Stmkt auc-class.9-10-spring.2013

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Generic Strategy

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Porter’s Generic Strategies

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Exercise: Which is which??..

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1. McDonalds.

2. GAD

3. KFC

4. Burger King

5. AmrHamdy designs kitchens

6. GW Marriott

7. Metro market

8. Canary fast food

9. Kiosk in your street

Competitive Strategy

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Identify the potential competitors

Analyze the competitor’s Objectives

Determine the competitor’s Strategies

Analyze the competitor’s SWOT

Identify the competitor’s:

- Share of Market

- Share of Mind

- Share of Heart

How to analyze the competitors?

Which competitor to compete with?

Strong Weak

Good Bad

indirect Direct Coke Pepsi Tap

water

Ferrari

Branded

Products

Counterfeit X

Chevrolet Ford

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Competitor Map

Competitors & Market Dominance

Market Leader

Market Challenger

Market Follower

Market Nichers

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Market Leader

It’s the dominant company in the market with

the largest Market Share.

It leads the price changes, promotional

intensity & Distribution Coverage Ex.: Boeing (airliners), Nestle (food). Microsoft

(software), L'Oreal (cosmetics), Royal Dutch/Shell

(oil). McDonald's (fast food) and De Beer (diamonds).

Market Leader

Market Pioneer is the first company introduced a

certain product to the market.

Market leader must be Market pioneer to protect

its market share.

Motorola was the market Pioneer & Leader as well in

cell phone industry ..but Nokia& Ericsson were

pioneers so that they became market leaders

Coca Cola was the Market pioneer & Leader

establishing a positioning that it’s the original .. but

Pepsi positioned itself as a choice of new generation

thus became the market leader

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Objectives & Strategies of

Market Leader

A. Expanding total market, through: 1. More Usage/consumption

The dominant company will gain the most when the consumers increase the quantity or frequency of consumption.

Ex.: Heinz will gain more profits if the American consumers increase their consumption of Ketchup.

How to increase the Usage/Consumption??.. Ex.: larger packages have been shown to increase the

amount of product consumed at one time.

Ex.: increase the availability of the product will increase its consumption esp. soft drinks, snacks

Ex.: tie the product to a certain occasion Nescafe at morning, Coke & football matchs

A. Expanding total market, through:

2. New Customers

The dominant company will gain the most when the no. of

consumers increases even if some of them are buying

competitive brands.

How to attract new customers??..

Market penetration Growth Strategy, by: more ads,

discounts, promotional campaigns..etc

Market development Growth Strategy, by: targeting new

segment, target new geographical market

Product development Growth Strategy, by adding new

features that will encourage more customers to buy it


Market Leader

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A. Expanding total market, through: 2. New uses

The dominant company will gain the most when discovering and promoting new uses for the product.

Ex.: Nylon is an example of new-use expansion. Every time nylon became

a mature product, some new use appeared. Nylon was first used as a fiber for parachutes; then for women's socks ; later as a leading material in shirts; and in vehicle tires ..etc

Arm & Hammer baking soda the company discovered that consumers were using baking soda as a refrigerator deodorizer. It launched a heavy advertising and publicity campaign focusing on this use and persuaded consumers to place an open box of baking soda in their refrigerators and to replace it every few months.


Market Leader

B. Defending market share, through:

1. Position defense (Fortification strategy)

The dominant company must defend its current position

esp. in the consumer’s mind in order to minimize the

threat of being attracted to the competitor (attacker)

Ex.:

Pampers & Dryness,

BMW & Performance,

Coke & The Original,

Pepsi & New generation choice.


Market Leader

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The dominant company must defend its current

position by offering premium performance & superior

value through anticipative & creative marketers.

Ex.:

Shell must constantly guard against BP,

Gillette against Bic;

Kodak against Fuji;

Boeing against Airbus


Market Leader



The dominant company must keep diversifying its

business portfolio in order to protect its position in the

market.

Ex.:

Coca-Cola in spite of being the world leader in soft drinks, is

aggressively extending its beverage lines (related

diversification) and has diversified into equipment and

plastics (unrelated diversification).


Market Leader

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2. Flank defense

The dominant company must improve its weaknesses

to avoid threats or being attacked through these points

or to add more advantages even by diversifying its

business portfolio.

Ex.: after launching “Range Rover”, land-Rover company

became under attack by Japanese & US Companies which

launched similar cars but with lower prices. Therefore,

Land-Rover improved the engine of Range Rover to justify

the high price targeting high-end market and launched

“Discovery” with lower price to target low-end market.


