Lindell’s Lecture Notes CHAPTERS 3 & 4 B (supplement) COMPETITIVE ANALYSIS

Lindell’s Lecture Notes CHAPTERS 3 & 4 B (supplement) COMPETITIVE ANALYSISBA 315 Marketing ManagementBA 315 Marketing Management

YOUR COMPETITION: Even though you may have done a great job in pinpointing and studying your market segment the job isn't done until you have considered your competition.

• My main competitors in my market area are:

Name of firm (list)

YOUR COMPETITION: Based on my market research of statistical data (such as Sales Management) the amount of buying power per business represented in my area for this kind of business is $‑. If 1 can generate that amount of sales, it: will be sufficient for me to operate successfully.

• Five reasons why customers would buy from me rather than my competitors are:

• Five weaknesses my business will have, in comparison to my competitors, are:

In order to overcome these weaknesses, I will:

STEPS OF COMPETITIVE ANALYSIS 1. DEFINE THE TARGET MARKET 2. DEFINE THE DIRECT COMPETITORS (SERVING THE SAME MARKET

    SEGMENT(S) USE...PERCEPTUAL MAPPING          A. MULTIDIMENTIONAL SCALING          B. FACTOR ANALYSIS 3. ASSESS COMPETITIVE DYNAMICS          A. PIONEERING ADVANTAGE          B. POTENTIAL FOR TECHNOLOGY DISCONTINUITY          C. IDENTIFY FUTURE COMPETITORS (NEW ENTRANTS)          D. BARRIERS

STEPS OF COMPETITIVE ANALYSIS4. ASSESS COMPETITIVE INTENSITY-INCLUDE CONDITIONS THAT FOSTERS INTENSE COMPETITION

5.IDENTIFY AVENUES FOR ATTAINING A SUSTAINABLE ADVANTAGE OVER

COMPETITION

6.SOURCES OF COMETITIVE INTELLEGENCE

YOU MAY COMBINE STEPS 3 AND 4 INTO COMPETITIVE MARKET FORCES

Chapter Objectives 1.1. To gain an appreciation of the need To gain an appreciation of the need for performingfor performing

competitive analysis.competitive analysis. 2.2. To understand the fiveTo understand the five‑‑step approach step approach to carrying out ato carrying out a

competitive analysis.competitive analysis. 3.3. To become acquainted with perceptual To become acquainted with perceptual mapping and themapping and the

techniques used.techniques used. 4.4. To gain an appreciation and awareness To gain an appreciation and awareness of sources ofof sources of

competitive intelligence

Definition of the target market We establish the We establish the productproduct market market boundaries of boundaries of interest and identify interest and identify any specific target any specific target segments.segments.

identifies direct competitors who are likely to gain or who are likely to gain or lose a substantial lose a substantial customer share over time customer share over time because they serve the because they serve the same customers and offer same customers and offer similar benefits.similar benefits.

perceptual mapping

Perceptual mapping methods are used to position the firm against competitors as seen by the consumer. Product positioning is used to determine the brands that consumers see as being similar.

perceptual mapping Managers rely on some Managers rely on some

perceptual mappingperceptual mapping techniques to portray how techniques to portray how customers perceive the customers perceive the various market competitors. various market competitors. There are two types:There are two types:

Multidimensional scaling relies on similarity judgments of consumers in determining the degree of similarity between pairs of products.

percep tual mapping

A factor analysis based approach relies on buyers assessment of determinant attributes to evaluate alternatives

Assessing competitive dynamics Assessing competitive Assessing competitive

dynamicsdynamics, step 3 of the , step 3 of the competitive analysis, competitive analysis, involves attempting to involves attempting to project what the future project what the future competitive environment competitive environment will look like.will look like.

