In a path breaking analysis, Derek Abell suggests defining business along the three dimensions of customer groups, customer functions, and alternative technologies. Customer groups relate to ‘who’ is being satisfied, customer needs describe ‘what’ is being satisfied, and alternative technologies means ‘how’ the need is being satisfied. Exhibit 2.5 presents a diagrammatic view of these three dimensions.
Exhibit
Three Dimensions for Defining a Business
Customer groups are created according to the identity of the customers. Customer functions are basedon what the products or services provide to the customers. Alternative technologies describe the manner in which a particular function can be performed for a customer.
Applying Abell’s three dimensional model to the illustration of timekeeping business, we could identify the three dimensions as follows:
Customers groups are individual customers and industrial users. Customer functions are of finding time, recording time, using watches as a fashionable accessory, and as a gift item..Alternative technologies are of the mechanical, quartz digital, and quartz analog types.
Such a clarification helps in defining a business explicitly. A clear business definition is helpful for strategic management in many ways. For instance, a business definition can indicate the choice of objectives, help in exercising a choice among different strategic alternatives, facilitate functional policy implementation, and suggest appropriate organisational structure. A watch manufacturer who makes ladies watches of the utility type could extend its business definition along the customer dimension and make ornamental watches also. It could also diversify further by moving into the manufacture of wall clocks. Having decided to manufacture ornamental ladies watches it would have to effect changes in marketing and other functional policies. If utility watches were being made on a production to stock basis, ornamental watches may require a production to order system of manufacturing. Technological choice will vary from making mechanical hand wound watches to making battery operated quartz digital watches, which are two entirely different processes. We could, of course, go on pointing out various other implications of defining a business along these three dimensions. In sum, we can observe that the model provides powerful insights into understanding and defining business.
