The 3C Analysis Business Model was developed by Japanese business strategist Kenichi Ohmae. The 3C Model is a marketing tool that focuses on customers, competitors, and the company. At the intersection of these three variables lies an effective marketing strategy to gain a potential competitive advantage and build a lasting company.
The 3C analysisbusiness model was developed by Japanese business strategist and organizational theorist Kenichi Ohmae in 1982.
The model first appeared in Ohmae’s book The Mind of the Strategist: The Art of Japanese Business, where he discussed the thinking processes and planning techniques of some of the world’s most successful companies.
The book was well-received for its ability to empower modern decision-makers to be courageous, innovative, problem-solvers.
Indeed, Harvard Business School Professor Michael Porter said that Ohmae’s book was “A fascinating window into the mind of one of Japan’s premier strategists…full of ideas about how to improve strategic thinking.”
In essence, Ohmae posited that business success was based on a mix of:
The needs of the customer.
The strengths of the corporation, and
The products and services offered by competitors.
When a firm takes the time to integrate all three components in harmony, it can then develop a sustainable competitive advantage.
However, when one of these components is not in balance, the success of the company may be jeopardized.
In the following sections, we’ll take a look at customers, corporations, and competitors in more detail.
Customers
Customers are the most important of the three components, for without customers there can be no company nor any way to gain a competitive advantage.
Ohmae believed that customers were the foundation for any strategy and that the goal of any business should be to support the interests of the customer and not shareholders, for example.
Businesses must know their customers intimately so that their marketing strategies resonate with them on a meaningful level. This starts with research and a few questions such as:
What is the demographic of the target audience? In other words, who are the customers that a business wants to target?
Why do they make buying decisions? Are they motivated by value, economy, or status? What other problems might they be trying to solve?
What are the different segments of a target audience and how might be they marketed to effectively? For example, a consumer who drinks coffee to stay awake will need a different strategy than one who drinks it socially in a café.
Competitors
A business must know where it stands in relation to its competitors. Is it bigger? Smaller? Is the competition trying to take market share from the business, or is the opposite true?
According to Ohmae, competitor-based marketing strategies involve looking for a point of difference in purchasing, engineering, sales, or servicing.
This can be achieved in several ways:
Investing in brand image
Ohmae noted that companies such as Sony and Honda were able to sell more than their competitors in the Japanese market because of heavy investment in advertising and consumer relations.
Hito-kane-mono
Japanese business planners believe in the concept of hito-kane-mono, loosely translated as people, money, and things (assets).
As a point of competitive differentiation, businesses can ensure these resources are in balance without waste or surplus.
For example, managers who are given more money than they can competently spend tend to waste that money unnecessarily. In this case, Ohmae argues that managers should first define their ideas and then adapt a budget to suit.
Profit and cost-structure differences
Different sources of profit can also be exploited, such as the profit seen in new product sales or value-adding services.
Large companies with lower fixed-cost ratios can also lower their prices in a stagnant market to gain market share.
Company
The company itself must also look inwardly to design strategies aimed at maximizing strengths relative to the competition. This involves a combination of short and long-term strategies, including:
Specialization
A business should always identify one or two areas of expertise, instead of trying to specialize in everything.
Produce or procure
In terms of manufacturing, a business has two options. It can take advantage of backward integration and take control of its supply chain in the process. Or, it can outsource non-value-adding activities to a third party.
Cost-effectiveness
This is a relatively simple way of gaining a competitive advantage. Businesses can reduce basic operating costs by focusing on processes that have the highest potential for automation or streamlining.
Longer-term, businesses can combine resources and knowledge with others in their industry to develop a competitive advantage.
Interpreting the 3C analysis
Interpreting the 3C analysis means taking a look at how each circle overlaps and interacts with the other circles. To better understand these interactions, we have provided a basic explanation of each below:
Customer/company overlap
This provides a competitive advantage in the market where a product is positively perceived by consumers who are more importantly willing to pay for it.
Customer/company/competition overlap
At the intersection of all three circles there is likely to be a price war. In other words, there is little differentiation between the products and services of one company and alternatives from another.
With consumers unable differentiate a value proposition, a price war may ensue.
Customer/competition overlap
An undesirable situation where consumers prefer the products and services of a competitor and are willing to pay for them.
Competition/company overlap
When the circles representing competition and company intersect, this may signify an illegal price-fixing situation.
Implementing the 3C analysis
For best results, decision-makers must not attempt to implement each of three components simultaneously.
Aside from the unnecessary stress and logistical issues that may arise, a better approach is to focus on the customers first and work from there. Making customers a priority does not mean shareholders are rejected.
In fact, a company that has authentic interest in its customers will find that shareholder interests are taken care of automatically.
