Chapter 3- Competition In a free market businesses can Make a profit Profit Drives business Profit can go to: 1. reinvesting 2. growth 3. debts 4. the owner In a free market people can hold

Private property

Free market encourages Competition Types of competition Perfect Monopolistic Oligopoly Monopoly Perfect Competition Large number of small companies, none of whom have

an opportunity to control the market-requires government legislation to restrict growth

Monopolistic competition Large number of companies, each having an

opportunity to control the market Oligopoly Small number of large companies, each with a

substantial amount of market control Monopoly Single company has all market control Communist countries or dictatorships

Do no permit free enterprise; they ban competition and forbid private ownership

Competition contributes to the economy by

Encouraging the creation of new businesses and products

Another Benefit of competition The wide selection of goods and services Competition leads to: 1. better products 2. better prices 3. new technology 4. increased productivity

5. improved service 6. improved selection Increasing productivity means: Company uses the same resources to produce more or

better products or services Research and development Supports scientists and technicians who work on ideas Improvements in one area can Lead to turmoil in others Examples of new products that hurt existing products

1. HD or 3D televisions.

2. Net books. 3. Smart phones. 4. iTunes & Netflix kindles (e-book reader) or any

downloading website. 5. Newer versions of music genres. Direct competition Products that are very similar Indirect competition Products or services that are not directly related to one

another

3.2 Competitive Advantages

Sustainable competitive advantages are

Methods by which a business holds on to its customers, in spite of competition

Types 1. Unique selling proposition 2. Lower production costs 3. Niche market- 4. Customer loyalty Unique selling proposition • Something that a product has that the

competition does not and will not have. Domino's Pizza: "You get fresh, hot pizza delivered to your door in 30 minutes or less -- or it's free."

• FedEx: "When your package absolutely, positively has to get there overnight"

• M&M's: "Melts in your mouth, not in your hand"

• Wonder Bread: "Wonder Bread Helps Build Strong Bodies 12 Ways"

Lower costs Produce cheaper: technology, process, location We have lost many jobs in Niagara because others have been able to produce the same products at lower prices. How have they achieved this advantage? (not in book)

Answer: they have achieved this advantage by moving plants or production buildings to other countries for example john dear was moved to a country( Mexico ) where they would work for less and not have to pay high in Canada. Instead they probably make half the money we would make.

Niche Market Product is destined for a small market, not worthy of

competitors-magazines Customer Loyalty is more like Customer intimacy and is called relationship marketing Which of the four types would a marketer have the most control over? Which is the easiest to manipulate? (not in book)

Answer: I think they have the most control over the Niche market. I think the Unique selling proposition is the easiest to manipulate.

Non sustainable advantages Can be used to shift sales in their direction

Types: 1. Promotion 2. Placement 3. Quality 4. Benefits of use 5. Price 6. Design Features Promotion Brand awareness is the major goal of most advertisers

and marketers Direct increase in sales is another

Placement To Compete:

A product must have a placement in the market The more placement it has… The more competitive it is How would you ensure that your product was in as many locations as possible? Which marketing technique would you employ? (not in book)

Answer: I would use advertising to get my product in many locations. I would use the Promotion technique.

Category Killers Big retail stores that specialize in a specific category

such as books, hardware or pet supplies. Examples of super stores: 2 (not in book)

Answer: Walmart ( food,clothes,house products ) & Zehrs ( food & clothes )

Quality The higher the quality the higher the cost

Lower quality goods will usually cost: Benefits of Use Values is not in the product itself so much as: Marketers add benefits to their products:

To distinguish them from those of their competitors then highlight those benefits

Price; If a product or service is: Less expensive than a competitor’s Design Features influence The way a product looks and what it does Package designs compete For consumer’s attention Some packages attract attention but also make the product…

More valuable to the consumer

3.3 Service Competition 2 Types 1. strictly service

2. value added service Value added service: Activities performed to support sale or other product Intangibles Things that cannot be touched Competitive advantages within service industries:

1. convenience 2. degree of service 3. selection 4. reputation 5. price

Convenience Making some activity easier or more comfortable Examples of things that aren’t convenient:

1. poor parking 2. line ups/bagging your groceries 3. stairs 4. poor location

Degree of Service Customers know that service costs: money Why do you think prices are higher at convenience stores than they are in grocery stores? (not in book)

Answer: I think prices are higher at convenience stores instead of grocery stores because if your getting gas and you forgot to pick something up at the store you don’t want to go to a grocery store so its more convent to go there.

What are the factors that make convenience stores convenient? (not in book)

Answer: That they have everything there that you might need.

Selection 2 Types:

1. wide: different types of products 2. deep: large quantity of 1 type of product

Reputation Important to service because: it has no product to show People who receive good service:

May tell others

But people who receive bad Almost always tell others

service Price Potential problem with prices that are too low:

Customers may question the quality Prices are affected by: Supply and demand

3.4 The Product/ Service mix Retail and wholesale merely Provide a service to both consumer and manufacturer Most consumers think they are paying for:

The products

Retailers make money from the service the provide to:

Manufacturer and consumer

Retailers also make money from

Added value services

Added value services examples 1. delivery

2. installation 3. extended warranties 4. gift wrapping

Businesses that sell service can Add products to their mix Examples: 1. movie popcorn

2. video store treats 3. salons sell hair products 4. sport teams sell apparel

3.5 The Competitive market Competitive market Consists of specific types of products as well as the

companies that make them Market Share Percentage of sales within a specific market category Market Segments Narrower part of a broad category, with an

identifiable characteristic Beverages would be a Category Juice would be a Segment of the beverage category Grapefruit juice can be a Segment of the juice category How to increase market share 1. increase the size of overall

market(competition is good) coke and pepsi! 2. Take customers away from competitiors

Few companies experience more than

A one or two share point increase or decrease within a year

How to improve market share 1. successful advertising campaign

2. good distribution deal-placement One of the most important roles of every marketing department is to

Track and explain market share alterations in every segment

3.6 Competing in International markets The most important activity for any business to perform before entering any market

Research

Promotion (considerations)

1. regulations 2. cultural differences 3. religions

Placement- Distribution options

1. use existing distributors 2. set up its own office and hire locally 3. Joint ventures

Joint Venture 2 businesses with similar goals combine resources Quality: Countries that lack the natural resources that Canada has,

might offer several opportunities for Canadian companies. Entering a market where your product does not exists would require

a large advertising budget and a creative, educational ad campaign

Pricing foreign products competitively requires

Specialized knowledge

Tariffs are Taxes placed on goods being imported into a country in

order to protect the local industries from too much foreign competition

Landed costs= Product+shipping+currency exchange+tariffs Design considerations 1. legal design requirements

2. instructions 3. translation