Management by the market constraint in the Hi-Tech industry

This paper presents a systematic approach to managing by the market constraint in the Hi-Tech industry. In line with the Theory of Constraints methodology, it is argued that in a market-constrained environment, the marketing and sales department together with the research and development department are Permanent Bottlenecks and need to be managed as such. The paper modifies the Theory of Constraint's five focusing steps to accommodate the market constraint. It describes the Strategic Gating and Tactical Gating that enable the firm to increase shareholder value, emphasizing that even though the company has to seek profitable orders in the competitive market, management can control the situation by the focusing methods presented. The paper also suggests a way to reduce costs in non-critical areas and stresses the need for lead-time protective buffers.