Market Leader


3. Pre-emptive defense

The dominant company must start to attack before

being attacked by the challengers

Ex.:

when being threatened in the mid-1980s by the impending

entry of Japanese manufacturers into the US market,

Cummins Engine slashed its prices by almost a third to

save its no. 1 position in the $2 billion heavy-duty truck

engine market. Today, no single US-built tractor-trailer truck

contains a Japanese engine.


Market Leader

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4. Counter-offensive defense

The dominant company will respond to any attack by

counterattack action

This strategy will be very successful if the competitor is

vulnerable.

Ex.:

When Fuji attacked Kodak in the film market, Kodak

counterattacked by dramatically increasing its promotion and

introducing several innovative new film products which pushed

fuji to go again to its main interest.


Market Leader

B. Defending market share, through: 4. Counter-offensive defense (con’t)

Mars' attack on the ice-cream market, using its brand extensions of Mars Bars, Snickers, Bounty and so on, created a new product class of ice-confectionery. Unilever's Walls ice-cream division, which is market leader in parts of Europe, had difficulty countering this because it had no confectionery brands to use in that way. It overcame the problem by developing brand extensions of Cadbury's products, a competitor of Mars, which has no ice-cream interests. In other parts of Europe, Nestle is leader in the ice-cream market. With its strength in both confectionery and ice cream, it was able to launch brand extensions to match Mars.


Market Leader

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4. Counter-offensive defense (con’t)

Xerox attacked IBM in mainframe computers, then IBM counterattacked by producing lower price photocopier to compete with Xerox bread and butter copiers with a leasing option which attracted a lot of customers and pushed Xerox to sell its mainframe computer business unit to honeywell to focus on protecting its copier business unit


Market Leader


5. mobile defense

The dominant company must have a flexible

response capability thus The leader can stretch into

new markets and from the current product to the

broader underlying consumer need. EX.: Armstrong Cork redefined its focus from 'floor covering'

to 'decorative room covering' (including walls and ceilings)

Philip Morris faced growing curbs on cigarette smoking, they

moved quickly into new consumer products industries, by

buying General Foods and Kraft to become the world's largest

consumer packaged goods company.


Market Leader

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B. Defending market share, through: 5. mobile defense (cont’)

This strategy is depending on 2 pillars (R&D) & external environment analysis.

Ex.: Persil has a leadership in UK soap powder market due to the constant attempts to keep the product in line with changing customer requirements.

However, Persil went to far twice, first, by product development to be with “biological formula” which made Persil market-driving company all competitors started to imitate although this feature had been proved later to be weakness since it caused skin irritation for some customers.

Second, by another product development trial by adding magnesium accelerator which damaged clothes and every time Persil original formula was back again.


Market Leader


6. Contraction defense (strategic withdrawal)

The dominant company sometimes prefer to give

up weak market to reduce overstretching and

allow concentration on the core business.

The company will serve fewer markets, but serve

them much better. Ex.: McDonald’s –Egypt started to produce “falafel” to

attract new segments but failed. So it phased out that

SBUand went back again to its main interest “burger “.

Virgin will face dramatic failure if its management board

continues its extensive unrelated diversification strategy


Market Leader

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C. Expanding market share, through:

1. Win competitor’s customers

The dominant company can eat from the

competitor’s market share by offering Sales

promotions and price reductions but such gains

may disappear once the promotion ends.

Exceptions to this are price fights stimulated by

market leaders with more resources than

competitors. Ex.: Pampers & kiddy, caudles..etc


Market Leader


2. Win competitor

The dominant company may find it easier to buy

competitors rather than win their customers.

Moreover, this action may take the company into

new field Ex.: BMW's purchase of the Rover Group with its small cars

and cross-country vehicles.

Nestle intends to hold its position as the world's leading

food company, although DANONE also intends to be.

Both have been acquiring businesses, Nestle buying Perrier

and Rowntree among others, while DANONE own Jacobs,

Kronenbourg, Amora, Lee & Perrins and IIP sauce


Market Leader

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3. Win loyalty

The dominant company will benefit from

customers loyalty and this will definitely increase

its market share positively. Ex.: In the UK grocery market Tesco challenged and

overtook Sainsbury's as the market leader by introducing a

hugely popular loyalty scheme while Sainsbury's was

resisting this trend


Market Leader

Market Challenger

A runner-up firm in an industry that is fighting

hard to increase its market share.

