Page 30 - Bruce Ellig - The Complete Guide to Executive Compensation (2007)

16 The Complete Guide to Executive Compensation

Market for
Product Company Action
Threshold Risky Invest Maintain Look for
cautiously position change
Growth Invest heavily Stay the Increase Hold market
course market share share
Maturity Look Increase Look for the
elsewhere market share second wave Milk it
Decline Why bother? Watch margins Milk it Milk it
Company Product Threshold Growth Maturity Decline
Lifecycle Stage
Table 1-9. Product vs. market cycle position

Threshold. The threshold stage is the stage where the dream becomes a reality. The idea is
transformed into a product or service and brought to the market. The idea may have been
that of the dreamer, but it is the entrepreneur who capitalizes on it. The dreamer and
entrepreneur may be the same or different individuals.
Before entering the market with a product or service, the company should carefully
examine its potential. Who will be interested in buying it? How much are they willing to pay?
What is the competition? When are competing products likely to enter the market? Where
will it be sold? Why is it expected to be profitable? What resources must be committed?
When? How big is the market? What is its likely lifecycle span?
The long-standing belief is that the first product to enter a market has a major advantage
over those that follow. But the market must accept (and buy) its product for the company to
be successful. If the market fails to do so, a competitor will follow and attempt to convince the
customer that it provides a superior product, be it in terms of price, quality, or service. If the
competitor is successful, the pioneer will likely fail.
During the threshold stage, the company probably has a limited range of closely related
products. Distribution of these products may be primarily in a regional area, the company
may have attained a position of dominance in a small industry, sales are probably under $50
million, and managers are exploring new markets for products.
Decisions are made by individuals, often with little thought or delay and usually on
intuition, as there are few, if any, policies and procedures. Written job descriptions and
organization charts do not exist, and relative duties and responsibilities of individuals have
not been clearly identified. A high degree of overlap in apparent responsibilities exists among
a number of jobs. There is no depth of management.
The tone is casual, with everyone on a first-name basis, and the dress code emphasizes
comfort rather than appearance. Survival of the products has the full attention of everyone.
Cash is scarce and cash flow problems periodically occur, with management often deferring
its own salary payments to ease the crunch. It is a time of high risk in order to survive.
Increased sales and sufficient cash flow to meet needs are key.