Topic Dealing with the Competition

Copyright © 2003 Prentice-Hall, Inc.

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TopicTopic

Dealing with Dealing with the the CompetitionCompetition


Competitive advantages require delivering more value Competitive advantages require delivering more value and satisfaction to target consumers than competitors and satisfaction to target consumers than competitors dodo

Competitive marketing strategies are how companies Competitive marketing strategies are how companies analyze their competitors and develop value-based analyze their competitors and develop value-based strategies for profitable customer relationshipsstrategies for profitable customer relationships

Creating Competitive Advantage


Competitor analysis is the process of identifying, Competitor analysis is the process of identifying, assessing, and selecting key competitorsassessing, and selecting key competitors

Competitor Analysis


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Competitor Analysis

Manufacturer or seller of a product or service whose Manufacturer or seller of a product or service whose product or service can be used to fill or satisfy a product or service can be used to fill or satisfy a consumer need in a market where other sellers offer consumer need in a market where other sellers offer products that will also fill or satisfy the same need.products that will also fill or satisfy the same need.

Business competitors are:Business competitors are: Other organizations offering the Other organizations offering the samesame product or product or

service now. service now. Other organizations offering Other organizations offering similarsimilar products or products or

services now. services now. Organizations that could offer the Organizations that could offer the same or similarsame or similar

products or services in the future. products or services in the future. Organizations that could Organizations that could remove the needremove the need for a for a

product or service. product or service.

• Identifying CompetitorsIdentifying Competitors


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LEVELS OF COMPETITION

Diet lemon limes

Baseball cards

Fruit flavored

colas

Coffee

DietCoke

DietPepsi

Diet-Rite cola

Bottled water

Lemon limes

Regularcolas

Beers

Juices

Wine

Fast food

Tea

Video rentals

Icecream

Product form competition: Diet colas

Product category competition: Soft drinks

Generic competition: Beverages

Budget competition: Food and entertainment


Competition Myopic

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Who might Jet Airways consider its Competitor?

Who Might Ritz Carlson consider its competitor?

•Competing against Premium Airlines•Competing against anyone who offers Air travel•Competing against anyone who offers Travel•Competing for same consumer dollar


Competitor Analysis

• Assessing CompetitorsAssessing Competitors

•Company needs to look in each competitors product quality , features , and mix , customer services , pricing policy, distribution coverage , sales force strategy , and Advertising and sales promotion program •Study each competitors R&D , Manufacturing , purchasing , Financial and other strategies


Competitor Analysis

• Assessing CompetitorsAssessing Competitors


Competitor Analysis

Strong or weak competitors:Strong or weak competitors:

Customer value aCustomer value analysisnalysis determines the benefits that target customers’ determines the benefits that target customers’ value and how customers rate the relative value of various value and how customers rate the relative value of various competitors’ offerscompetitors’ offers

Identification of major attributes that customers value and the Identification of major attributes that customers value and the importance of these valuesimportance of these values

Assessment of the company’s and competitors’ performance on the Assessment of the company’s and competitors’ performance on the valued attributesvalued attributes

““Strategic Sweet SpotStrategic Sweet Spot” (it meet customers need in a way ” (it meet customers need in a way rivals can’t)rivals can’t)

• Selecting Competitors to Attack and AvoidSelecting Competitors to Attack and Avoid


Competitor Analysis

Close or distant competitors: Close or distant competitors: Nike Nike with Adidas …….Bata’s power in Indiawith Adidas …….Bata’s power in India

Bausch and Lomb vs Johnson and Johnson Bausch and Lomb vs Johnson and Johnson (Vistakon - Acuvue)(Vistakon - Acuvue)

Good or bad competitors: Good or bad competitors: Share the Share the cost and product development , increase cost and product development , increase Demand Demand

E.g Yahoo! Music unlimited sees Rhapsody, E.g Yahoo! Music unlimited sees Rhapsody, Napster , AOL Music , Amazon.com , other Napster , AOL Music , Amazon.com , other music download services as good music download services as good competitors and Apple i-Tunes music store competitors and Apple i-Tunes music store as bad competitoras bad competitor


