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C H A P T E R
Defining the Competitive Set2
Key Question for This Chapter: Who do we or will we compete against?
McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved.
Major Topics for Ch. 2
I. Bases of Competition
II. Levels of Competition*
III. Methods for Determining Competitors**
IV. Right Level of Competition for You
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Bases of Competition
I. Product-oriented Approach Similar Physical Attributes Functional Similarity
II. Customer-oriented ApproachWho they are – competition for same budget When they use the productWhy they use the product - benefits sought
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Bases of Competition (con’t).
III. Marketing oriented: promotion & distribution
- Media
- Distribution
IV. Resource-oriented Approach (Internal)- Raw materials- Employees- Financial resources
IV. Geographic: Becoming less relevant
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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
Beer
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
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Example 1: Energy Bar Competition
Odwalla Power Bar
Balance BarClif
Energy Bars
Snack/Health Bars
Healthy Snacks
Other Snacks
Nutrigrain Bars Slimfast Bars Granola Bars
FruitsNutsJuice
CrackersChipsCandy
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Example 2: Super-Premium Ice Cream
Level of Competition
Definition Competitors
Product form Super-Premium Haagen-DazsStarbuck/GodivaBen & Jerry’s
Product category Ice cream Breyer’sDreyer’sPrivate labels
Generic Snacks DessertsNovelties
Frito LayNabiscoNestléMrs. FieldsYoplait
Budget Other supermarket, Convenience store products
Many
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Example 3: PDA
Level of Competition
Definition Competitors Need Satisfied
Product form Full-featured PDAs Palm Pilot VIIHandspringCompaq AeroPocket PC makers
Personal information management plusintegrated communications
Product category PIM (Personal Information Managers)
Palm IIIRoyalCasio PV-100
PIM only
Generic Tablet PC/Cell phones
ToshibaNokiaSamsung
Other solutions to the above
Budget $100-$1,000
Paper-based solutionsBusiness items costing$100-$1000
RolodexDay TimerFax MachinesPersonal copiersFurniture (e.g. Steelcase)
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Levels of Competition: Implications for Product Strategy
Budget
Generic
Product Category
Product Form
Competitive Level
Convince Customers that the Brand is Better than Others
Convince Customers that the Product Form is Best in the
Category
Convince Customers that the Product Category is the Best
Way to Satisfy Needs
Convince Customers that the Generic Benefits are the Most
Appropriate Way to Spend their Money
Product Management Task
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Methods for Determining Competitors*
Existing categories: ex) IRI; SIC NAICSwww.census.gov/epcd/www/naics.html
Managerial judgmentCustomer-purchase-based measuresCustomer-judgment-based measures
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Managerial Judgment of Competition
Markets Same Different
Product/Services
Same
Different
A
C
B
D
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Customer-purchase-based measures
Brand Switching Data The Extent of Substitutability among Brands
Cross-Elasticity of Demand: Change in Brand B’s Sales/ Change in Brand A’s Price
Mainly Used for Nondurable Products
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Brand-Switching Matrix
Time t+1
A B C D E
A .6 .2 .2 0 0
B .2 .3 .4 .1 0
C .2 .3 .5 0 0
D 0 .1 .1 .5 .3
E .1 0 0 .4 .5
Time t
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Customer-Judgment-Based Measures
Overall similarity (by Perceptual Mapping)*Similarity of consideration setsProduct deletion (based on product
unavailability)Substitution In Use:
List all the uses of a product List other products that provides the same uses
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Perceptual Mapping
Means graphic description of customers’ perception about different brands/products.
You can use it to gainBetter understanding of market structureCustomer perceptions for a new product
conceptDirection for R&D efforts to satisfy customers
better
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Developing A Perceptual Map
Two Alternative ways Attribute Rating method (AR) Overall Similarity method (OS)
Attribute Rating Method Data Cube (brands*attributes*respondents) Statistical Analysis (Factor Analysis) Find out two (or three) axes for the perceptual map Attribute Analysis Limitations Suitable for B-to-B products
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Developing A Perceptual Map
Overall Similarity method (OS) Suitable for consumer products and services Ask consumers’ perception the extent of similarity
of pairs of items. Similarity Data Analysis (Multidimensional Scaling) You name the axes and infer the attributes
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Defining Competition with Perceptual Mappingexample: desserts
• Moist• Needs refrigeration
• Tapioca pudding mixLocal mix •
Pudding mix
Chocolate torte mix •
D-zer ta • • Jell-O
• Canned pudding
• Individual pie
• Hostess cupcakes
• Quick bread mix
Good for a coffee break •
As a formal dessert•
Homemade cake •Bakery cake
•
Homemade cookies
• Cheese cake mix
“Snackin’ Cake” mix •
• Frozen cake
• Layer cake mix
• “Stir’n Frost cake mix
Takes a long time to prepare •
Bundt cake mix •
Custard mix
Boston crème pie mix“Light Style” cake mix
Coffee cake mix •
Bakery cookies •Pillsbury cookie dough •
Cookie mix •
•
• Easy to carry with meIn my school work lunch •
• Between meal snack
• Pepperidge Farm cookies• Oatmeal cookies
• Frozen pie
• Homemade pie
Date bar mix •
Brownie mix •
••
Bakery pie •
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Enterprise Competition in Financial Services
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Two Key Things to Remember
I. How would you determine competition?
II. Choose the focal level of competition*
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Right Level of Competition for You
I. Your Firm’s Market Position
II. Time Horizon
III. Product Life Cycle and Technology Change
IV. Your Position in the Firm