Once the needs, wants, and demands of the consumer have been identified, the business should then concern itself with other matters.
In other words, how does the consumer base perceive its products and services? How does it perceive competitor products? This provides insight into what the competition is capable of doing in the market.
From there, the business must direct resources in such a way that its strengths are maximized and competitive advantage is created.
For the model to be effective, it is important to note that the business does not need to excel in every area.
It can start with a decisive edge in just one key function and then set about enhancing the other functions.
The 3C model is not complex or convoluted, but it does encourage decision-makers to simplify operations by focusing on customers, competitors, and the corporation at all times.
Case Studies
Technology Company Launching a New Smartphone:
Imagine a technology company preparing to launch a new smartphone in a highly competitive market. They use the 3C Analysis Business Model to devise their marketingstrategy:
Customers: The company conducts thorough market research to understand their target customers. They identify that their customers value sleek design, advanced camera features, and long battery life. They also find that many customers are willing to pay a premium for cutting-edge technology.
Competitors: The company analyzes its competitors’ offerings. They discover that one of their competitors has recently launched a smartphone with similar features, but at a slightly lower price point. Another competitor is focusing on sustainability and environmental friendliness.
Company: The company assesses its strengths. They have a history of producing innovative and high-quality smartphones, and they have a strong R&D team. They also have a reputation for excellent customer service.
Based on the analysis, the company decides to focus their marketingstrategy on emphasizing the smartphone’s sleek design, advanced camera features, and superior battery life. They also highlight their commitment to innovation and customer satisfaction. To counter the competitor’s lower-priced option, they emphasize the premium quality and cutting-edge technology of their product. Additionally, they consider introducing a recycling program to address the competitor’s focus on sustainability.
Retail Clothing Brand Expanding into a New Market:
A retail clothing brand is considering expanding its operations into a new international market using the 3C Analysis Business Model:
Customers: The brand conducts market research to understand the preferences and demographics of the target customers in the new market. They find that customers in this region prefer vibrant colors and unique designs. The customers also value eco-friendly and sustainable fashion options.
Competitors: The brand researches the existing competitors in the new market. They discover that local brands dominate the market with a focus on traditional and culturally-inspired clothing. Another international brand is known for its sustainable practices and organic materials.
Company: The brand evaluates its strengths. They are known for their contemporary and trendy designs, efficient supply chain management, and commitment to ethical sourcing and production.
Based on the analysis, the brand decides to tailor their clothing line for the new market by incorporating vibrant colors and unique designs inspired by the local culture. They also highlight their commitment to sustainability by using organic and eco-friendly materials. To differentiate from the local brands, they emphasize their contemporary and trendy designs that cater to a younger audience. They also consider collaborating with local artisans to incorporate traditional elements into their designs, creating a unique fusion of styles.
Restaurant Chain Adapting to Changing Consumer Preferences:
A restaurant chain is facing declining sales and changing consumer preferences. They apply the 3C Analysis Business Model to strategize their revival:
Customers: The chain conducts surveys and collects feedback to understand why customers are visiting less frequently. They find that customers are seeking healthier food options, faster service, and convenient online ordering.
Competitors: The chain researches its competitors in the fast-food industry. They identify that some competitors are offering healthier menu options, while others have embraced digital ordering platforms for seamless customer experiences.
Company: The chain evaluates its strengths. They have a well-established brand with a loyal customer base. Their locations are easily accessible, and they have a strong history of quality and consistency.
Based on the analysis, the restaurant chain decides to revamp its menu by introducing healthier food options and clearly labeling nutritional information. They also invest in digital ordering platforms to improve convenience and speed of service. To differentiate themselves, they emphasize their commitment to using fresh, locally sourced ingredients and highlight their legacy of quality and consistency. They also consider loyalty programs and promotions to reward their existing customer base.
Online Retailer Navigating an Oversaturated Market:
An online retailer operating in an oversaturated market applies the 3C Analysis Business Model to stand out:
Customers: The retailer conducts data analysis and customer surveys to understand what factors drive purchasing decisions. They discover that customers are seeking personalized shopping experiences, value for money, and quick and reliable delivery.
Competitors: The retailer analyzes its competitors, both large and small, in the online retail space. They identify that some competitors are offering free shipping, while others are focusing on niche markets.
Company: The retailer evaluates its strengths, including its user-friendly website, extensive product range, and strong customer support.
Based on the analysis, the online retailer decides to invest in enhancing its website’s user experience to offer personalized recommendations and a seamless shopping journey. They also implement a competitive pricing strategy to provide value for money. To differentiate themselves, they introduce a premium loyalty program that offers fast and reliable delivery options. They highlight their wide product range and excellent customer support as factors that set them apart. Additionally, they consider partnerships with niche brands to attract specific customer segments.
