Dealing with the Competition

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Dealing with the Competition

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Dealing with the Competition

  1. 1. Chapter 8 Dealing with the Competition PowerPoint by Karen E. James Louisiana State University - Shreveport
  2. 2. Objectives <ul><li>Understand how a company identifies its primary competitors and ascertains their strategies. </li></ul><ul><li>Review how companies design competitive intelligence systems. </li></ul>
  3. 3. Objectives <ul><li>Learn how a company decides whether to position itself as a market leader, a challenger, a follower, or a nicher. </li></ul><ul><li>Identify how a company can balance a customer vs. competitor orientation. </li></ul>
  4. 4. Competitive Markets <ul><li>Porter’s Five Forces that Determine Market Attractiveness: </li></ul><ul><ul><li>Threat of intense segment rivalry </li></ul></ul><ul><ul><li>Threat of new entrants </li></ul></ul><ul><ul><li>Threat of substitute products </li></ul></ul><ul><ul><li>Threat of buyers’ growing bargaining power </li></ul></ul><ul><ul><li>Threat of suppliers’ growing bargaining power </li></ul></ul>
  5. 5. Competitive Markets <ul><li>Failing to identify competitors can lead to extinction </li></ul><ul><li>Internet businesses have led to disintermediation of middlemen </li></ul><ul><li>Competition can be identified using the industry or market approach </li></ul>
  6. 6. Competitive Markets <ul><li>Number of sellers and degree of differentiation </li></ul><ul><li>Cost structure </li></ul><ul><li>Entry, mobility and exit barriers </li></ul><ul><li>Degree of vertical integration </li></ul><ul><li>Degree of globalization </li></ul>Industries Can Be Classified By:
  7. 7. Competitive Markets <ul><li>Industry Structures </li></ul><ul><li>Pure Monopoly </li></ul><ul><li>Pure Oligopoly </li></ul><ul><li>Differentiated Oligopoly </li></ul><ul><li>Monopolistic Competition </li></ul><ul><li>Pure Competition </li></ul><ul><li>Only one firm offers an undifferentiated product or service in an area </li></ul><ul><ul><li>Unregulated </li></ul></ul><ul><ul><li>Regulated </li></ul></ul><ul><li>Example: Most utility companies </li></ul>
  8. 8. Competitive Markets <ul><li>Industry Structures </li></ul><ul><li>Pure Monopoly </li></ul><ul><li>Pure Oligopoly </li></ul><ul><li>Differentiated Oligopoly </li></ul><ul><li>Monopolistic Competition </li></ul><ul><li>Pure Competition </li></ul><ul><li>A few firms produce essentially identical commodities and little differentiation exists </li></ul><ul><li>Lower costs are the key to higher profits </li></ul><ul><li>Example: oil </li></ul>
  9. 9. Competitive Markets <ul><li>Industry Structures </li></ul><ul><li>Pure Monopoly </li></ul><ul><li>Pure Oligopoly </li></ul><ul><li>Differentiated Oligopoly </li></ul><ul><li>Monopolistic Competition </li></ul><ul><li>Pure Competition </li></ul><ul><li>A few firms produce partially differentiated items </li></ul><ul><li>Differentiation is by key attributes </li></ul><ul><li>Premium price may be charged </li></ul><ul><li>Example: Luxury autos </li></ul>
  10. 10. Competitive Markets <ul><li>Industry Structures </li></ul><ul><li>Pure Monopoly </li></ul><ul><li>Pure Oligopoly </li></ul><ul><li>Differentiated Oligopoly </li></ul><ul><li>Monopolistic Competition </li></ul><ul><li>Pure Competition </li></ul><ul><li>Many firms differentiate items in whole or part </li></ul><ul><li>Appropriate market segmentation is key to success </li></ul><ul><li>Example: beer, restaurants </li></ul>
  11. 11. Competitive Markets <ul><li>Industry Structures </li></ul><ul><li>Pure Monopoly </li></ul><ul><li>Pure Oligopoly </li></ul><ul><li>Differentiated Oligopoly </li></ul><ul><li>Monopolistic Competition </li></ul><ul><li>Pure Competition </li></ul><ul><li>Many competitors offer the same product </li></ul><ul><li>Price is the same due to lack of differentiation </li></ul><ul><li>Example: farmers selling milk, crops </li></ul>
  12. 12. Competitive Markets <ul><li>A broader group of competitors will be identified using the market approach </li></ul><ul><li>Competitor maps plot buying steps in purchasing and using the product, as well as direct and indirect competitors </li></ul>
  13. 13. Competitor Analysis <ul><li>Key characteristics of the competition must be identified: </li></ul><ul><ul><li>Strategies </li></ul></ul><ul><ul><li>Objectives </li></ul></ul><ul><ul><li>Strengths and Weaknesses </li></ul></ul><ul><ul><ul><li>Effect a firm’s c ompetitive position in the target market </li></ul></ul></ul><ul><ul><li>Reaction Patterns </li></ul></ul>
  14. 14. Competitor Analysis <ul><li>Dominant </li></ul><ul><li>Strong </li></ul><ul><li>Favorable </li></ul><ul><li>Tenable </li></ul><ul><li>Weak </li></ul><ul><li>Nonviable </li></ul>Competitive Positions in the Target Market
