Does a firm in SR Corp’s position need to focus its marketing activities? What criteria might be used to prioritize these three market niches?

Question

What will be an ideal response?

Answer 1

The instructor should start this discussion with comments about the importance of strategic focus for technology-based firms. Resource-constrained firms need to focus both their R&D and marketing efforts to achieve commercial success.3 In this case, in order to create leverage, SR Corp needs to pick the most attractive market niche for its new technology, create a “win” with an initial customer, and then aggressively pursue companies similar to that customer, all the time seeking to learn from its successes and mistakes.
The instructor may wish to introduce this part of the case by reviewing the “traditional” approaches to market definition.
The standard criteria that students should identify are
• Current Market Demand
• Future Market Demand (Market Growth)
• Competitive Intensity (at various price-performance tiers of the market)
• Suitability of the Firm’s Sales Force to the Given Segment
These criteria would emerge from a reading of established marketing and strategy texts.4
The instructor should challenge the solidity of these traditional criteria for companies working with emerging technologies and markets such as SR Corp:
• Future market demand is dynamic and highly subjective in terms of the rate of projected growth.
• Competitive intensity is unclear because new competitors tend to “pop out of the woodwork” every six months.
• The suitability of the sales force is really not applicable because SR Corp did not really have a sales force yet, other than Hastings himself. Small firms building novel technology cannot be expected to create a distribution capability well in advance of product completion.
This also raises the question regarding when the company should begin hiring sales staff to supplement Hastings’ own efforts. In the case, the lead investor wanted to see plans for enhancing the firm’s marketing function. Some students may argue that new hires in this area should begin immediately. However, this might be premature. Hastings should be able to “close” two or three initial customers with appropriate assistance from Dr. York and Dr. Schall. Further, additional sales staff at this point in time would probably generate leads that the company could not effectively handle.
It should be noted from the prior discussion that all three market niches had high potential volumes for SR Corp’s technology. The telephone company niche appeared the largest. However, one might argue that too fine a differentiation between markets in terms of sales is useless because the projections of market demands were based on working technology solutions (i.e., 99 percent effective discrete speaker-independent speech recognition). Competitors’ voice button systems provided only 90 percent accuracy.
All three niches were being addressed by significant suppliers, ranging from AT&T, to the Baby Bells, to Northern Telecom, to more recent startups, although none had achieved in excess of 15 percent market share in any niche as a supplier of speech recognition systems. While there was potential “knockout” competition in each of the three niches, no single firm had yet been able to deliver the punch in speaker-independent, discrete technology.
The suitability of the SR Corp’s sales force was not an issue yet; it did not have one. The instructor might ask the students to consider the manner in which selling is done in new firms and what that effort would be like for SR Corp. Hastings, York, and Schall would do the selling and their “pitch” would be first to high-level business executives emphasizing the “value” in the solution.