share of the small market. Barco's overall market share for all types of projectors was only 4%.

Even though Barco's market was mainly in graphics projectors, the company had not introduced a new graphics projector in over two years. Instead, it was spending a large portion of its R&D budget on video projector products. However, video projectors were not Barco's market.

Barco's engineers had been working long hours on their new projector that would not be as good as Sony's. Some people thought they should not stop work on that product since the engineers' morale would suffer after being told how important it was to work hard to get the product out. However, even considering the morale of the product team, it would not have been a good idea to introduce a product that was inferior to that of Sony. Barco wisely stopped working on the inferior product and put a major effort in developing a projector that outperformed Sony's.

The Barco case illustrates several marketing strategy concepts:

• Price / Selling Effort Strategies: A firm that follows a skimming strategy seeks to be the first to introduce a product with very good performance, selling it to the innovator market segment and charging a premium price for it. It makes as much profit as possible, then moves on when the competition arrives. The price is likely to fall over time as competition is encountered. Such a skimming strategy contrasts with a penetrating strategy, which seeks to gain market share by sacrificing short-term profits, and increasing the price over time as market share is gained.
• Competitors have certain strengths and abilities. To succeed, a firm must leverage its own unique abilities.
• A firm should prepare defensive strategies before potential threats arrive. If the competition surprises a firm with the introduction of a vastly superior product, the firm should resist the temptation to proceed with its mediocre product. A firm never should introduce a product that is obsolete when it hits the market.
  
• The competition's probable response to a firm's actions should be considered carefully.

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Marketing Strategy

The marketing concept of building an organization around the profitable satisfaction of customer needs has helped firms to achieve success in high-growth, moderately competitive markets. However, to be successful in markets in which economic growth has leveled and in which there exist many competitors who follow the marketing concept, a well-developed marketing strategy is required. Such a strategy considers a portfolio of products and takes into account the anticipated moves of competitors in the market.

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Retailers Are Wary of the Smartphone Wielding Shoppers

In a previous post, we noted how consumers are becoming smarter shoppers and how technology is playing a key role.  As technology continues to advance us to having instant access to almost anything, retailers are facing a host of issues with repercussions that could change how retailing is done.  Thanks to such technologies as search engines, product rating sites and mobile devices, today’s consumers are in a far better position to assess the value of a purchase than they have ever been.  While the average consumer does not yet possess the product comparison and negotiation skills of a corporate purchasing agent, technology is helping them get closer.

The ramifications for retailers of tech-savvy consumers are tremendous, especially in terms of consumers’ use of mobile devices.  While store-based retailers are accustom to dealing with educated customers (i.e., shoppers who have done their research), before mobile technology these retailers at least had an advantage of providing something new once the consumer walked into the store.  The retailer could offer updated product details, new promotions, new pricing and other information the consumer did not know before the store visit and, consequently, could not easily research while in the store.  However, with today’s mobile technologies even new information can be quickly researched by shoppers while they are still in the store.

As explained in this story, one of the key bits of information in-store consumers seek with their mobile devices is a price comparison.  Shoppers can use smartphones and even pad technologies (e.g., iPad) to quickly search other retailers to determine whether the product sitting in front of them on a display table is actually a bargain.  Even easier, snapping a picture of a product’s UPC code using a smartphone camera can provide the consumer with a list of places selling the same product and the prices they are charging.

But, things do not just end with a search.  Possibly, the biggest slap in the face of store-based retailers comes from consumers who are willing to wait to acquire the product.  These consumers may window shop at the physical store and while still in the store place the order for the product with another retailer who will ship it directly to their residence, often at no charge.

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