You are the CIO of RaumCo a company that creates and sells h

You are the CIO of RaumCo, a company that creates and sells high quality stereo equipment. Your company currently holds 28 percent of market share, with over 3,000 employers operating in six countries. You have just finished reading The Long Tail by Chris Andersen and The Innovator\'s Dilemma by Clayton Christensen, and you are interested in determining how you can grow your business while reducing costs. In a brief 2-page essay summarize each book and explain how RaumCo could implement the strategies explained in each book to create competitive advantage and increase sales.

Solution

RaumCo. can gain significantly in future and improve their business prospects by applying key insights presented by author Chris Andersen in his book The Long Tail. The book states that products that are in low demand or products that have low sales volume can come together and collectively build a stronger market share for themselves. For this the companies will need large storage and distribution channels. What this necessarily means that even if the sales volume of a particular product is low an organization can still have a strong business model by selling a large number of different items.

As RaumCo. is present in six different countries it can easily focus on selling its products in large quantities in all the countries combined. This is a pragmatic strategy that should be followed given the fact that the traditional market for hit products and services is declining and is being replaced by a new niche market. Going forward it will not be possible to rely on best seller products to make efficient use of distribution channels, storage space, and all other elements in supply chain model involving costs and overheads. As consumers are now more networked and are looking more and more at the digital space the relevance of traditional costing is declining.

RaumCo., in future, can sell its existing niche products as well as develop and sell new niche products, economically. This was not possible in the post due to cost inefficiencies. However, going forward, the company will use its presence to sell large quantities of its niche products to make its cost model work in its favor.

The company will have to embrace the fact that efficiencies in distribution, manufacturing and marketing is changing and it should be ready to take advantage of these changes in the long run.

RaumCo. will also gain its business prospects significantly by applying the key learning from Clayton Christensen’s book – The Innovator’s Dilemma. In this book Mr. Christensen says that companies should focus on disruptive innovation and should not look at innovating and building and developing new products for the incumbent customers. This is because disruptive innovations and disruptive technologies have a fluid future and can have long term positive ramifications for an organization.

It is important for RaumCo. to harness the principles of disruptive innovation. It is a fact that RaumCo. depends on its customers as well as its investors for resources. So when we are facing the challenges posed to us by a disruptive innovation or a disruptive technology it is very important for us to set up an autonomous organization that will be charged with developing a business model that will be new as well as be independent and will be structured around the disruptive innovation. Lastly our company should not ignore small markets in future under the false notion that small markets will not properly serve our growth needs. This is because by the time markets become large enough to be interesting it is already dotted by a large number of competitors.