Dealing with Compettion


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Dealing with Compettion

  1. 3. Chapter 9: Dealing with Competition
  2. 4. <ul><li>How do Marketers Identify Competition? </li></ul><ul><li>How should we analyze Competitors strategies, objectives, strengths, and weaknesses? </li></ul><ul><li>How can market leaders expand their total market and defend market share? </li></ul><ul><li>How should market challengers attack market leaders? </li></ul><ul><li>How can market followers or nichers compete effectively? </li></ul>L E A R N I N G
  3. 5. Source: Michael Porter’s Five forces Model
  4. 6. <ul><li>Threat of intense segment rivalry - segment is unattractive if it contains numerous, strong, or aggressive competitors. </li></ul><ul><li>2. Threat of new entrants - segment's attractiveness varies with the height of its entry and exit barriers. The most attractive segment has high entry barriers and low exit barriers. </li></ul><ul><li>3. Threat of substitute products - A segment is unattractive when there are actual or potential substitutes for the product. </li></ul><ul><li>4. Threat of buyers' growing bargaining power - A segment is unattractive if buyers possess strong or growing bargaining power. </li></ul><ul><li>5. Threat of suppliers' growing bargaining power - A segment is unattractive if the company's suppliers are able to raise prices or reduce quantity supplied. </li></ul>Competitive Forces
  5. 7. Industry Concept • Number Of Sellers And Degree Of Differentiation • Entry, Mobility, And Exit Barriers • Cost Structure • Degree Of Vertical Integration • Degree Of Globalization Marketing Concept According to marketing approach, competitors are companies that satisfy the same customer need. The market concept of competition reveals a broader set of actual and potential competitors. By mapping the buyer's steps in obtaining and using the product a company's direct and indirect competitors can be identified. Identify Competitors
  6. 8. Group A Narrow line Lower mfg. cost Very high service High price Group C Moderate line Medium mfg. cost Medium service Medium price Group B Full line Low mfg. cost Good service Medium price Group D Broad line Medium mfg. cost Low service Low price High Low Low High Quality Vertical Integration Figure 9.2 Strategic groups in the major- appliance industry Page 228
  7. 9. Strategies: What strategies a company uses to enter/survive in the market? Objectives: What are the objectives of the competitor’s and what drives its behaviour? Factors shaping a competitor’s objectives include size, history, current management, and financial situation. Analyze Competitors
  8. 10. Figure 9.3 page 230 <ul><li>FORMULATING PRINCIPLES </li></ul><ul><li>Reconstruct market boundaries </li></ul><ul><li>Look across alternative industries </li></ul><ul><li>Look across strategic groups within industries </li></ul><ul><li>Look across chain of buyers </li></ul><ul><li>Look across complementary product and service offerings </li></ul><ul><li>Look across functional or emotional appeal to buyers </li></ul><ul><li>Look across time </li></ul>
  9. 11. Figure 9.3 <ul><li>b. Focus on the big picture not the numbers </li></ul><ul><li>c. Reach beyond existing demand </li></ul><ul><li>d. Get the strategic sequence right </li></ul><ul><li>Is there buyer utility? </li></ul><ul><li>Is the price acceptable? </li></ul><ul><li>Can we attain target cost? </li></ul><ul><li>What are the adoption Challenges? </li></ul>
  10. 12. Figure 9.3 <ul><li>EXECUTING PRINCIPLES </li></ul><ul><li>Overcome key organizational hurdles </li></ul><ul><li>Cognitive hurdle </li></ul><ul><li>Resource hurdle </li></ul><ul><li>Motivational hurdle </li></ul><ul><li>Political hurdle </li></ul><ul><li>b. Build execution into strategy </li></ul><ul><li>Kotler: Marketing management page 230 </li></ul>
  11. 13. INDIVIDUAL USER COMMERICAL & INDUSTRIAL EDUCATIONAL PERSONAL COMPUTERS HARDWARE ACCESORIES SOFTWARE Strengths and Weaknesses: A company needs to gather information on each competitor's strengths and weaknesses. FIGURE 9.4 PAGE 230 A COMPETITORS EXPANSION PLAN DELL
  13. 15. <ul><li>Three Important Variables for analyzing competitors </li></ul><ul><li>Share of market - The competitor's share of the target market. </li></ul><ul><li>Share of mind - The percentage of customers who named the competitor in responding to the statement, &quot;Name the first company that comes to mind in this industry.” </li></ul><ul><li>Share of heart - The percentage of customers who named the competitor in responding to the statement, &quot;Name the company from which you would prefer to buy the product. </li></ul><ul><li>Companies that make steady gains in mind share and heart share will inevitably make gains in market share and profitability </li></ul>
  14. 16. MARKET SHARE MIND SHARE HEART SHARE TABLE 9.2 PAGE 231 MARKET SHARE, MIND SHARE, AND HEART SHARE 2005 2006 2007 2005 2006 2007 2005 2006 2007 COMPETITOR A 50% 47% 44% 60% 58% 54% 45% 42% 39% COMPETITOR B 30 34 37 30 31 35 44 47 53 COMPETITOR C 20 19 19 10 11 11 11 11 8
  15. 17. Selecting Competitors: Strong versus Weak: Weak require fewer resources per share point gained. The firm should also compete with strong competitors to keep up with the best. Close versus Distant: Most companies compete with competitors who resemble them the most &quot;Good&quot; versus &quot;Bad&quot;: should support its good competitors (Play by the rules) and attack its bad competitors.
