The 3C model by Kenichi Ohmae
The 3C model has been given by well known business strategist of Japanese origin, Kenichi Ohmae. The 3 C's of the model stands for:
- The Corporation,
- The Customer, and
- The Competition
According to Kenichi Ohmae if success is to be achieved, then the business strategy making process should incorporate the above three players. These three players form the strategic triangle and their integration can give sustainability and competitive advantage to a business.
1. Strategies based On Corporation
These are the strategies which focus upon the strength of the corporation in functional areas in relation to the competition. According to Ohmae, the exploration of these functional areas is critical for achieving success in the industry in which the organization operates.
Selectivity or sequencing
It is not necessary that the organization has to lead in every area to achieve success. It can select and work on a specific functional area so that it gets a clear edge in that particular area in relation to its competitors. The other areas will follow suit and improve with time.
Make or buy
Markets often see increase in wage cost. In these situations, a company can subcontract a major percentage of assembly operations it undertakes. When the competitors are unable to shift to vendors and subcontractors in a rapid manner, then the difference that will arise in the cost structure of the company and/or the company's ability or inability in coping with the demand fluctuations can have strategic implications that can be significant as well.
Improvement in cost effectiveness
There are three methods to achieve cost effectiveness. The first method is to reduce the basic costs involved. The second method is to exercise greater selectivity in accepting orders, in offering company's products and in performing company's functions. The third method is to share a key function within the corporation or with other companies. Sharing of resources has been found to be advantageous in marketing.
2. Strategies based on Customers
According to Ohmae, the clients of any company form the main basis of making any business strategy. A business corporation which is genuinely interested in its customers will be able to gain more investor confidence. Therefore the interest of customers should be given top priority while devising a strategy.
Segmentation of the market can be done in three ways:
1. Market segmentation on the basis of objectives- The market can be segmented on the basis of the ways by which the customer uses a product. If we take motorcycles as an example, then the market can be segmented into customers who use the motorcycle for doing adventure riding and for experiencing thrill and those customers which use a motorcycle to commute to their offices or business places.
2. Market Segmentation on the basis of customer coverage- The tradeoff study of
Market versus market costs can give points on the basis of which a market can be segmented. A point of diminishing returns can be always found in the cost versus coverage relationship graph. A company should therefore work to optimize the market it covers channel wise or according to geography.
3. Re-segmenting the market- In a fierce competition, it is likely that two or more corporations dissect the market into segments on similar lines. Over a period of time this segmentation will loose its relevance. It is better to re-examine the market by getting the preferences of a group of key customers. The re-segmentation of the market can be done on the basis of it.
3. Strategies based on competitors
Competitor based strategies can be made by looking into various sources of differentiation in company functions like engineering, design, purchase, sales and servicing. The following aspects can be a source of differentiation:
1. Power of image-When it is difficult to distinguish between the product's performance and mode of distribution, then image can be a source of differentiating in a positive manner.
2. Capitalization on profit and cost structure differences-The differences in the source of profit can be exploited first. Then, the difference in the ratio between fixed cost and variable cost can also be exploited. For example, a company that incurs low fixed costs can lower the prices of its products/services (in a relatively sluggish market) and gain more market share.
3. Hito-Kane-Moto- It is Japanese phrase used by the Japanese business planners which means people (hito), money (kane) and things (mono). By things they mean the fixed assets of any company. They believe that for achieving streamlined management of the corporation, these three highly critical resources should be in balance and there should be no waste or surplus of any of them. People or the management talent has to be allocated at the start of the business operations on the basis of fixed assets like plant, machinery, process know-how, technology and functional strength. When the people develop creative ideas which propel the business in the forward direction, then money can be allocated to develop the ideas given by the managers. The allocation of money or funds has to be done at the last stage.