0 Chapter 8 Dealing with the Competition. 1 Objectives Understand how a company identifies its...

1

Chapter 8Chapter 8

Dealing with the Dealing with the CompetitionCompetition

2

ObjectivesObjectives

Understand how a company identifies its

primary competitors and ascertains their

strategies.

Review how companies design competitive

intelligence systems.

3

ObjectivesObjectives

Learn how a company decides whether to

position itself as a market leader, a challenger,

a follower, or a nicher.

Identify how a company can balance a

customer vs. competitor orientation.

4

Competitive MarketsCompetitive Markets

Porter’s Five Forces that Determine

Market Attractiveness:

– Threat of intense segment rivalry

– Threat of new entrants

– Threat of substitute products

– Threat of buyers’ growing bargaining power

– Threat of suppliers’ growing bargaining power

6

Barriers & Profitability

7


Failing to identify competitors can lead to

extinction

Internet businesses have led to

disintermediation of middlemen

Competition can be identified using the

industry or market approach

8


Number of sellers

and degree of

differentiation

Cost structure

Entry, mobility and exit

barriers

Degree of vertical

integration

Degree of globalizationDegree of globalization

Industries Can Be Classified By:

9


Industry Structures

Pure Monopoly

Pure Oligopoly

Differentiated Oligopoly

Monopolistic

Competition

Pure Competition

Only one firm offers an

undifferentiated

product or service in an

area

– Unregulated

– Regulated

Example: Most utility

companies

10


Industry Structures

Pure Monopoly

Pure Oligopoly


Monopolistic

Competition

Pure Competition

A few firms produce

essentially identical

commodities and little

differentiation exists

Lower costs are the key

to higher profits

Example: oil

11


Industry Structures

Pure Monopoly Pure Oligopoly Differentiated Oligopoly

Monopolistic Competition

Pure Competition

A few firms produce partially differentiated items

Differentiation is by key attributes

Premium price may be charged

Example: Luxury autos

12


Industry Structures

Pure Monopoly

Pure Oligopoly


Monopolistic

Competition

Pure Competition

Many firms

differentiate items in

whole or part

Appropriate market

segmentation is key to

success

Example: beer,

restaurants

13


Industry Structures

Pure Monopoly

Pure Oligopoly


Monopolistic

Competition

Pure Competition

Many competitors offer

the same product

Price is the same due to

lack of differentiation

Example: farmers

selling milk, crops

14


A broader group of competitors will be

identified using the market approach

Competitor maps plot buying steps in

purchasing and using the product, as well as

direct and indirect competitors

15

Competitor AnalysisCompetitor Analysis

Key characteristics of the competition must

be identified:

– Strategies

– Objectives

– Strengths and Weaknesses Effect a firm’s competitive position in the target market

– Reaction Patterns

16

Competitor AnalysisCompetitor Analysis

Dominant

Strong

Favorable

Tenable

Weak

Nonviable

Competitive PositionsPositions in the Target Market

17

Competitive Intelligence SystemsCompetitive Intelligence Systems

Designing the system involves:

– Setting up the system

– Collecting the data

– Evaluating and analyzing the data

– Disseminating information and

responding to queries

18

Competitive Intelligence SystemsCompetitive Intelligence Systems

Value analysis helps firms to select

competitors to attack and to avoid

– Customers identify and rate attributes

important in the purchase decision for the

company and competition

Attacking strong, close, and bad

competitors will be most beneficial

19

Designing Competitive StrategiesDesigning Competitive Strategies

Major Strategies

Market-Leader

Market-Challenger

Market-Follower

Market-Nicher

Expanding the total

market

Defending market

share

Expanding market

share

20


Expanding the Total Market:– Targeting Product to New Users

Market-penetration strategyNew-market strategyGeographical-expansion strategy

– Promoting New Uses of Product

– Encouraging Greater Product Use

21


Position

defense

Flank defense

Preemptive defense

Counteroffensive

defense

Mobile defense

Contraction defense

DefendingDefending Market Share

22


Before Attempting to Expand Market

Share, Consider:

– Probability of invoking antitrust action

– Economic costs involved

– Likelihood that marketing mix decisions

will increase profits

23


Major Strategies

Market-Leader

Market-Challenger

Market-Follower

Market-Nicher

First define the

strategic goals and

opponent(s)

Choose general attack

strategy

Choose specific attack

strategy

24


General Attack Strategies:– Frontal attacks match competition– Flank attacks serve unmet market needs or

underserved areas– Encirclement “blitzes” opponent– Bypassing opponent and attacking easier

markets is also an option

25


Price-discount

Lower-price goods

Prestige goods

Improved services

Product proliferation

Product innovation

Distribution innovation

Manufacturing cost

reduction

• Intensive advertising promotion

Specific Attack Strategies Include:

26


Major Strategies

Market-Leader

Market-Challenger

Market-Follower

Market-Nicher

Imitation may be more profitable than innovation

Four broad strategies:– Counterfeiter

– Cloner

– Imitator

– Adapter

27


Major Strategies

Market-Leader

Market-Challenger

Market-Follower

Market-Nicher

Niche specialties:

– End-user

– Vertical-level

– Customer-size

– Specific customer

– Geographic

– Product/product line

– Product feature

– Job-shop – Quality-price

– Service – Channel

28

Balancing Customer and Competitor Balancing Customer and Competitor OrientationsOrientations

Competitor-centered companies evaluate

what competitors are doing, then formulate

competitive reactions

Customer-centered companies focus on

customer developments when formulating

strategy

0 Chapter 8 Dealing with the Competition. 1 Objectives Understand how a company identifies its...

Documents

Transcript of 0 Chapter 8 Dealing with the Competition. 1 Objectives Understand how a company identifies its...