NEW YORK: Wal-Mart and Procter & Gamble are examples of brand owners which have found "one way to compete", helping them successfully stand out from the competition.
Research by Paul Leinwand and Cesare Mainardi, of Booz and Co, found manufacturers that emphasise short-term revenue gains and move into categories outside of their fields of expertise generally run the risk of failure.
"Companies succumb to intense pressure for top-line growth and chase business in markets where they don't have the capabilities to sustain success," they said.
"Attempts at growth emanate not from the core but from the acquisition of 'adjacencies' and the exploration of market opportunities that don't align properly with their central strengths."
In contrast, firms like Procter & Gamble, Coca-Cola, Mars and Wrigley have each displayed a tight focus on their unique advantages, and have all benefited from a "coherence premium" as a result.
"They figure out what they are really good at and then develop those three to six capabilities, which can involve anything from knowledge to processes to tools, until they are interlocking and best in class," said Leinwand and Mainardi.
P&G's mantra of "touching and improving" the lives of consumers is one example of how a corporation can locate its "sweet spot" by understanding the value it alone can provide to customers.
More specifically, this requires adopting a common position wherever an organisation faces the market, alongside building a coherent portfolio which is targeted at identifiable groups of consumers.
Wal-Mart has prospered from utilising this kind of approach in a bid to connect with its core audience, which it has defined as the "ceo mom".
The retailer has effectively leveraged its four key strengths, which take the form of "aggressive vendor management", "expert point-of-sale data analytics", "superior logistics" and "working-capital management".
"Every Wal-Mart product and service fits with the company's 'way to play' - its 'Everyday low prices' - and capabilities system. It's coherence at its finest," Leinwand and Mainardi said.
Pfizer, the pharmaceutical specialist, also transformed its consumer healthcare arm through an expertly executed restructuring programme in 2002, and then sold it on for a substantial profit.
In the first instance, Pfizer clearly outlined its priorities, which included science-led innovation and making the switch from prescription to over-the-counter products.
Other outcomes from this process were the employment of "claims-based marketing featuring a demonstrable health benefit" and "focused portfolio management of aggressive and moderate growth brands."
Pfizer thus sold its confectionary and shaving brands, and centred its attention on ranges like Listerine, Zyrtec and Nicorette, which were supported at "above market rates."
It also extended its reach by acquiring new brands, like Purell, which played a distinctive role in the segment the company was seeking to expand in to.
"Pfizer consumer healthcare became a premier company in its category, delivering a growth rate double the industry average," Leinwand and Mainardi said.
In contrast, ConAgra Foods and Sara Lee both suffered from building up broad stables of products which covered too many categories, and only generated moderate increases in sales as a consequence.
These firms have since started to streamline their operations and improve their performance, but are still endeavouring to catch up with some of their biggest rivals.
Research by Paul Leinwand and Cesare Mainardi, of Booz and Co, found manufacturers that emphasise short-term revenue gains and move into categories outside of their fields of expertise generally run the risk of failure.
"Companies succumb to intense pressure for top-line growth and chase business in markets where they don't have the capabilities to sustain success," they said.
"Attempts at growth emanate not from the core but from the acquisition of 'adjacencies' and the exploration of market opportunities that don't align properly with their central strengths."
In contrast, firms like Procter & Gamble, Coca-Cola, Mars and Wrigley have each displayed a tight focus on their unique advantages, and have all benefited from a "coherence premium" as a result.
"They figure out what they are really good at and then develop those three to six capabilities, which can involve anything from knowledge to processes to tools, until they are interlocking and best in class," said Leinwand and Mainardi.
P&G's mantra of "touching and improving" the lives of consumers is one example of how a corporation can locate its "sweet spot" by understanding the value it alone can provide to customers.
More specifically, this requires adopting a common position wherever an organisation faces the market, alongside building a coherent portfolio which is targeted at identifiable groups of consumers.
Wal-Mart has prospered from utilising this kind of approach in a bid to connect with its core audience, which it has defined as the "ceo mom".
The retailer has effectively leveraged its four key strengths, which take the form of "aggressive vendor management", "expert point-of-sale data analytics", "superior logistics" and "working-capital management".
"Every Wal-Mart product and service fits with the company's 'way to play' - its 'Everyday low prices' - and capabilities system. It's coherence at its finest," Leinwand and Mainardi said.
Pfizer, the pharmaceutical specialist, also transformed its consumer healthcare arm through an expertly executed restructuring programme in 2002, and then sold it on for a substantial profit.
In the first instance, Pfizer clearly outlined its priorities, which included science-led innovation and making the switch from prescription to over-the-counter products.
Other outcomes from this process were the employment of "claims-based marketing featuring a demonstrable health benefit" and "focused portfolio management of aggressive and moderate growth brands."
Pfizer thus sold its confectionary and shaving brands, and centred its attention on ranges like Listerine, Zyrtec and Nicorette, which were supported at "above market rates."
It also extended its reach by acquiring new brands, like Purell, which played a distinctive role in the segment the company was seeking to expand in to.
"Pfizer consumer healthcare became a premier company in its category, delivering a growth rate double the industry average," Leinwand and Mainardi said.
In contrast, ConAgra Foods and Sara Lee both suffered from building up broad stables of products which covered too many categories, and only generated moderate increases in sales as a consequence.
These firms have since started to streamline their operations and improve their performance, but are still endeavouring to catch up with some of their biggest rivals.
Data sourced from Booz & Co; additional content by Warc staff
