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Competitive positions
And competitive marketing strategy
Based on ch. 20 in Jobber
Henning Knudsen EAL 1
The strategic triangle
Company
Customers Competitors
Competitive behaviourForms:
1. Conflict.
2. Competition.
3. Co-existence.
4. Co-operation.
5. Collusion.
Porters 1980 classic Competitive Strategy: Techniques for Analysing Industries and Competitors
Market Leader:Objectives: To stay No. 1 !
• Largest market share• Most likely the initiator of price changes in the market• Typically first in product development (largest R/D budget)• Financial ability to cover many segments• Widest distribution• Largest promotional budget • Examples:
– McDonalds– Coca Cola– TDC – Kellogg's – Maersk
5
Hold objectives
Attractive conditionsMarket leader in a mature or declining marketCosts exceed benefits of building
Strategic focusMonitoring the competitionConfronting the competition
Defender
Defence strategies
1Positiondefence
2Flanking defence
4 counteroffensive defence
3 Pre-emptive defence
Attacker 6 Strategic
withdrawal
5 Mobile defence
Defense strategies
• Position defense– Defend your position/share through e.g.:
• Advertising/promotion• New product varieties• ..will often outspend competition
• (Coca Cola/TDC)• Flank defense
– Avoid competitive entry in segments not covered…• Colgate Toothpaste
• Pre-emptive defense– Attack first
• TDC ?
8Henning Knudsen EAL
Defense strategies cont.
• Counter offensive defense– Head On Counter Attack
• Match/exceed what the attacker is offering– Pricing/discount– New products/new features
• Mobile defense– Diversify/enter broader market
• Phillip MorrisKraft General Food Kraft Jacobs Suchard……….. ==>
• US entertainment industry….– Cinemas entertainment
• Contraction defense– Leave business where you cannot compete.
• Nokia
9Henning Knudsen EAL
Market Leader Strategies
• Expanding the Market ….?– Attract new users to the market
• likely strategy in early stages of the PLC• the market leader's ”responsibility” • (the market leader will most likely gain major part of growth)
– Introduce new ways and situations to use the product– Achieve increased usage among existing users
• B) Defending your Share ……?• Objectives….:
– to reduce probability of attack– to divert attacks to less threatening areas– to lessen intensity of attacks
• C) Winning Share of the Market …… ?– Most companies are likely to focus on gaining market share – (being the one of the most important factors explaining level of
profitability).
10
Market Challenger Objectives: To take the market
leader's position!
• Will focus on adding value / new features /lower prices as a tool to gain share
• Will constantly aim at identifying and exploiting weaknesses in leader’s position
• Examples:– Pepsi– Burgerking– Stimorol is the market leader in Denmark, Russia, and Sweden – - ….but challenger in Norway. – Carlsberg in England
11
Build objectives
Attractive conditionsGrowth markets
Exploitable competitive weaknessesExploitable corporate strengthsAdequate corporate resources
Strategic focusMarket expansionNew users New usesIncreased frequency of useWinning market shareProduct innovationDistribution innovationPromotional innovationPenetration pricingCompetitor confrontationMerger or acquisitionForming strategic alliances
Defender
Attack strategies
1. Frontal attack
2. Flanking attack
4. Bypass attack
3. Encirclement
5.Guerrilla
attack
Attacker
MARKET CHALLENGER STRATEGIES
• Frontal / head on Attack – Key …resources
• Flanking Attack– Concentrate your strength on the leaders weakness…
• Encirclement Attack– Attack the leader from "all sides"– Example: Seiko’s 2000 new watches
• Bypass Attack– Seek new business through major technological development or going for new
markets with new products • Example: Scandinavian Tobacco Company (House of Prince) Furniture • Guerrilla Attack
– Targeting limited part of the market
14Henning Knudsen EAL
Frontal - HEAD ON - Attack
• Success depends on four factors:
– …the challenger should have a clear and sustainable competitive advantages
– …the challenger should achieve proximity in other areas
– …success is more likely if it is difficulty for market leader to retaliate.– – the challenger must have adequate resources to withstand the leaders
potential retaliation.
15Henning Knudsen EAL
Flanking - How is it done ???• Flanking with low price
– Example: Budget Rent- a- Car / Rent a Wreck• Virgin air / Ryan air• Flanking with high price
– Example: Orville Redenbacher's Gourmet Popping Corn:– "The world most expensive popping corn".
• Flanking with small size:– Example: Volkswagen (Beetle) in the US
• Flanking with large size:– Example: The oversized tennis racket
• Flanking with distribution– Examples: Hjemis door-to-door
• Flanking with product form– Examples: Aquafresh– Softsoap / Ren&Mild
• Flanking with fewer calories– Example: Lean cusine
16Henning Knudsen EAL
Market FollowerWill "follow" the market leader.
Objectives: Keep existing customers + gain a few new ones.
• Will often avoid "Rocking the Boat".• Examples:
– Many Private label products act as followers in the market
– (e.g. Jolly Cola vs. Coca Cola)– Discount labels are most often followers
17
Market Nicher.Objectives : Be the "Market Leader" in a
small segment of the market.
• Avoid direct competition with larger competitors - hoping that niche is of no interest to large competitors.
• Might be a “nicher” within:• Product category :
– (with a limited, highly specialised assortment)• Customers:
– (meeting very specific requirements for limited number of customers)• Geographical market area:
– (covering limited geographical area, only)• Examples.
– B&O– Ecological food items – ALBANI is a "geographical nicher"
18
Niche objectives
Attractive conditionsSmall budgetStrong competitors dominating major segmentsPockets existing for profitableoperationsCreating a competitive advantage
Strategic focusMarket segmentationFocused R&DDifferentiationThinking small
Harvest objectives
Attractive conditions:Market is mature or declining (dog products)In growth markets where costs of building or holding exceed thebenefits (selected problem children)Care of loyal customersFuture breadwinners exist
Strategic focusEliminate R&D expenditureProduct reformulationRationalise product lineCut market supportConsider increasing price
Divest objectives
Attractive conditionsLoss-making products or businessdrain on resourcesOften low share in declining marketsCosts of turnaround exceed benefitsRemoval will not significantly affect sales of other products
Strategic focusGet out quickly:Minimise the costs