Dealing with the Competition

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Chapter 8

• Dealing with the Competition

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Objectives

• Understand how a company identifies its primary
  competitors and ascertains their strategies.
• Review how companies design competitive
  intelligence systems.

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Objectives

• Learn how a company decides whether to position
  itself as a market leader, a challenger, a
  follower, or a nicher.
• Identify how a company can balance a customer vs.
  competitor orientation.

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Competitive Markets

• Porters Five Forces that Determine Market
  Attractiveness
• Threat of intense segment rivalry
• Threat of new entrants
• Threat of substitute products
• Threat of buyers growing bargaining power
• Threat of suppliers growing bargaining power

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Barriers Profitability
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Competitive Markets

• Failing to identify competitors can lead to
  extinction
• Internet businesses have led to disintermediation
  of middlemen
• Competition can be identified using the industry
  or market approach

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Competitive Markets
Industries Can Be Classified By

• Entry, mobility and exit barriers
• Degree of vertical integration

• Number of sellers and degree of differentiation
• Cost structure

Degree of globalization
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Competitive Markets

• Industry Structures
• Pure Monopoly
• Pure Oligopoly
• Differentiated Oligopoly
• Monopolistic Competition
• Pure Competition

• Only one firm offers an undifferentiated product
  or service in an area
• Unregulated
• Regulated
• Example Most utility companies

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Competitive Markets

• Industry Structures
• Pure Monopoly
• Pure Oligopoly
• Differentiated Oligopoly
• Monopolistic Competition
• Pure Competition

• A few firms produce essentially identical
  commodities and little differentiation exists
• Lower costs are the key to higher profits
• Example oil

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Competitive Markets

• Industry Structures
• Pure Monopoly
• Pure Oligopoly
• Differentiated Oligopoly
• Monopolistic Competition
• Pure Competition

• A few firms produce partially differentiated
  items
• Differentiation is by key attributes
• Premium price may be charged
• Example Luxury autos

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Competitive Markets

• Industry Structures
• Pure Monopoly
• Pure Oligopoly
• Differentiated Oligopoly
• Monopolistic Competition
• Pure Competition

• Many firms differentiate items in whole or part
• Appropriate market segmentation is key to success
• Example beer, restaurants

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Competitive Markets

• Industry Structures
• Pure Monopoly
• Pure Oligopoly
• Differentiated Oligopoly
• Monopolistic Competition
• Pure Competition

• Many competitors offer the same product
• Price is the same due to lack of differentiation
• Example farmers selling milk, crops

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Competitive Markets

• A broader group of competitors will be identified
  using the market approach
• Competitor maps plot buying steps in purchasing
  and using the product, as well as direct and
  indirect competitors

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Competitor Analysis

• Key characteristics of the competition must be
  identified
• Strategies
• Objectives
• Strengths and Weaknesses
• Effect a firms competitive position in the
  target market
• Reaction Patterns

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Competitor Analysis
Competitive Positions in the Target Market

• Dominant
• Strong
• Favorable

• Tenable
• Weak
• Nonviable

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Competitive Intelligence Systems

• Designing the system involves
• Setting up the system
• Collecting the data
• Evaluating and analyzing the data
• Disseminating information and responding to
  queries

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Competitive Intelligence Systems

• Value analysis helps firms to select competitors
  to attack and to avoid
• Customers identify and rate attributes important
  in the purchase decision for the company and
  competition
• Attacking strong, close, and bad competitors will
  be most beneficial

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Designing Competitive Strategies

• Major Strategies
• Market-Leader
• Market-Challenger
• Market-Follower
• Market-Nicher

• Expanding the total market
• Defending market share
• Expanding market share

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Designing Competitive Strategies

• Expanding the Total Market
• Targeting Product to New Users
• Market-penetration strategy
• New-market strategy
• Geographical-expansion strategy
• Promoting New Uses of Product
• Encouraging Greater Product Use

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Designing Competitive Strategies
Defending Market Share

• Position defense
• Flank defense
• Preemptive defense

• Counteroffensive defense
• Mobile defense
• Contraction defense

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Designing Competitive Strategies

• Before Attempting to Expand Market Share,
  Consider
• Probability of invoking antitrust action
• Economic costs involved
• Likelihood that marketing mix decisions will
  increase profits

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Designing Competitive Strategies

• Major Strategies
• Market-Leader
• Market-Challenger
• Market-Follower
• Market-Nicher

• First define the strategic goals and opponent(s)
• Choose general attack strategy
• Choose specific attack strategy

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Designing Competitive Strategies

• General Attack Strategies
• Frontal attacks match competition
• Flank attacks serve unmet market needs or
  underserved areas
• Encirclement blitzes opponent
• Bypassing opponent and attacking easier markets
  is also an option

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Competitive Markets
Specific Attack Strategies Include

• Price-discount
• Lower-price goods
• Prestige goods
• Improved services

• Product proliferation
• Product innovation
• Distribution innovation
• Manufacturing cost reduction

• Intensive advertising promotion

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Designing Competitive Strategies

• Major Strategies
• Market-Leader
• Market-Challenger
• Market-Follower
• Market-Nicher

• Imitation may be more profitable than innovation
• Four broad strategies
• Counterfeiter
• Cloner
• Imitator
• Adapter

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Designing Competitive Strategies

• Major Strategies
• Market-Leader
• Market-Challenger
• Market-Follower
• Market-Nicher

• Niche specialties
• End-user
• Vertical-level
• Customer-size
• Specific customer
• Geographic
• Product/product line
• Product feature
• Job-shop Quality-price
• Service Channel

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Balancing Customer and Competitor Orientations

• Competitor-centered companies evaluate what
  competitors are doing, then formulate competitive
  reactions
• Customer-centered companies focus on customer
  developments when formulating strategy