The Market Makers: How Leading Companies Create and Win Markets

Citation

(1999), "The Market Makers: How Leading Companies Create and Win Markets", The Bottom Line, Vol. 12 No. 2. https://doi.org/10.1108/bl.1999.17012bad.003

The Market Makers: How Leading Companies Create and Win Markets

The Market Makers: How Leading Companies Create and Win MarketsDaniel F. Spulber,BusinessWeek Books, McGraw HillNew York1998

Keywords: Markets, Strategies

The focus of this book is winning in business. "Market makers" are those innovative companies that are continually leading their industry or doing what it takes to become the leaders of tomorrow. They are those companies that realize that competition means outperforming all other companies in their industry. Companies succeed by focusing on activities that provide the greatest economic value added. Thus, successful companies are "market makers," in that they operate the institutions of exchange, earn economic rents from continually monitoring market forces and then arbitraging across markets, supply intermediation services to their customers and suppliers and create networks of suppliers and distributors. In this way, companies create and manage their markets and earn returns by providing efficient transactions.

The first two chapters of this book discuss why winning markets is important and why winning is a value worth having. Success in winning the market requires adopting new strategies and rethinking the mission and methods of business. To help companies understand the process, the author introduces his key conceptual framework for winning markets, the Main framework. Key elements of the Main framework are market making, arbitrage, intermediation services and networking. Then he discusses how to apply the aforementioned key elements to competitive strategy making and he sets out four market-entry strategies that are based on the Main framework. Spulber then explores indirect methods of competition through which companies gain strength by serving markets that have been missed by incumbent companies. He follows this analysis by analyzing offensive and defensive strategies for head to head competition.

Part II, "Building market bridges", discusses how a firm creates value by using the key elements of the Main framework. In this part, he emphasizes the value of arbitrage. Although all the strategies and practical applications of the Main framework are aimed at directing the efforts of companies toward winning the market. Winning is the driving force of business which motivates managers and employees to keep focused on the common goal. This motivation to win is what stimulates innovation, improves product quality and generates productive efficiency. Winning markets means that the firm not only creates and operates the institutions of exchange but also creates value by making the market through its pricing and coordination activities. However, to arbitrage effectively, the firm must have better market information, be able to respond to opportunities as they develop quicker than the competition and must execute exchanges efficiently and with lower transaction costs than competitors. Within this main frame of reference, intermediation means that based on the information which the firm has acquired about the market, it is able to be the bridge between the suppliers and its customers by playing the role of agent, monitor, broker and communicator of information to the consumer. In order for a firm to continually win markets, it must incessantly push out the boundaries of the envelope. It does this by extending the size of its organization and its market network. The expansion of its market network is done by a combination of internal growth, contracts, strategic alliances and mergers.

In the first four chapters of Part II of this book Spulber presents as the foundation of competitive strategic thinking, his Main framework. Basically, these chapters utilize the aforementioned key elements as the pivots on which firms can base competitive strategies. To this end he draws insights from game theory, military strategy and management strategy. Part III, "Market strategies", sets out four entry strategies that demonstrate how firms can win markets and compete against alternative market organizations. In summary, Part II presents strategies for building market bridges, while Part III applies these concepts to the design of competitive strategies for winning markets.

This book should be read by those determined not only to plan out winning business strategies but also to execute those strategies practically in the world of business. The book derives from a particular cultural mindset in which the highest value is placed on winning markets and doing it "right". I would recommend this book for students of business in the broadest possible sense. These should include undergraduates and graduate students, managers, marketers, venture capitalists, consultants, strategy researchers and those who are not squeamish about doing what it takes to win.