Though Theodore Levitt wrote his famous article titled Marketing Myopia in 1975, I believe the idea behind this article is still very much relevant and I think it will become increasingly more important in the future. Why? Lets find out.

According to Levitt, most companies fail because they incorrectly define the business they are in, that is, they define it narrowly in terms of the product rather than the benefits the product or service provides to the customer.

He explains his idea with the help of the example of railroad industry in the U.S. Railways were the backbone of the US economy. Slowly and steadily, railroad companies in US started going into red in spite of the fact that the US economy was growing. More and more people were traveling and more and more goods were being shipped all over the US. All the railroad companies did was point at the dismal state of the railroad industry to justify their poor performance. According to Levitt, the dire state of the railroad industry was because the railroads thought they were in the railroad industry and as such saw only the other railroad companies as their competitors. Whereas, Levitt suggests that the railroad industry should have thought of themselves as being in the business of transportation of people and goods. Such a step would have enabled them to identify who their real competitors were and who was taking away their business. The knowledge of their real competitors would have made them realize that the airlines, trucking industry and the automobile industry were taking their customers away and that they have to compete with them and not just with other railroad companies.

By the way, the US railroad fiasco could have been replicated in India if Indian railways had not pulled up their socks. With the advent of low cost carriers like Spicejet, GoAir and others, Indian Railways could have headed for trouble. If they had not perceived these low cost airlines as their competitors then they would have found themselves in the same situation in which the US rail roads found themselves in. However, it seems that the railways have realized this and are taking suitable action to not only improve their services but have also adopt their pricing strategy keeping the airline industry’s pricing structure in mind .

While teaching the importance of competition to management students, I always ask the participants, “Assume you are the CEO of Maruti Suzuki. Now tell us which business you are in?” The answers I get are usually the obvious one – auto/cars.” And when I ask them who their competitors are, they name all the car manufacturing companies. Now this is what according to Levitt leads to downfall of a large number of companies because they are defining their business very narrowly. Going by Levitt’s theory, Maruti is in the business of “transportation,” that is, transporting people. The benefit of cars to the customers is that they can transport themselves to the desired destination in a car. So Maruti should consider itself a part of the transportation industry, not just as a part of the automobile and car industry. Who should it consider as its competition? Well, everyone in transportation industry and maybe some out of the transportation industry as well.

So who are Maruti’s competitors? Well, all those who transport people and even some who don’t. Let’s discuss this point further. First, it is obvious that all car manufacturing companies are its competitors. I am sure that this does not need any further explanation. Next all motorcycle manufacturers are also its competitors. Surprised? Well don’t be. As the price difference between cars and motorcycles decreases, there will be quite a few people who will buy a car and not a motorcycle. In fact, Maruti is trying exactly this by continuously slashing the price of Maruti800 model. The price of Maruti800 is also something that motorcycle manufacturers have to keep in mind while marketing their products. With Tata’a small car Nano, imagine the competitive pressure on the motorcycle industry. Tata’s Nano may also provide some competitive pressure on the three-wheeler manufacturers.

Who else transports people? What about the airlines, bus service and railways? Let us see if these industries are also competitors from Maruti? There was a time when there were just three viable and convenient options for travelling from Delhi to Chandigarh, that is, by car, by bus or by air. Each of these were competing with each other and they were all viable options for travelling. If more and more people decided to drive by car to Chandigarh from Delhi, the demand for cars will increase at the expense of bus service and airline industry. Similarly, if more and more people would decide to travel by bus, the demand for cars and airlines would drop tremendously.