Creating Competitive Advantage

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Creating Competitive Advantage

• Chapter 18

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Objectives

• Learn Major Goals of Marketing
• Learn how to understand competitors as well as
  customers via competitor analysis.
• Learn the fundamentals of competitive marketing
  strategies based on creating value for customers.

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c
Intel

• Has dominated the chip industry
• Success is directly related to Intels
  competitive strategy
• Strategy focuses on superior value and product
  leadership

• Heavy focus on product and advertising innovation
  and RD investments
• Changing market needs have challenged Intel to
  adapt
• Intel is capitalizing on the Internet now

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Two Major Goals of Marketing

• 1. Design and Manage a Superior Value-Delivery
  System to Reach and Satisfy Target Customer
  Segments.
• 2. Gain and Sustain Competitive Advantage.

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Defining Customer Value
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Value Chain Analysis
Firm Infrastructure
Human Resource Management
Technology Development
Procurement
Support Activities
Margin
Outbound Logistics
Marketing and Sales
Operations
Inbound Logistics
Service
Primary Activities
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Customer Value-Delivery Network
Customer (you)
Retailer (Sears)
Delivery
Order
Producer (Levi)
Delivery
Order
Vendor (Milliken)
Delivery
Order
Raw Material Supplier (Du Pont)
Delivery
Order
Order
Delivery
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Definition

• Competitive Advantage
• An advantage over competitors gained by
  offering consumers greater value than
  competitors offer.

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Figure 18-1 Steps in Analyzing Competitors
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Competitor Analysis

• Firms face a wide range of competition
• Be careful to avoid competitor myopia
• Methods of identifying competitors
• Industry point-of-view
• Market point-of-view

Steps in the Process

• Identifying Competitors
• Assessing Competitors
• Selecting Competitors to Attack or Avoid

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Levels of Competition
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230-year-old Encyclopedia Britannica viewed
itself as competing with other publishers of
printed encyclopedias. Big mistake! Its real
competitors were software encyclopedias and the
Internet.
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Discussion Question

• Create a levels of competition diagram for one of
  the following
• WalMart
• McDonalds
• Nike
• Starbucks
• Google

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Competitor Analysis

• Determining competitors objectives
• Identifying competitors strategies
• Strategic groups
• Assessing competitors strengths and weaknesses
• Benchmarking
• Estimating competitors reactions

Steps in the Process

• Identifying Competitors
• Assessing Competitors
• Selecting Competitors to Attack or Avoid

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Competitor Analysis

• Strong or weak competitors
• Customer value analysis
• Close or distant competitors
• Most companies compete against close competitors
• Good or Bad competitors
• The existence of competitors offers several
  strategic benefits

Steps in the Process

• Identifying Competitors
• Assessing Competitors
• Selecting Competitors to Attack or Avoid

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Customer Value Analysis (for Competition)

• Identify Attributes Customers Value
• Assess Attribute Importance
• Assess Company and Competitor Performance
• Examine Segments on Attribute-by-Attribute Basis
• Monitor Customer Values Over Time

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Competitive Strategies

• Basic Winning Competitive Strategies Michael
  Porter
• Overall cost leadership
• Lowest production and distribution costs
• Differentiation
• Creating a highly differentiated product line
  and marketing program
• Focus
• Effort is focused on serving a few market
  segments

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Attractiveness of an Industry

Threat of Potential Entrants
Bargaining Power of Suppliers
Bargaining Power of Buyers
Existing Rivalry
Threat of Substitutes
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Hohner has successfully implemented a focus
strategy to capture an 85 share of the harmonica
market.
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Competitive Strategies

• Basic Competitive Strategies Value Disciplines
• Operational excellence
• Superior value via price and convenience
• Customer intimacy
• Superior value by means of building strong
  relationships with buyers and satisfying needs
• Product leadership
• Superior value via product innovation

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Discussion Question
Firms that follow a customer intimacy strategy
are willing to do almost anything for their
customers. Does such a strategy make sense for
local businesses, or only for national / global
corporations?
British Airways practices customer intimacy with
select frequent flyers
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Figure 18-3 Hypothetical Market Structure
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Competitive Strategy

• Expanding the total demand
• Finding new users
• Discovering and promoting new product uses
• Encouraging greater product usage
• Protecting market share
• Many considerations
• Continuous innovation
• Expanding market share
• Profitability rises with market share

Competitive Positions

• Market Leader
• Market Challenger
• Market Follower
• Market Nicher

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Competitive Strategy
WD-40 has a knack for developing new uses for its
product. What other brands have adopted a
similar strategy?
WD40
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Competitive Strategy

• Option 1 challenge the market leader
• High-risk but high-gain
• Sustainable competitive advantage over the leader
  is key to success
• Option 2 challenge firms of the same size,
  smaller size or challenge regional or local firms
• Full frontal vs. indirect attacks

Competitive Positions

• Market Leader
• Market Challenger
• Market Follower
• Market Nicher

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Pepsi is an example of market challenger that has
chosen to use a full frontal attack
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Competitive Strategy

• Follow the market leader
• Focus is on improving profit instead of market
  share
• Many advantages
• Learn from the market leaders experience
• Copy or improve on the leaders offerings
• Strong profitability

Competitive Positions

• Market Leader
• Market Challenger
• Market Follower
• Market Nicher

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Dial Corporation successfully uses a market
follower strategy
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Competitive Strategy

• Serving market niches means targeting subsegments
• Good strategy for small firms with limited
  resources
• Offers high margins
• Specialization is key
• By market, customer, product, or marketing mix
  lines

Competitive Positions

• Market Leader
• Market Challenger
• Market Follower
• Market Nicher

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FedEx and UPS are two competitors in the package
delivery business. What competitive strategy
seems to describe each company?
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Balancing Customer and Competitor Orientations

• Companies can become so competitor centered that
  they lose their customer focus.
• Types of companies
• Competitor-centered companies
• Customer-centered companies
• Market-centered companies

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Figure 18-4 Evolving Company Orientations
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Latest thinking on Competition
Monopolist
Competitive Approach
Cooperative Approach
Co-opetition