Competitor Analysis Blue Ocean Strategy : Finding uncontested market spaces: Value Blue Ocean Strategy : Finding uncontested market spaces: Value

Innovation Innovation

Cirque du soleil reinvented the circus , finding and uncontested market space that created new Demand and rendered rival irrelevant . Animal acts to theatrical experiences against competitor Ringling bros. and Barnum & Bailey


Competitor Analysis

Identifies competitive information and the best Identifies competitive information and the best sources of this informationsources of this information

Continually collects informationContinually collects information Checks information for validity and reliabilityChecks information for validity and reliability Interprets informationInterprets information Organizes informationOrganizes information Sends key information to relevant decision makersSends key information to relevant decision makers Responds to inquiries about competitorsResponds to inquiries about competitors

Designing a Competitive Intelligence SystemDesigning a Competitive Intelligence System


Competitive Strategies

Entrepreneurial marketingEntrepreneurial marketing involves visualizing an opportunity involves visualizing an opportunity and constructing and implementing flexible strategiesand constructing and implementing flexible strategies

Formulated marketingFormulated marketing involves developing formal marketing involves developing formal marketing strategies and following them closelystrategies and following them closely

Intrepreneurial marketingIntrepreneurial marketing involves the attempt to reestablish an involves the attempt to reestablish an internal entrepreneurial spirit and refresh marketing internal entrepreneurial spirit and refresh marketing strategies and approachesstrategies and approaches

Formulated side vs Creativity side Formulated side vs Creativity side

Approaches to Marketing StrategyApproaches to Marketing Strategy



Michael Porter’s four basic Michael Porter’s four basic competitive positioning strategiescompetitive positioning strategies

Basic Competitive StrategiesBasic Competitive Strategies



Michael Treacy and Fred Wiersema suggest Michael Treacy and Fred Wiersema suggest companies can companies can gain leadership positions by delivering superior value to gain leadership positions by delivering superior value to their customers in three strategies or “value disciplines:”their customers in three strategies or “value disciplines:”

Operational excellence : Operational excellence : Superior Value, efficient value delivery Superior Value, efficient value delivery system, reliable , good quality products.(Wal-Mart , Big Bazar, IndiGo)system, reliable , good quality products.(Wal-Mart , Big Bazar, IndiGo)

Customer intimacy: Customer intimacy: Superior value and tailoring its products or Superior value and tailoring its products or services to match the needs of targeted customers(Taj Groups,Lexus) services to match the needs of targeted customers(Taj Groups,Lexus)

Product leadership: Product leadership: Superior value by continuous stream of leading –Superior value by continuous stream of leading –edge products(Nokia , Apple) edge products(Nokia , Apple)

Fed Ex , Wal-Mart Fed Ex , Wal-Mart

Basic Competitive StrategiesBasic Competitive Strategies


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Hypothetical Market Structure & Strategies

40%

Marketleader

30%

Marketchallenger

20%

Marketfollower

Defend Market Share

Expand Market Share

Attack leader Imitate

10%

Marketnicher

Special-ize


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Designing Competitive Strategies

Market-Leader Strategies Market-Leader Strategies – – Many industries Many industries

contain one firm that is acknowledged market leader and leads the contain one firm that is acknowledged market leader and leads the other firms in price changes , new-product development, distribution other firms in price changes , new-product development, distribution coverage and promotion intensity. coverage and promotion intensity.

