Chapter 7 Dealing with the Competition PowerPoint by Yu Hongyan Business School of Jilin University.
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Transcript of Chapter 7 Dealing with the Competition PowerPoint by Yu Hongyan Business School of Jilin University.
Chapter 7
Dealing Dealing with the with the
CompetitionCompetition
PowerPoint by Yu Hongyan Business School of Jilin
University
Objectives
Understand how a company identifies its primary competitors and ascertains their strategies.
Review how companies design competitive intelligence systems.
Objectives
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.
Five Forces Determining Segment Structural Attractiveness
Potential Entrants(Threat ofMobility)
Potential Entrants(Threat ofMobility)
Buyers(Buyer power)
Substitutes(Threats ofsubstitutes)
Suppliers(Supplier power)
Suppliers(Supplier power)
IndustryCompetitors
(Segment rivalry)
Competitive Markets
Figure 8-1: Five Forces that Determine
Market Attractiveness
Barriers and Profitability
Low, stablereturnsLowLow
High, stablereturnsHighHigh
LowLow
Low, riskyreturns
High, riskyreturns
HighHigh
En
try
Bar
rier
sE
ntr
y B
arri
ers
Exit barriersExit barriers
Competitive Markets
Figure 8-2: Barriers and Profitability
Discussion Scenario
Assume that Texas passes legislation which legalizes casino riverboat gambling (riverboats must be located on rivers, lakes, or oceans). A limited number of gaming licenses are strictly controlled by the state gaming commission.
Assume you work for Harrah’s. Using Porter’s Five Forces, analyze the market attractiveness of Texas.
Competitive Markets
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
Competitive Markets
Industries Can Be Classified By:Number of sellers and degree of differentiation
Entry barriers, mobility and exit barriers
Degree of globalization
Degree of vertical integration
Cost structure
Industry Industry CharacteristicsCharacteristics
Competitive Markets
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
Competitive Markets
Industry Structures
Pure Monopoly Pure Oligopoly Differentiated
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
Competitive Markets
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
Competitive Markets
Industry Structures
Pure Monopoly Pure Oligopoly Differentiated
Oligopoly Monopolistic
Competition Pure Competition
Many firms differentiate items in whole or part
Appropriate market segmentation is key to success
Example: beer, restaurants
Competitive Markets
Industry Structures
Pure Monopoly Pure Oligopoly Differentiated
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
Competitive Markets
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
Competitive Markets
Figure 8-3: Competitor
Map of Eastman
Kodak
Competitor Analysis
Key Competitive Characteristics to be Identified:
Strengths and WeaknessesStrengths and WeaknessesEffect a firm’s competitive positionEffect a firm’s competitive position
Reactive PatternsReactive Patterns
ObjectivesObjectives
StrategiesStrategies
HighHigh
LowHigh
LowLow
Qu
alit
yQ
ual
ity
Vertical IntegrationVertical Integration
Strategic Groups in the Major Appliance Industry
Group A•Narrow line•Lower mfg. cost•Very high service•High price
Group D•Broad line•Medium mfg. cost•Low service•Low price
Group C•Moderate line•Medium mfg. cost•Medium service•Medium price
Group B•Full line•Low mfg. cost•Good service•Medium price
Competitor Analysis
Figure 8-4: Strategic Groups in the Major Appliance Industry
Analyzing Competitors
CompetitorCompetitorActionsActions
ObjectivesObjectives
Strengths &Strengths &WeaknessesWeaknesses
ReactionReactionPatternsPatterns
StrategiesStrategies
Competitor Analysis
Competitive Positions in the Target Market
Weak
Favorable
Dominant
Nonviable
Tenable
Strong
Discussion Scenario
Choose one of these three product classes: personal computers, soft drinks, or mass merchandise retailers.
Identify key competitors within your chosen product class, as well as the competitive position held by each. Be prepared to defend your classifications.