  15. 15. Competitive Intelligence Systems <ul><li>Designing the system involves: </li></ul><ul><ul><li>Setting up the system </li></ul></ul><ul><ul><li>Collecting the data </li></ul></ul><ul><ul><li>Evaluating and analyzing the data </li></ul></ul><ul><ul><li>Disseminating information and responding to queries </li></ul></ul>
  16. 16. Competitive Intelligence Systems <ul><li>Value analysis helps firms to select competitors to attack and to avoid </li></ul><ul><ul><li>Customers identify and rate attributes important in the purchase decision for the company and competition </li></ul></ul><ul><li>Attacking strong , close , and bad competitors will be most beneficial </li></ul>
  17. 17. Designing Competitive Strategies <ul><li>Major Strategies </li></ul><ul><li>Market-Leader </li></ul><ul><li>Market-Challenger </li></ul><ul><li>Market-Follower </li></ul><ul><li>Market-Nicher </li></ul><ul><li>Expanding the total market </li></ul><ul><li>Defending market share </li></ul><ul><li>Expanding market share </li></ul>
  18. 18. Designing Competitive Strategies <ul><li>Expanding the Total Market: </li></ul><ul><ul><li>Targeting Product to New Users </li></ul></ul><ul><ul><ul><li>Market-penetration strategy </li></ul></ul></ul><ul><ul><ul><li>New-market strategy </li></ul></ul></ul><ul><ul><ul><li>Geographical-expansion strategy </li></ul></ul></ul><ul><ul><li>Promoting New Uses of Product </li></ul></ul><ul><ul><li>Encouraging Greater Product Use </li></ul></ul>
  19. 19. Designing Competitive Strategies <ul><li>Position defense </li></ul><ul><li>Flank defense </li></ul><ul><li>Preemptive defense </li></ul><ul><li>Counteroffensive defense </li></ul><ul><li>Mobile defense </li></ul><ul><li>Contraction defense </li></ul>Defending Market Share
  20. 20. Designing Competitive Strategies <ul><li>Before Attempting to Expand Market Share, Consider: </li></ul><ul><ul><li>Probability of invoking antitrust action </li></ul></ul><ul><ul><li>Economic costs involved </li></ul></ul><ul><ul><li>Likelihood that marketing mix decisions will increase profits </li></ul></ul>
  21. 21. Designing Competitive Strategies <ul><li>Major Strategies </li></ul><ul><li>Market-Leader </li></ul><ul><li>Market-Challenger </li></ul><ul><li>Market-Follower </li></ul><ul><li>Market-Nicher </li></ul><ul><li>First define the strategic goals and opponent(s) </li></ul><ul><li>Choose general attack strategy </li></ul><ul><li>Choose specific attack strategy </li></ul>
  22. 22. Designing Competitive Strategies <ul><li>General Attack Strategies: </li></ul><ul><ul><li>Frontal attacks match competition </li></ul></ul><ul><ul><li>Flank attacks serve unmet market needs or underserved areas </li></ul></ul><ul><ul><li>Encirclement “blitzes” opponent </li></ul></ul><ul><ul><li>Bypassing opponent and attacking easier markets is also an option </li></ul></ul>
  23. 23. Competitive Markets <ul><li>Price-discount </li></ul><ul><li>Lower-price goods </li></ul><ul><li>Prestige goods </li></ul><ul><li>Improved services </li></ul><ul><li>Product proliferation </li></ul><ul><li>Product innovation </li></ul><ul><li>Distribution innovation </li></ul><ul><li>Manufacturing cost reduction </li></ul><ul><li>Intensive advertising promotion </li></ul>Specific Attack Strategies Include:
  24. 24. Designing Competitive Strategies <ul><li>Major Strategies </li></ul><ul><li>Market-Leader </li></ul><ul><li>Market-Challenger </li></ul><ul><li>Market-Follower </li></ul><ul><li>Market-Nicher </li></ul><ul><li>Imitation may be more profitable than innovation </li></ul><ul><li>Four broad strategies: </li></ul><ul><ul><li>Counterfeiter </li></ul></ul><ul><ul><li>Cloner </li></ul></ul><ul><ul><li>Imitator </li></ul></ul><ul><ul><li>Adapter </li></ul></ul>
  25. 25. Designing Competitive Strategies <ul><li>Major Strategies </li></ul><ul><li>Market-Leader </li></ul><ul><li>Market-Challenger </li></ul><ul><li>Market-Follower </li></ul><ul><li>Market-Nicher </li></ul><ul><li>Niche specialties: </li></ul><ul><ul><li>End-user </li></ul></ul><ul><ul><li>Vertical-level </li></ul></ul><ul><ul><li>Customer-size </li></ul></ul><ul><ul><li>Specific customer </li></ul></ul><ul><ul><li>Geographic </li></ul></ul><ul><ul><li>Product/product line </li></ul></ul><ul><ul><li>Product feature </li></ul></ul><ul><ul><li>Job-shop </li></ul></ul><ul><ul><li>Quality-price </li></ul></ul><ul><ul><li>Service </li></ul></ul><ul><ul><li>Channel </li></ul></ul>
  26. 26. Balancing Customer and Competitor Orientations <ul><li>Competitor-centered companies evaluate what competitors are doing, then formulate competitive reactions </li></ul><ul><li>Customer-centered companies focus on customer developments when formulating strategy </li></ul>
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