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July 15, 2007


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Victor Cook, Jr., New Orleans, Louisiana


The short response to the issues you raise is this: Strategic groups are inherently dynamic collections of companies that compete simultaneously for customers and capital. The companies that managers think are their competitors will change from year-to-year, if not from quarter-to-quarter.

The greatest blinder to understanding enterprise marketing was planted in the mind of every business school student by marketing professors themselves: Their micro-marketing perspective says that companies are competitors only if they serve the same customers, fulfill the same needs, and deliver the same solutions. When you add the dimension of competing simultaneously for customers and capital, then throw in the impact of M&A dynamics on the competitive landscape, it's clear that this conventional definition of competition is not up to the job of analyzing enterprise marketing strategies.

Grocery stores in the same trading area with the same mix of products and services that compete for the same customers would fit the micro-marketing definition of competing firms. However, such a narrow focus makes it impossible to conduct an analysis of the competition for shareholder value. You can't measure the market value of a local supermarket because it is not traded on a stock exchange. Such a restrictive definition of a grocery chain strategic group also would exclude Whole Foods Markets Inc. as a competitor of Kroger. This omission would hide useful enterprise marketing information from investors.

Theoretically the companies in a strategic group have (or might acquire) a high degree of market commonality and resource equivalence. If you're interested in the details, see my 11 minute Adobe Connect presentation "Who's in My Strategic Group?" at http://breeze.tulane.edu/cookchapterthree/

What does this mean in practical terms? The companies currently (or might in the future) share a lot of customers and have similarly deep pockets. Using these criteria the five "investment banks" in my analysis can properly be treated as strategic group. Many others also could be included, especially European and Asian banks, that are beginning to make inroads in U.S. markets.

A trade-off between "deep pockets" and "shared customers" is involved in the definition of a strategic group. In the broadest sense, every firm is in competition with all other firms in its competition for capital; however, a limit is imposed by the requirement for some level of current (or anticipated) product market commonality. Otherwise, we lose an important dimension of the competitive effects (shared customers) embedded in a strategic group. In the narrowest sense, there exist few pure competitors for a firm’s customers since its products are, to some extent, unique.

My goal in this analysis was to achieve a balance between the market commonality and resource equivalence among investment banks. In addition, I wanted a definition that will be meaningful in the future. Ask yourself: Do these investment banks fill this bill?

Subtracting Citigroup's non-overlapping revenues will not improve the analysis because you cannot subtract that portion of its market cap created by those revenues. Enterprise marketing requires a new and different perspective on competition.

Thanks for your comments.



The concept you describe may have merit, but it can only be useful if markets are defined correctly.

For example, if you look at the revenues and earnings of Citigroup and Goldman, you will find that Citi participates in many markets that Goldman does not participate.

Thus to make a meaningful comparison between Citi and GS, you should subtract from Citi's totals the revenues and ascribed market value for activities in which GS does not compete. Only then can you make a direct comparison between Citi and Goldman.

Now, the comparsion may be somewhat more valid between Citi and MER and MS, because MER and MS engage in a broader range of activities. But, even MER and MS do not really compete over the broad range of Citi's activities.

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