Based on his observations of market maker companies such as The Gap, Southwest Airlines, NationsBank, Microsoft, Dell Computer, Wal‐Mart, Charles Schwab, Sun Microsystems and Toyota and many others, Daniel F. Spulber presents a dynamic approach to management strategy. This management strategy provides us with a frame of reference within which innovative companies, i.e. market makers, succeed by building bridges between their customers and their suppliers of capital, services, manufactured input and technology. These market makers have succeeded by continually developing innovative transactions that have made them the focal point of the industry that they serve. Thus customers and suppliers benefit from lower transaction costs, innovative products and services and economic growth which companies that win their markets by delivering superior performance provide. Given the aforementioned, the author develops a theory of competitive strategy based on innovation and creativity in managing a company′s market. To this end, each step in the process of creating market makers is illustrated with practical applications from the experiences of successful market maker companies, as well as the experiences of less successful ones. Secondly, the author states that the introduction of these new types of strategies for winning markets requires rethinking the mission and methods of business.
To assist companies to follow the route of the market makers, Daniel F. Spulber presents how companies aspiring to be market makers must operate. These elements consist of the ABCs of Market Making, Arbitrage, Intermediation and Networking. Firms make the market by creating the institutions of exchange and managing the transactions. The value added by firms as a result of their market making activities reflects not only the transformation of productive inputs into outputs but also, the bringing together of primary suppliers and final customers. Included within the wide range of a firm′s market making activities are:
price‐setting;
market clearing;
coordinating exchanges;
allocating goods and services.
To arbitrage effectively a firm must have reliable market information, must be able to quickly respond to opportunities as they develop, and must execute exchanges efficiently with lower transaction costs than competitors. This allows profit making based on recognizing and taking advantage of price differences arising between markets separated by Space, Time, Uncertainty and Technology. Companies also provide a complex set of Intermediation Services in which they act as:
agent;
monitor;
broker;
communicator.
These four roles highlight the role of the firm as a bridge between its suppliers and its customers. All these activities are based on information. In the realm of networking, the firm′s market networking relationships are at least as important as its organizational structure and internal management. These relationships can be formal contracts, informal working partnerships, or strategic alliances. The relationships, which a company forges with its suppliers and customers, are the source of its added value. This insight needs to be integrated into management strategy. The firm must decide which activities must be carried out internally and which should be taken in cooperation with suppliers and distributors. Thus the firm chooses between extending its organization or developing its market network.
After presenting his main framework, Spulber discusses how to apply it to competitive strategy making. To this end, he explores the area of indirect methods of competition. Indirect competition takes place when companies serve markets missed by other companies. He goes on to discuss offensive and defensive strategies for head to head competition. Spulber states that regardless of the type of competition, in which a firm is engaged, the focus must be on winning markets. Winning markets means that a company must not only provide a better quality product at lower prices but also provide more convenient service than the competition. Convenient service should translate into lower transaction costs for customers and suppliers.
This book is organized into three parts. In Part 1, Winning Markets, the author states that to win markets the firm must create and operate the institutions of exchange by creating value not only through its pricing and coordinating activities but also, in its role as intermediary, in which it provides valuable information and coordination services for its customers and suppliers. This in turn leads to the creation of innovative transactions that earn arbitrage profits for the firm. This striving to win is much more than competition for its own sake. The winning firm, by following an effective strategy establishing an effective organization and encouraging continual innovation, achieves recognition from its suppliers and customers as a market leader. This leads to enhanced favorable contract terms and investor willingness to supply funds for growth at a lower cost.
The second part of this book, Building Market Bridges: The Main Framework, (Chapters 3‐6) discusses how a firm creates value. To this end the author analyses in depth the meaning of Market Making, Arbitrage, Intermediation and Networking. In this section, also, Spulber examines how a firm′s market making activities such as pricing, coordinating exchange, clearing the market and allocating goods and services serve to connect markets and discover new innovative connections between their upstream and downstream markets. Consequently by expanding both their organization and their market network, firms grow and create value.
Part III, Market Strategies (Chapters 7‐9), Spulber presents the basic elements of the strategies required to win markets. In this discussion, Spulber demonstrates how firms compete against alternative forms of market organizations. For example, a firm can follow a strategy that enables it to go between buyers and sellers; or second, follow one that enables the firm to consolidate smaller distributors and suppliers; or third, it can bypass distributors and search for customers directly; or fourth, a firm can connect with its distributors and suppliers through contracts and alliances. In addition, Spulber also shows how companies can penetrate a market neglected by major rivals and grow without directly confronting powerful rivals. Spulberg′s strategies are applicable to any organization, especially libraries. By mastering the workings of your library, whether that be within non‐profit or profit making organizations that generate competitive strategies by cultivating funders, buyers/clients and sellers of goods and services so as to enhance the organization′s value. The author′s innovative ideas go beyond traditional thinking and has infused a realm of strategic thinking in such a manner that non‐profits managers would be wise to read this book and apply its ideas to the competitive world of fund raising.
