Competition

COMPETITION

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Response Mechanism

Poor firms ignore their competitors; average firms copy their competitors; winning firms lead their competitors.

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Competition

Competition: “A market in which rival sellers are trying to gain extra business at one another's expense and thus are forced both to be as efficient as possible and to hold their prices down as much as possible.”

www.mvp.cfee.org/en/glossary.html

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Competitors

Competitors : “those firms or individuals who seek to satisfy the same customers or customer needs and offer similar products or services, close substitutes or brands to them”.

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Identifying Competitors Industry Concept of Competition

Industry Number of Sellers and

Degree of Differentiation Pure monopoly Oligopoly

Pure oligopoly Differentiated oligopoly

Monopolistic competition Pure competition

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Analyzing Competitors

Three Variables to Monitor When Analyzing Competitors: Share of market Share of mind Share of heart

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What it is ?

Share of market : The competitor’s share of the target market

Share of mind: The percentage of customers who name the competitor in responding to the statement, “Name the first company that comes to your mind in this industry.”

Share of heart: The percentage of customers who named the competitor in responding to the statement, “Name the company from which you would prefer to buy the product.”

Figure 9-1: Five Forces Determining Segment Structural Attractiveness

Competitive ForcesMichael Porter’s 5 forces theory

Threat of:Threat of:1.1. intense intense

segment segment rivalryrivalry

2.2. new entrantsnew entrants

3.3. substitute substitute productsproducts

4.4. buyers’ buyers’ growing growing bargaining bargaining powerpower

5.5. suppliers’ suppliers’ growing growing bargaining bargaining powerpower

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Barriers and Profitability9-9

Figure 9-2:

Effects of Competition

Enlarging the product mix The mix is defined by :1. the industry and 2. manufacturing environment and 3. management strategies that position the company as a 1. specialty, 2. niche or 3. broad-based supplier of goods and services

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Levels of Competition

Brand Competition Industry Competition Form Competition Generic Competition

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Brand Competition

Rival companies offering a similar product and services to the same customer at similar prices.

Maruti800, Santro, Matiz

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Industry Competition

A Competition within all companies making same product and class of products.

Maruti800 could compete against all other automobile manufacturers

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Form Competition

All companies manufacturing products that supply the same resultant to the consumer

Maruti800 would see itself competing against not only automobiles manufacturers but also against manufacturers of trucks,LCVs and even with manufacturers of various motor cycles mfg companies.

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Generic Competition

All companies that compete for the same consumer’s wallet and try to achieve maximum share of wallet.

Maruti800 would see itself competing with companies that sell white goods.

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Analysis of Competition

Two Approaches Industry analysis Key player analysis

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Industry Analysis

5 Steps:1. Defining an industry : E.g. Cement

ndustry,automobiles industry

2. Study of key aspects: Market Size,growth,structure,gov.policy etc.

3. SWOT

4. Predicting the changes in industry strategies

5. Analysis of Results identification of strategic player

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Creative Marketer

It discovers & produce solutions customers did not ask for but to which they enthusiastically respond.

A market driving firm

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Anticipative marketer

It looks ahead into what needs customers may have in the near future.

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Responsive Marketer

It finds a stated need & fills it

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Defending the Market Share

Continuous innovation Developing new products Distribution effectiveness Cost cutting 6 defense strategies

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6 Defense Strategies Position Defense Flank Defense Preemptive Defense Counteroffensive Defense Mobile Defense Contraction Defense

Planned contraction (Strategic withdrawal)

Designing Competitive Strategies

Position defense

Building superior brand power and making the brand almost Impregnable (unassailable)

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Flank defense

Erect outposts to protect a weak front or possibly serve as an Invasion base for counterattacking the possible challenge for the weak (low) product.

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Preemptive defense

To attack before the enemy starts its offense.

Keep your competitors off balanced: open many pockets of offense.

Preannouncements Small firms may choose another

direction to avoid head to head competition.

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Counter offensive defense

Launching a pincer movement counter attacking attacker’s main

territory: So that the aggressor will have to pull

back some of its troops to defend its territory.