Pioneering advantage is the market advantage that results from a competitor being the innovator in a market. Several factors contribute to this advantage:

1.Pioneer products act as "prototypes" for competitors.2. Initial brands potentially build significant loyalty.3. Late entrants will have difficulty obtaining awareness and trail by distributors and consumers. Pioneering advantagePioneering advantage

If the future competitive structure of a market is to be understood, managers should attempt to determine the potential for technological discontinuity. Note- LPC WINDSURFER EXAMPLE

Steps of competitive analysis (continued)Steps of competitive analysis (continued)

Although the identity of current direct competitors is important, it is equally essential to identify future competitors, i.e., new entrants.Such as…MISTRAL,BIC

Steps of competitive analysis (continued)Steps of competitive analysis (continued)

Barriers to entry make it difficult to become a significant competitor in a new market.

Steps of competitive analysis (continued)Steps of competitive analysis (continued)

Barriers to entry Economies of scale, initial financial investment, lack of access to sources of production, and limited access to distribution channels are some typical barriers to entry.

Steps of competitive analysis (continued)Steps of competitive analysis (continued)

Barriers to entry …Tariffs, quotas, customs, and governmental intervention are some international entry barriers.

Steps of competitive analysis (continued)Steps of competitive analysis (continued)

New entrants can cause considerable competitive concern through improved price performance trade offs, by bringing new skills to the industry,or by virtue of cross subsidizations.

Steps of competitive analysis (continued)Steps of competitive analysis (continued)

The importance of assessing competitive intensity, step 4, is twofold: to determine the likely cost of meeting competition and to recognize the most important bases and types of competition.

Steps of competitive analysis (continued)Steps of competitive analysis (continued)

Several basic conditions which foster intense competition are: numerous competitors, slow industry growth, undifferentiated products and services, low switching costs, significant economies of scale, industry overcapacity, and management loyalty

Steps of competitive analysis (continued)Steps of competitive analysis (continued)

The ultimate purpose of performing a competitive analysis is to identify possible avenues for attaining a sustainable advantage over competitors so as to achieve product or product line objectives.

Steps of competitive analysis (continued)Steps of competitive analysis (continued)

In assessing competitive advantage, managers must identify the positions and sources of advantage that lead to desired market performance outcomes.

. Steps of competitive analysis (continued)Steps of competitive analysis (continued)

1. Positional advantages depend on the customer's perception of these advantages.

. Steps of competitive analysis (continued)Steps of competitive analysis (continued)

2. Source advantages include: skills of people within the organization, the systems or arrangement developed for market response, and the organization's resources.

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Steps of competitive analysis (continued)Steps of competitive analysis (continued)

3. Superior resources, intangible and tangible, can enable a firm to either underprice the competition or to offer better or unique performance.

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Steps of competitive analysis (continued)Steps of competitive analysis (continued)

Sources for obtaining competitive intelligence fall into three basic categories: published material & documents, competitors' employees, suppliers, or customers; and direct observation.

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Steps of competitive analysis (continued)Steps of competitive analysis (continued)

ALMOST HOMETHE BATTLE FOR THE COOKIE MARKET

– In 1982, marketers in the cookie In 1982, marketers in the cookie industry received a industry received a doublebarreled attack with thedoublebarreled attack with the entrance of Procter & Gamble's entrance of Procter & Gamble's Duncan Hines cookies and Frito Duncan Hines cookies and Frito Lay's Grandma's brand. Lay's Grandma's brand. Initially, both lines were Initially, both lines were successfully testsuccessfully test marketed in marketed in Kansas City, and by 1983, FritoKansas City, and by 1983, Frito Lay had begun moving into a Lay had begun moving into a variety of other markets.variety of other markets.

ALMOST HOMETHE BATTLE FOR THE COOKIE MARKET 1.1. Multidimensional scalingMultidimensional scaling relies on relies on

similarity judgments of consumers in similarity judgments of consumers in determining the degree of similarity determining the degree of similarity between pairs of products.between pairs of products.

2. A factor analysis based approach relies on buyers assessment of determinant attributes to evaluate alternatives

Competitive analysis-LPC@umsl.edu

Don’t forget your handout packet:Don’t forget your handout packet: An exam An exam question: We analyze a competitor on five question: We analyze a competitor on five abilities….. abilities….. The abilitiy to………..The abilitiy to………..