Microsoft – ( Computer software)Microsoft – ( Computer software) Intel – (Microprocessors) Intel – (Microprocessors) Gillette – ( Razor Blades)Gillette – ( Razor Blades) L.G – (Consumer Electronics)L.G – (Consumer Electronics) Future Group (Retailing)Future Group (Retailing) Tata Motors (Commercial Vehicles)Tata Motors (Commercial Vehicles) Mc Donald's (Fast Food)Mc Donald's (Fast Food)


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Action Plan

To remain number one calls for action on three fronts To remain number one calls for action on three fronts The firm must find ways to The firm must find ways to expand theexpand the total market total market

demanddemand The firm must The firm must protect its current market shareprotect its current market share through through

good defensive actions good defensive actions Firm can try to Firm can try to increase its market shareincrease its market share even when it is even when it is

constantconstant


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Expanding the Total Expanding the Total MarketMarket New UsersNew Users New Uses New Uses More UsageMore Usage


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Protect Market share


Expand Market Share Even small Market share : 1% is $90 billion (Digital Even small Market share : 1% is $90 billion (Digital

Camera Market) , $ 720 billion (Carbonated drink Camera Market) , $ 720 billion (Carbonated drink market)market)

Profitability rises with increasing Market share.Profitability rises with increasing Market share.

Why GE shed its computer , air-conditioning , small appliances Why GE shed its computer , air-conditioning , small appliances and television business?and television business?

Gaining Increased Market share will not always generate profits : Depends on Gaining Increased Market share will not always generate profits : Depends on strategy for gaining increased share.strategy for gaining increased share.

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Market Challenger Strategies

The market challengers’ strategic objective is to The market challengers’ strategic objective is to gain market share and to become the leader gain market share and to become the leader eventually.eventually.

Colgate , Ford , P&GColgate , Ford , P&G By attacking the market leader: By attacking the market leader: ““Second Mover Advantage”Second Mover Advantage” By attacking other firms of the same size or By attacking other firms of the same size or

by attacking smaller firms e.g. by attacking smaller firms e.g. Johnson and Johnson and Johnson took Vistakon – Acuvue & attacked Bausch Johnson took Vistakon – Acuvue & attacked Bausch and Lomb and Lomb

Frontal Attack: Attacking the Competitors Strengths rather than weaknesses Captain cook & Tata Salt

Indirect Attack:Attacking unguarded or weakly guarded grounds Honeywell IBM’s Rival


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Market-Follower Strategies

Theodore Levitt in his article, Theodore Levitt in his article, “Innovative Imitation”“Innovative Imitation” argued that a product imitation strategy might be just as argued that a product imitation strategy might be just as profitable as a product innovation strategyprofitable as a product innovation strategy

e.g. e.g. Product innovation--SonyProduct innovation--Sony

Product-imitation--PanasonicProduct-imitation--Panasonic

ImitatorImitator – It copies something but maintains differentiation in – It copies something but maintains differentiation in terms of packaging , advertising , pricing or location . Dominos terms of packaging , advertising , pricing or location . Dominos home delivery Idea , car manufacturers imitate the style of one home delivery Idea , car manufacturers imitate the style of one another another

AdapterAdapter – It takes the leaders products and adapts or improves – It takes the leaders products and adapts or improves them . The adapter may choose to sell in different markets e.g. them . The adapter may choose to sell in different markets e.g. Japanese firms after adapting and improving products Japanese firms after adapting and improving products developed elsewheredeveloped elsewhere


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Market-Nicher Strategies

Smaller firms can avoid larger firms by targeting smaller Smaller firms can avoid larger firms by targeting smaller markets or niches that are of little or no interest to the markets or niches that are of little or no interest to the larger firmslarger firms

e.g. Logitech (Interface Device maker)– a Little Mouse that e.g. Logitech (Interface Device maker)– a Little Mouse that roars vs Microsoft roars vs Microsoft

Nike constantly created new niches--cycling, walking, hiking, Nike constantly created new niches--cycling, walking, hiking, cheerleading, etccheerleading, etc

Nicher achieves high Margins Nicher achieves high Margins


Balancing Customer and Competitor Orientations

Can companies spend too much on tacking Can companies spend too much on tacking competitor damaging its customer competitor damaging its customer orientation ?orientation ?


Balancing Customer and Competitor Orientations

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Topic Dealing with the Competition