Principale of Marketing
Week #2.b
Differentiation + Cost Leadership
- how could you be both? And still be successful?
- When you come into the market with a new business model you are able to do both
- EXAMPLE: Dell was the first to sell online - they sold cheaper than in store. * IBM followed suit by lowering prices - lowering profit * Dell revolutionized sales * How? Instead of selling to the retailers, where they make 60% profit, they make the profit. They sell wholesale. Cut out the middle man. * They took cost leadership in wholesale computers * They were able to differentiate by selling online and with the extra money they are able to advertise. * IBM suffers * This is a new business model - selling online
Innovation
* innovation that works is not based on a new product * instead you need to create a new business model * Steve Jobs (Apple) invented iTunes - instead of selling CD's for $20, you could download songs for $.99 * Google in 2000 won the search engine competition. The innovation was the business model. Google posted advertisements which led to it's road to fame. * AIG insurance company came to Israel. It challenged the Israeli insurance companies, like Migdel. They knew it would take 1 -2 years before AIG would be situated in the market. Howveer they did not retaliate. AIG has a new business model, and goes directly to the customer, instead of through agents, like what Migdel had. Migdel agents would achieve 30% profit, whereas, AIG cut out the middle man, achieved 15% profit, and thus were able to sell the policies cheaper. * Stint (a small spring that you can insert into your heart arteries, inorder to clear them). Johnson and Johnson invented the stint 20 years ago. First model; it enlarges the arteries, but then the body responses by attacking the stint because they recognize it as a foreigner. So, due to this response, the person with a stint usually has another heart attack, and the doctors then stick
Differentiation + Cost Leadership
- how could you be both? And still be successful?
- When you come into the market with a new business model you are able to do both
- EXAMPLE: Dell was the first to sell online - they sold cheaper than in store. * IBM followed suit by lowering prices - lowering profit * Dell revolutionized sales * How? Instead of selling to the retailers, where they make 60% profit, they make the profit. They sell wholesale. Cut out the middle man. * They took cost leadership in wholesale computers * They were able to differentiate by selling online and with the extra money they are able to advertise. * IBM suffers * This is a new business model - selling online
Innovation
* innovation that works is not based on a new product * instead you need to create a new business model * Steve Jobs (Apple) invented iTunes - instead of selling CD's for $20, you could download songs for $.99 * Google in 2000 won the search engine competition. The innovation was the business model. Google posted advertisements which led to it's road to fame. * AIG insurance company came to Israel. It challenged the Israeli insurance companies, like Migdel. They knew it would take 1 -2 years before AIG would be situated in the market. Howveer they did not retaliate. AIG has a new business model, and goes directly to the customer, instead of through agents, like what Migdel had. Migdel agents would achieve 30% profit, whereas, AIG cut out the middle man, achieved 15% profit, and thus were able to sell the policies cheaper. * Stint (a small spring that you can insert into your heart arteries, inorder to clear them). Johnson and Johnson invented the stint 20 years ago. First model; it enlarges the arteries, but then the body responses by attacking the stint because they recognize it as a foreigner. So, due to this response, the person with a stint usually has another heart attack, and the doctors then stick