They can attack the leader and other

competitors in an aggressive way.

Ex.: Colgate, Fiat, Toyota, Roche, Sandoz,

HSBC, Carlsberg and PepsiCo.

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Market Challenger

To succeed with such an attack, a company

must have some sustainable competitive

advantage over the leader, a cost advantage

leading to lower prices or the ability to

provide better value at a premium price. Ex.: Komatsu successfully challenged Caterpillar by

offering the same quality at much lower prices, Glaxo

became Europe's leading drug company by

aggressively marketing its 1st product Zantac.

To gain market share from:

Market leader Xerox overtook 3M in the copy market then Canon overtook

Xerox later

Company of its own size Any company which is underfinanced or not satisfying the

customers’ needs well.

Smaller or weaker companies Most Banks are growing up by acquiring smaller ones.

Objectives of Market Challenger

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1. Frontal Attack

The challenger matches the competitor's product,

advertising, price and distribution efforts. It attacks

the competitor's strengths rather than its

weaknesses.

IBM & Apple

Vodafone & Mobinil

Unilever & P&G

Market Challenger Strategies

2. Flanking attack

Rather than attacking head on, the challenger can

concentrates its resources to attack the

competitor’s weak spots. Flank attacks make

good sense when the company has fewer

resources than the competitor Ex.: Airbus challenged Boeing a company that dominates

the industry by developing the A300 with range and

payload performance different from Boeing's

established 727, 737 and 747 range.


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2. Flanking attack Another flanking strategy is to find unserved

segments or new geographical areas to fill them in with its products and develop them into strong segments.

Ex.: European & Japanese car makers do not try to compete with American car makers by producing large forms Instead they recognized an unserved consumer segment that wanted small, fuel-efficient cars and moved to fill this hole.

Coca cola is dominating Soft drink market except some eastern & Asian areas where Pepsi dominates.


3. Encirclement attack

It involves attacking from all directions even by isolating

the competitor from the supply of its raw material

and/or the customer they serve.

The encirclement strategy makes sense when the

challenger has superior resources to produce better

products that can break the competitor quickly.

Ex.: For several years, Seiko has been gaining distribution in

every big watch outlet and overwhelming competitors with its

variety of constantly changing models. In most markets Seiko

offers about 400 models, but its marketing strength is backed by

the 2,300 models it makes and sells worldwide.


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4. Bypass attack

is an indirect strategy. The challenger bypasses the

competitor by diversifying into unrelated products,

or moving into new geographic markets or into new

technologies to replace existing products.

Ex.: Technological leapfrogging is a bypass strategy

used often in high-technology industries. Instead of

copying the competitor's product and mounting a costly

frontal attack, the challenger patiently develops the next

technology. When satisfied with its superiority, it

launches an attack where it has an advantage.


5. Guerrilla attack

The challenger typically makes small, periodic attacks to

harass the competitor, hoping eventually to establish

permanent footholds.

It might use selective price cuts, novel products, executive

raids, intense promotional outbursts or assorted legal actions

Ex.: When entrepreneur F.Laker frontally attacked the established

airlines (TWA) by offering cheap transatlantic flights, they fought

back and bankrupted him. Now TWA has all but disappeared and

British Airways is facing Virgin Atlantic run by a much wilier

entrepreneur. Richard Branson. He makes guerrilla attacks on his

much larger competitors..

Normally, guerrilla actions are by smaller firms against larger ones.


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Market Follower Strategies

Product imitation might be as profitable as

product innovation.

Many companies prefer to follow rather than

challenge the market leader.

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Follower Strategies

Counterfeiter - duplicates product

Cloner - slight variations

Eg Addidas in Abbidas & Addidos

Imitator - differentiation in packaging,

advertising, pricing, location

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http://www.tsingtaobeer.com/index.htm

http://www.tsingtaobeer.com/index.htm

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Objectives of the Nicher:

1. Creating niches

2. Expanding niches

3. Protecting niches

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Nicher Strategies

Small firms target small markets that are of

little/no interest to large firms

Create, expand & protect niches

Offer high value, premium price, low

production costs.

Multiple niches increases chance of survival

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Why is Niching Profitable?

The main reason is that the market nicher

ends up knowing the target customers so

well that it meets their needs better than

other firms selling to this niche.

The nicher achieves high margin, while, the

mass marketer achieves higher volume.

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Stmkt auc-class.9-10-spring.2013

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