The 3C Model of
Kenichi Ohmae, a famous Japanese strategy guru, stresses that a strategist
should focus on three
key factors for success.
"In the construction of any business
strategy, three main players must be taken into account:
Only by integrating the three C's (Customer, Competitor, and Company), sustained
competitive advantage can exist. He refers to these key factors as the three C's or
3C Model: Customer-based
the basis of all strategy. ..."There is no doubt that a corporation's
foremost concern ought to be the interest of its customers rather than
that of its stockholders and other parties. In the long run, the
corporation that is genuinely interested in its customers is the one that
will be interesting to investors".
Segmenting by objectives:
Here, the differentiation is done in terms of the different ways different
customers use the product. Take coffee, for example. Some people drink it
to wakeup or keep alert, while others view coffee as a way to relax or
socialize (coffee breaks).
Segmenting by customer coverage:
This type of strategic segmentation normally emerges from a trade-off
study of marketing costs versus market coverage. There appears always to
be a point of diminishing returns in the cost-versus-coverage
relationship. The corporation's task, therefore, is to optimize its range
of market coverage, be it geographical or channel, so that its cost of
marketing will be advantageous relative to the competition.
Resegmenting the market:
In a fiercely competitive market, the corporation and its head-on
competitors are likely to be dissecting the market in similar ways. Over
an extended period of time, therefore the effectiveness of a given initial
strategic segmentation will tend to decline. In such a situation it often
pays to pick a small group of key customers and reexamine what it is that
they are really looking for.
Changes in customer mix:
Such a market segment change occurs where the forces at work are altering
the distribution of the user-mix over time by influencing demography,
distribution channels, customer size, etc. This kind of change calls for
shifting the allocation of corporate resources and/or changing the
absolute level of resources committed in the business, failing which
severe losses in the market share can occur.
3C Framework: Corporate-based strategies. They aim to maximize the corporation's
strengths relative to the competition in the functional areas that are
critical to success in the industry.
Selectivity and sequencing:
In order to win the corporation does not need to have a clear lead in
every function from sourcing to functioning. If it can gain a decisive
edge in one key function, it will eventually be able to pull ahead of the
competition in other functions that may now be no better than mediocre.
A case of make or buy:
In case of rapidly rising wage costs, it becomes a critical decision for a
company to subcontract a major share of its assembly operations. Its
competitors may not be able to shift production so rapidly to
subcontractors and vendors, and the resulting difference in cost structure
and/or in the company's ability to cope with demand fluctuations could
have have significant strategic implications.
This can be done in three basic methods. The first is by reducing basic
costs much more effectively than the competition. The second method is
simply to exercise greater selectivity in terms of orders accepted,
product offered, or functions to be performed which means cherry-picking
the high-impact operations so that as others are eliminated, functional
costs will drop faster than sales revenues. The third method is to share a
certain key function among the corporation's other businesses or even with
other companies. Experience indicates that there are many situations in
which sharing resources in one or more basic sub-functions of marketing
can be advantageous.
3C Concept: Competitor-based strategies according to Kenichi Ohmae
can be constructed by looking at possible sources of differentiation in
functions ranging from purchasing, design, and engineering to sales and
The power of an image:
Both Sony and Honda outsell their competitors as they invested more
heavily in public relations and promotion and managed these functions more
carefully than did their competitors. When product performance and mode of
distribution are very difficult to differentiate, image may be the only
source of positive differentiation. But as the case of the Swiss watch
industry reminds us, a strategy built on image can be risky and must be
Capitalizing on profit- and cost-structure differences:
Firstly, the difference in source of profit might be exploited, for e.g.
profit from new product sales, profit from services etc. Secondly, a
difference in the ratio of fixed cost to variable cost might also be
exploited strategically for e.g. a company with a lower fixed cost ratio
can lower prices in a sluggish market and win market share. This hurts the
company with a higher fixed cost ratio as the market price is too low to
justify its high-fixed-cost-low-volume operation.
Tactics for flyweights:
If such a company chooses to compete in mass-media advertising or massive
R&D efforts, the additional fixed costs will absorb such a large portion
of its revenue that its giant competitors will inevitably win. It could
though calculate its incentives on a graduated percentage basis rather
than on absolute volume, thus making the incentives variable by
guaranteeing the dealer a larger percentage of each extra unit sold. The
Big Three, of course, cannot afford to offer such high percentages across
the board to their respective franchised stores; their profitability would
soon be eroded if they did.
A favorite phrase of Japanese business planners is hito-kane-mono, or
people, money, and things (fixed assets). They believe that streamlined
corporate management is achieved when these three critical resources are
in balance without any superfluity or waste. For example cash over and
beyond what competent people can intelligently expend is wasted. Again too
many managers without enough money will exhaust their energies and involve
their colleagues in time-wasting paper warfare over the allocation of the
limited funds. Of the three critical resources, funds should be allocated
last. Based on the available mono-plant, machinery, technology, process
know-how, functional strengths and so on-the corporation should first
allocate management talent. Once these hito have developed creative,
imaginative ideas to capture the business's upward potential, the kane, or
money, should be allocated to the specific ideas and programs generated by
Book: Kenichi Ohmae - The Mind Of The Strategist: The Art of Japanese
Book: Kenichi Ohmae - The Invisible Continent : Four Strategic Imperatives
of the New Economy
T I P : Here you can discuss and learn a lot more about the 3C's Model of Ohmae.
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