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Mobile defense: The Leader stretches its domain over new territories that can serve as future centers for defense & offense through market broadening and diversification.

1. Market broadening: Shifting focus from the current product to the underlying generic need. Company gets involved in the R & D across the whole range of technology associated with that need.

2. Principle of the objective: The most important military principle is the Principle of the Objective. This principle requires that you decide in advance exactly what it is that you are trying to accomplish. What exactly is your objective? 80% of all problems in personal and corporate life come from a lack of clarity with regard to objectives and goals.

3. Principle of mass: The principle of mass should be understood in terms of its components: (1) effects - not forces, (2) place and time, (3) joint integration, and (4) synchronization.

4. Market diversification : Shifting into the unrelated industries.

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Market-Challenger Strategies Defining the Strategic Objective and

Opponent(s) It can attack the market leader It can attack firms of its own size that are

not doing the job and are underfinanced It can attack small local and regional

firms Choosing a General Attack Strategy


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Brand-extension strategy Multibrand strategy Heavy advertising and

media pioneer Aggressive sales force Effective sales promotion Competitive toughness Manufacturing efficiency

and cost cutting Brand-management system

Attack Strategies

Figure 9-10:

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5 Attack Strategies Frontal Attack

Flank Attack

Encirclement Attack

Bypass Attack

Guerrilla Warfare

Designing Attack Strategies

Analyzing Competitors9-32

Reaction Patterns1. If competitors are nearly identical and make their

living the same way, then their competitive equilibrium is unstable.

2. If a single major factor is the critical factor, then the competitive equilibrium is unstable.

3. If multiple factors may be critical factors, then it is possible for each competitor to have some advantage and be differentially attractive to some customers. The more factors that may provide an advantage, the more competitors who can coexist. Competitors all have their segment, defined by the preference for the factor trade-offs they offer.

4. The fewer the number of critical competitive variables, the fewer the number of competitors.

5. A ratio of 2 to 1 in market share between any two competitors seems to be the equilibrium point at which it is neither practical nor advantageous for either competitor to increase or decrease share.

Definition of Attack

Frontal Attack : The attacker matches its opponent’s product , advertising ,price and distribution.

Flank Attack : An enemy’s weak spots are targeted.

Encirclement Attack : It is attempt to capture a wide slice of the enemy’s territory through a blitz

Bypass Attack : Bypassing the enemy and attacking easier markets to broaden resource base.

Guerrilla Attack : Waging small, intermittent attacks to harass & demoralize the opponent.

Figure 9-6: Hypothetical Market Structure

Designing Competitive Strategies9-34


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Market-Leader Strategies Expanding the Total Market

New Users Market-penetration strategy New-market segment strategy Geographical-expansion strategy

New Uses More Usage

Defending Market Share


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Choosing a Specific Attack Strategy Price-discount Lower price goods Prestige goods Product proliferation Product innovation Improved services Distribution innovation Manufacturing cost reduction Intensive advertising promotion


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Market-Follower Strategies Innovative imitation

(Product imitation) Product innovation Four Broad Strategies:

Counterfeiter Cloner Imitator Adapter

Counterfeiter

The counterfeiter duplicates the leader’s product and package and sell it on the black market or through disreputable dealers

Cloner

The Cloner emulates the leader’s product, name and packaging, with slight variation.

Imitator

The imitator copies some things but maintains differentiation in terms of

Packaging Advertising Pricing Location

Adapter

The adapter takes (legally) the leader’s product and improves them and sell it probably at a different country.


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Market-Nicher Strategies High margin versus high

volume Nicher Specialist Roles

End-user specialist Value-added reseller

Vertical-level specialist Customer-size specialist Specific-customer specialist Geographic specialist Product or product-line

specialist

Product-feature Product-feature specialistspecialist

Job-shop Job-shop specialistspecialist

Quality-price Quality-price specialistspecialist

Service specialistService specialist Channel Channel

specialistspecialist

Balancing Customer and Competitor Orientations

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Competitor-centered companyCustomer-centered company

Competition

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