  16. 18. Vulnerable <ul><li>Selecting CUSTOMERS </li></ul><ul><li>As part of the competitive analysis, firms must evaluate its customer base and think about which customer it’s willing to lose and which it wants to retain. </li></ul><ul><li>One way to divide up the customer base is in terms of whether a customer is valuable and vulnerable, creating a grid of four segments. </li></ul><ul><li>Customer selection grid table 9.3 page 232 </li></ul>Not vulnerable Valuable Not Valuable These customers are profitable but not completely happy with the company. Find out and address their sources of vulnerability to retain them . These customers are likely to defect. Let them go or even encourage their departure These customers are loyal and profitable. Don’t take them for granted but maintain margins and reap the benefits of their satisfaction. These unprofitable customers are happy. Try to make them valuable or vulnerable.
  17. 19. Competitive Strategies for Market Leaders Expanding the Total Market New customers: Potential new users maybe divided into three groups: • Those who might use it but do not (market-penetration strategy) • Those who have never used it (new-market segment strategy) • Those who live elsewhere (geographical-expansion strategy)
  18. 20. <ul><li>More usage : Two ways of increasing usage </li></ul><ul><li>Increasing the level or quantity of consumption: through packaging or product design or by increasing the availability of product </li></ul><ul><li>Increasing the frequency of consumption: identifying completely new and different ways to use the brand and communicate the advantages of using the brand more frequently </li></ul>
  19. 21. Figure 9.6 – Six types of Defense Strategies page 236 Attacker 3) Pre-emptive 4)Counteroffensive 1) Position DEFENDER 2)FLANK 6) Contraction 5)Mobile
  20. 22. Defending Market Share The most constructive response is continuous innovation . The leader leads the industry in developing new product and customer services, distribution effectiveness, and cost cutting. It keeps increasing its competitive strength and value to customers. • Position Defense: It involves occupying the most desirable market space in the minds of the consumers • Flank Defense: the market leader should also erect outposts to protect a weak front or possibly serve as an invasion base for counterattack. • Pre-emptive Defense: A more aggressive manoeuvre is to attack before the enemy starts its offense. A company can launch a pre-emptive defence in several ways
  21. 23. Defending Market Share Cont’d • Counteroffensive Defense: the leader can meet the attacker frontally or hit its flank or launch a pincer movement. An effective counterattack is to invade the attacker's main territory so that it will have to pull back to defend the territory. • Mobile Defense: In mobile defence, the leader stretches its domain over new territories that can serve as future centres for defence and offense through market broadening and market diversification. • Contraction Defense: giving up weaker territories and reassigning resources to stronger territories.
  22. 24. <ul><li>Expanding Market Share </li></ul><ul><li>A company should consider four factors before pursuing increased market share: </li></ul><ul><li>The possibility of provoking antitrust action </li></ul><ul><li>Economic cost </li></ul><ul><li>Pursuing the wrong marketing-mix strategy </li></ul><ul><li>The effect of increased market share on actual and perceived quality </li></ul>
  23. 25. <ul><li>Competitive Strategies for Market Challengers </li></ul><ul><li>Defining the Strategic Objective and Opponent(S) </li></ul><ul><li>A market challenger must decide whom to attack: </li></ul><ul><li>It can attack the market leader. This is a high-risk but potentially high-payoff strategy </li></ul><ul><li>It can attack firms of its own size that are not doing the job and are underfinanced </li></ul><ul><li>It can attack small local and regional firms </li></ul>
  24. 26. Choosing a General Attack Strategy • Frontal Attack: The attacker matches its opponent's product, advertising, price, and distribution • Flank Attack: Identifying shifts in market segments geographic areas that are causing gaps to develop, and then rushing in to fill the gaps and develop them into strong segments. • Encirclement Attack: The encirclement involves launching a grand offensive on several fronts. Make sense when the challenger commands superior resources
  25. 27. Choosing a General Attack Strategy • Bypass Attack: It means bypassing the enemy and attacking easier markets to broaden one's resource base. Three lines of approach: diversifying into unrelated products, diversifying into new geographical markets, and leapfrogging into new technologies to supplant existing products. • Guerrilla Warfare: Small, intermittent attacks to harass and demoralize the opponent and eventually secure permanent footholds (selective price cuts, intense promotional blitzes, and occasional legal action)
  26. 28. Market follower strategies A strategy of product imitation might be as profitable as a strategy of product innovation. The innovators bear the expense of developing the new product, getting it into distribution, and informing and educating the market. Counterfeiter – duplicates the leader’s product and packages and sells it on the black market. Cloner – the cloner emulates the leader’s products, name, and packaging, with slight variations. Imitator – copies some things from the leader but maintains differentiation in terms of packaging, advertising, pricing, or location. Adapter – takes the leader’s products and adapts or improves them.
  27. 29. <ul><li>Competitive Strategies for Market-Nicher </li></ul><ul><li>The nicher achieves high margin, whereas the mass marketer achieves high volume. Nichers have three tasks: creating niches, expanding niches, and protecting niches. </li></ul><ul><li>Because niches can weaken, the firm must continually create new ones therefore multiple niching is preferable to single niching. </li></ul><ul><li>The key idea in successful nichemanship is specialization. </li></ul>
  28. 30. Here are some possible niche roles: • End-user specialist : The firm specializes in serving one type of end-use customer. • Customer-size specialist: The firm concentrates on selling to small, medium-sized, or large customers. • Geographic specialist: The firm sells only in a certain locality, region, or area of the world.
  29. 31. possible niche roles CONt’D: • Product-feature specialist : The firm specializes in producing a certain type of product or product feature • Quality-price specialist: The firm operates at the low- or high-quality ends of the market • Channel specialist: The firm specializes in serving only one channel of distribution