Competitive Environment

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Competitive Environment
Environmental Opportunities
Environmental Constraints
SWOT scan, analyze and respond
2
Macro Competitive Environments
Economics
Social Culture
Personnel
Political Legal
Product
Marketing
Needs Consumer Wants
Price
Distr.
Technology
Finance
Collaborators
Accounting
Promotion
Production
Monopoly Pure
Competition
(Utilities)
(Agriculture)
3
Macro Environmental AnalysisScan it, analyze it
respond to it

• Reactive response
• Proactiveresponse

Avoid Marketing Myopia a S-R, narrow view
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Types of Competition

• Levels of competition
• Among all organizations (all desires)
• Among product class(es)
• Among product categories (substitutes)
• Among brands (Mfgr., private, generic)
  
  Source P. Kotler

Industry Focus A group of organizations that
offer products that are near substitutes for each
other
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Competitive Analysis
Basic-Desire Competition . . . . Product Class
Competition
(A) Transportation . . .
Air - Car - Boat (B) Entertainment
. . . ( TV Radio)
(MusicSports) (C) Beverages
. . . alcohol soft Drinks
Beer (light-Regular) Wine- (red-white)
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Competitive AnalysisProduct Categories
Example
Product Category
(In Gallons)
McKay, Betsy. Moove Over, Milkman. WSJ, B1,
June 6, 2003.
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Competitive Analysis Active thirst

• What one would reach for when hot and thirsty.

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Competitive Analysis ...Leads to strategy
tactics

• Market Identification - what am I selling?
• Product differentiation (competitive advantage?)
  ( absolute-relative ) (physical
  psychological)
• Sustainability overtime is difficult

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Core Competency
Focus

• is a proficiency in a critical functional
  activity. When matched to an environmental
  opportunity it provides a companys unique
  competitive advantage

• Resource Concentration
• Unique Value
• Cost leadership

• Executed in-house
• Competitive advantage sustainability

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Competitive Analysis (Product Utilities)
Form Utility
Product Quality
Price
Possession Utility
Place Utility
Consumer Possession
Time Utility
Promotion
Alliances Collaborators
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Competitive analysis leads to Channel
Collaborators
(Strategic alliances, network based consortium,
partnerships)
PRIMARY ACTIVITIES
DOWNSTREAM
UPSTREAM
C u s t o m e r s
Company
(Mergers acquisitions)
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A Model of Forces Driving Competition
Potential entrants
Threat of new entrants
Bargaining power of suppliers
Industry competitors Rivalry among existing
firms
Buyers
Suppliers
Bargaining power of buyers
Threat of substitute products
Substitutes
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Characteristics of Competitive Market Structures

• Number of Competitors
• Product Homogeneity
• Consumer Behavior
• Supplier Market Effort
• Market Knowledge
• Resource Mobility (ease of entry)
• Size of Market
• Production Capacity
• Industry level versus Firm level

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Pure Competition

• Large of buyers/sellers
• Low barriers for entry/exit
• Perfect Market Information
• Many product substitutes

• One seller
• Regulated by public agencies
• Utilities (water,energy)

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Market Structure - Oligopoly

• 3 Largest companies
• - Philip Morris (Marlboro)
• RJR (Camel)
• British American Tobacco (Lucky Strike)
• Combined International Market Share gt 50

Near perfect market knowledge by sellers
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Monopolistic Competition
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Market Based Competitive Forces
Selected Characteristics of Competitive Structures
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Market Based Competitive Forces
Selected Characteristics of Competitive Structures
change price, change demand
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Market (Structure) Based Competitive Model

• Industry Leads Business Leads Market
• Structure To Conduct
  To Performance
• Pure Comp. Product Quality Efficiency
• Monopolistic Customer Service -
  Prices
• Oligopoly Product Externalities - Resource
• 
  Utilization

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Market Structure Influences Market Performance

• Efficiency of prices to reflect true costs
• Employment Act of 1946 (Goals)
• - Economic Growth
• Freedom of choice
• Desire to fill needs of consumer

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The Role of Government is to Regulate Market
Based Competitive Forces
Healthy Rivalry
Destructive (-)
Ineffective (-)
Legal limits
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Tenets of Market Based Capitalism
Premises - Competition is good for participants
- Compatibility of participant
interests

• Freedom to own property
• Free from government interference
• Freedom to enter/exit
• Freedom to make profits

Competing Economic Models Command Economy
Socialism - Market Economy
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Applied Marketing
2005 estimates