Competitive Intelligence Systems
Designing the Designing the systemsystem
Collecting Collecting the datathe data
Evaluating and Evaluating and analyzing the dataanalyzing the data
Disseminating information and Disseminating information and responding to queriesresponding to queries
Designing the System Involves:
Competitive Intelligence Systems
The CI Resource Index is a search engine devoted to competitive intelligence resources
Competitive 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
Designing Competitive Strategies
Major Strategies
Market-Leader Market-Challenger Market-Follower Market-Nicher
Expanding the total market
Defending market share
Expanding market share
Competitor’s Expansion Plans
Markets
Pro
duct
s
IndividualUsers
Commercial & Industrial Educational
PersonalComputers
HardwareAccessories
Software
Dell
Hypothetical Market Structure & Strategies
40%
Marketleader
30%
Marketchallenger
20%
Marketfollower
Expand MarketDefend Market Share
Expand Market Share
Attack leaderStatus quo
Imitate
10%
Marketnicher
Special-ize
Designing Competitive Strategies
Expanding the Total Market: Targeting Product to New Users
Market-penetration strategy New-market strategy Geographical-expansion strategy
Promoting New Uses of Product Encouraging Greater Product Use
Designing Competitive Strategies
Figure 8-5: Defense Strategies
Designing Competitive Strategies
Before Attempting to Expand Market Share, Consider: Probability of invoking antitrust action Economic costs involved Likelihood that marketing mix decisions will
increase profits
Designing Competitive Strategies
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
Designing Competitive Strategies
Figure 8-6: Attack Strategies
Designing Competitive Strategies
Intensive advertising promotion
Productproliferation
Prestige goods Price-discount
Product innovation
Distribution innovation
Improved services
Manufacturing cost reduction
Specific Specific Attack Attack
StrategiesStrategies
Lower-price goods
Discussion Scenario
As brand manager for the IBM personal computing division, you have been given the formidable task of increasing market share.
Identify and justify the general and specific attack strategies that you would use to accomplish this goal.
Designing Competitive Strategies
Major Strategies
Market-Leader Market-Challenger Market-Follower Market-Nicher
Imitation may be more profitable than innovation
Four broad strategies: Counterfeiter Cloner Imitator Adapter
Designing Competitive Strategies
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
Discussion Scenario
Companies or brands may successfully fill market niches.
Can you think of some companies or brands that follow a market niche strategy? If so, which ones?
Balancing Customer and Competitor Orientations
Competitor-centered companies evaluate what competitors are doing, then formulate competitive reactions
Customer-centered companies focus on customer developments when formulating strategy
Competitor’s Expansion Plans
Markets
Pro
duct
s
IndividualUsers
Commercial & Industrial Educational
PersonalComputers
HardwareAccessories
Software
Dell
Hypothetical Market Structure & Strategies
40%
Marketleader
30%
Marketchallenger
20%
Marketfollower
Expand MarketDefend Market Share
Expand Market Share
Attack leaderStatus quo
Imitate
10%
Marketnicher
Special-ize
Defense Strategies
AttackerAttacker
(3)(3) PreemptivePreemptivedefensedefense
(4)(4) Counter-Counter-offensiveoffensivedefensedefense Defender
(1)(1)PositionPositiondefensedefense
(5)Mobile
defense
(2) Flank defense(2) Flank defense
(6) Contraction(6) Contractiondefensedefense
Optimal Market SharePro
fita
bili
ty
Market share0% 25% 50% 75% 100%
Optimal market share
Attack Strategies
AttackerDefender
(3) Encirclement attack
(4) Bypass attack
(2) Flank attack
(5) Guerilla attack
(1) Frontal attack
Specific Attack Strategies
Price-discount Cheaper goods Prestige goods Product proliferation Product innovation Improved services Distribution innovation Manufacturing cost reduction Intensive advertising promotion
“Nichemanship”
End-user specialist Vertical-level specialist Customer-size specialist Specific-customer specialist Geographic specialist Product or product-line specialist Product-feature specialist Job-shop specialist Quality-price specialist Service specialist Channel specialist
Balance
CompetitionCustomer
+ Fighter orientation+ Alert+ Exploit weaknesses- Reactive
+ ID opportunities+ Long-run profit+ Emerging needs & groups