Key takeaways:
The 3C Analysis Business Model suggests a business focuses on three key factors for success – company, customer, and the competition.
The strengths of the 3C Analysis Business Model lie in its simplicity, practicality, and emphasis on efficiency to reduce wastage.
Customers are crucial to the success of the 3C Analysis Business Model, dictating the strategies formulated for competitors and the company.
Key Highlights
Definition: The 3C Analysis Business Model, developed by Kenichi Ohmae, emphasizes three key components: Customers, Competitors, and the Company. It provides a framework to develop effective marketing strategies and achieve a competitive advantage.
Origins: Kenichi Ohmae introduced the 3C Model in his book “The Mind of the Strategist: The Art of Japanese Business” (1982), offering insights into the decision-making processes of successful companies.
Balanced Integration: The model suggests that business success relies on harmonizing the needs of customers, the strengths of the company, and the competitive landscape.
Start with a focus on customers, aligning strategies to their needs.
Perceive how customers view company and competitor offerings.
Maximize company strengths to establish a competitive advantage.
Simplicity and Efficiency:
The model’s strength lies in its simplicity and practicality.
It encourages efficiency by reducing wastage of resources.
Decision-makers should simplify operations by focusing on customers, competitors, and the company.
3C
Description
Analysis
Implications
Applications
Examples
1. Customer Analysis (CA)
Analyze the characteristics, needs, and behaviors of customers or target market segments.
– Identify and profile the target customer segments based on demographics, preferences, and behaviors. – Assess customer needs, pain points, and buying behavior. – Analyze customer satisfaction and loyalty.
– Provides a deep understanding of customer preferences and expectations. – Guides product/service design and marketing strategies. – Helps in tailoring offerings to meet customer demands effectively.
– Profiling customer segments for product development. – Analyzing customer feedback and reviews to enhance products/services.
Customer Analysis Example: Conducting surveys and market research to understand the preferences and behavior of smartphone buyers.
2. Company Analysis (COA)
Examine the internal capabilities, strengths, weaknesses, and resources of the business.
– Assess the company’s core competencies, resources, and capabilities. – Identify strengths, weaknesses, and areas for improvement within the organization. – Analyze the company’s competitive advantage and unique selling propositions (USPs).
– Helps in identifying the company’s competitive advantages and areas that need strengthening. – Guides strategic planning and resource allocation. – Supports the development of sustainable competitive strategies.
– Conducting a SWOT analysis to assess internal strengths and weaknesses. – Analyzing the company’s operational efficiency and resource utilization.
Company Analysis Example: Evaluating a tech startup’s core competencies in software development and customer support.
3. Competitor Analysis (COMA)
Evaluate the strengths, weaknesses, strategies, and market positioning of competitors.
– Identify key competitors in the industry or market. – Analyze competitors’ product offerings, pricing strategies, and market share. – Assess competitors’ strengths, weaknesses, and areas where they outperform or lag behind.
– Provides insights into the competitive landscape and helps in identifying competitive threats. – Aids in developing strategies to differentiate from competitors. – Guides pricing and positioning decisions in the market.
– Conducting a competitive SWOT analysis to compare strengths and weaknesses with competitors. – Monitoring competitor pricing and product launches.
Competitor Analysis Example: Analyzing the market positioning and product features of smartphone competitors in the electronics industry.
Japanese business strategist Kenichi Ohmae developed the 3C Analysis Business Model, which is a holistic framework that analyzes and looks at business model development by focusing on three core stakeholders: customers, competitors, and the company.
Why is the 3C model important?
The 3C Business Model Analysis tool is very useful for taking a better snapshot of business models by looking at three core stakeholders (customers, competitors, and companies). By balancing these three stakeholders, a company can generate and capture value in the marketplace.
A failure mode and effects analysis (FMEA) is a structured approach to identifying design failures in a product or process. Developed in the 1950s, the failure mode and effects analysis is one the earliest methodologies of its kind. It enables organizations to anticipate a range of potential failures during the design stage.
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The Pareto Analysis is a statistical analysis used in business decision making that identifies a certain number of input factors that have the greatest impact on income. It is based on the similarly named Pareto Principle, which states that 80% of the effect of something can be attributed to just 20% of the drivers.
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A SWOT Analysis is a framework used for evaluating the business’s Strengths, Weaknesses, Opportunities, and Threats. It can aid in identifying the problematic areas of your business so that you can maximize your opportunities. It will also alert you to the challenges your organization might face in the future.
The PESTEL analysis is a framework that can help marketers assess whether macro-economic factors are affecting an organization. This is a critical step that helps organizations identify potential threats and weaknesses that can be used in other frameworks such as SWOT or to gain a broader and better understanding of the overall marketing environment.
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Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
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