Chap17 e161

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Chap17 e161

  1. 1. Chapter 17 Creating Competitive Advantage
  2. 2. Learning Goals <ul><li>Learn how to understand competitors as well as customers via competitor analysis. </li></ul><ul><li>Understand the fundamentals of competitive marketing strategies based on creating value for customers. </li></ul><ul><li>Realize the need for balancing customer and competitor organizations in order to become a truly market-centered organization. </li></ul>
  3. 3. <ul><li>Rated highly in Fortune Magazine’s most admired companies </li></ul><ul><li>Nation’s 7 th largest financial institution </li></ul><ul><li>Focus is on operational excellence and offering convenience and low prices </li></ul><ul><li>Branches or retail stores provide high-tech customer convenience </li></ul><ul><li>Looks to cross sell products and build full customer relationships </li></ul><ul><li>Exuberant corporate culture for employees </li></ul><ul><li>Could be considered the Wal-Mart of banking </li></ul>Case Study Washington Mutual 17 -
  4. 4. Learning Goals <ul><li>Learn how to understand competitors as well as customers via competitor analysis. </li></ul><ul><li>Understand the fundamentals of competitive marketing strategies based on creating value for customers. </li></ul><ul><li>Realize the need for balancing customer and competitor organizations in order to become a truly market-centered organization. </li></ul>
  5. 5. Definition <ul><li>Competitive Advantage </li></ul><ul><ul><li>An advantage over competitors gained by offering consumers greater value and satisfaction than competitors offer. </li></ul></ul>
  6. 6. Definition <ul><li>Competitive Analysis </li></ul><ul><ul><li>The process of identifying key competitors; assessing their objectives, strategies, strengths and weaknesses, and reaction patterns; and selecting which competitors to attack or avoid. </li></ul></ul>
  7. 7. Steps in Analyzing Competitors Figure 17.1 17 -
  8. 8. Barnes & Noble <ul><li>Founded in 1873, Barnes & Noble is the largest bookseller in the U.S. </li></ul><ul><li>Leading competitors include Borders and Amazon.com. </li></ul><ul><li>What might be Amazon’s competitive strengths and weaknesses? Borders? </li></ul><ul><li>How does Barnes & Noble strike back? </li></ul>Marketing in Action 17 -
  9. 9. Barnes & Noble <ul><li>Barnes & Noble stores compete with Amazon by offering a comfortable atmosphere to browse. </li></ul><ul><li>Barnes & Noble competes with Borders by: </li></ul><ul><ul><li>attempting to offer more in their stores including: </li></ul></ul><ul><ul><ul><li>pajama party story times for preschoolers </li></ul></ul></ul><ul><ul><ul><li>Singles events </li></ul></ul></ul><ul><ul><li>Maintaining more stores </li></ul></ul><ul><ul><li>Selling more per square foot </li></ul></ul>Marketing in Action 17 - $102 $116 Sales per square foot 450 657 Stores $1,170 $1,871 Sales (in million) Borders B&N
  10. 10. Competitor Analysis <ul><li>Identifying Competitors </li></ul><ul><li>Assessing Competitors </li></ul><ul><li>Selecting Competitors to Attack or Avoid </li></ul><ul><li>Firms face a wide range of competition </li></ul><ul><li>Be careful to avoid “competitor myopia” </li></ul><ul><li>Methods of identifying competitors: </li></ul><ul><ul><li>Industry point-of-view </li></ul></ul><ul><ul><li>Market point-of-view </li></ul></ul><ul><ul><ul><li>Competitor maps can help </li></ul></ul></ul>Steps in the Process:
  11. 11. Competitor Map Figure 17.2 17 -
  12. 12. Competitor Analysis <ul><li>Identifying Competitors </li></ul><ul><li>Assessing Competitors </li></ul><ul><li>Selecting Competitors to Attack or Avoid </li></ul><ul><li>Determining competitors’ objectives </li></ul><ul><li>Identifying competitors’ strategies </li></ul><ul><ul><li>Strategic groups </li></ul></ul><ul><li>Assessing competitors’ strengths and weaknesses </li></ul><ul><ul><li>Benchmarking </li></ul></ul><ul><li>Estimating competitors’ reactions </li></ul>Steps in the Process:
  13. 13. Competitor Analysis <ul><li>Identifying Competitors </li></ul><ul><li>Assessing Competitors </li></ul><ul><li>Selecting Competitors to Attack or Avoid </li></ul><ul><li>Strong or weak competitors </li></ul><ul><ul><li>Customer value analysis </li></ul></ul><ul><li>Close or distant competitors </li></ul><ul><ul><li>Most companies compete against close competitors </li></ul></ul><ul><li>“ Good” or “Bad” competitors </li></ul><ul><ul><li>The existence of competitors offers several strategic benefits </li></ul></ul>Steps in the Process:
  14. 14. Competitor Analysis <ul><li>In this Pringles ad, the company attacks a competitive product </li></ul>Marketing in Action 17 -
  15. 15. Competitor Analysis <ul><li>Designing Competitive Intelligence Systems </li></ul><ul><ul><li>A Well-Designed CI System: </li></ul></ul><ul><ul><ul><li>Identifies types and sources of competitive information </li></ul></ul></ul><ul><ul><ul><li>Continuously collects information </li></ul></ul></ul><ul><ul><ul><li>Checks reliability and validity of information </li></ul></ul></ul><ul><ul><ul><li>Interprets and organizes information </li></ul></ul></ul><ul><ul><ul><li>Distributes information to decision makers and responds to queries </li></ul></ul></ul>
  16. 16. Learning Goals <ul><li>Learn how to understand competitors as well as customers via competitor analysis. </li></ul><ul><li>Understand the fundamentals of competitive marketing strategies based on creating value for customers. </li></ul><ul><li>Realize the need for balancing customer and competitor organizations in order to become a truly market-centered organization. </li></ul>
  17. 17. Competitive Strategies <ul><li>Approaches to Marketing Strategy </li></ul><ul><ul><li>No single strategy is best for all companies </li></ul></ul><ul><ul><li>Marketing strategy and practice often passes through three stages: </li></ul></ul><ul><ul><ul><li>Entrepreneurial marketing </li></ul></ul></ul><ul><ul><ul><li>Formulated marketing </li></ul></ul></ul><ul><ul><ul><li>Intrepreneurial marketing </li></ul></ul></ul>
  18. 18. Competitive Strategies <ul><li>Porter’s Basic Competitive Strategies </li></ul><ul><ul><li>Overall cost leadership </li></ul></ul><ul><ul><ul><li>Lowest production and distribution costs </li></ul></ul></ul><ul><ul><li>Differentiation </li></ul></ul><ul><ul><ul><li>Creating a highly differentiated product line and marketing program </li></ul></ul></ul><ul><ul><li>Focus </li></ul></ul><ul><ul><ul><li>Effort is focused on serving a few market segments </li></ul></ul></ul>
  19. 19. Cost vs. Differentiation Strategy Marketing in Action 17 -
  20. 20. Competitive Strategies <ul><li>Treachy and Wiersema’s Basic Competitive Strategies: Value Disciplines </li></ul><ul><ul><li>Operational excellence </li></ul></ul><ul><ul><ul><li>Superior value via price and convenience </li></ul></ul></ul><ul><ul><li>Customer intimacy </li></ul></ul><ul><ul><ul><li>Superior value by means of building strong relationships with buyers and satisfying needs </li></ul></ul></ul><ul><ul><li>Product leadership </li></ul></ul><ul><ul><ul><li>Superior value via product innovation </li></ul></ul></ul>
  21. 21. Competitive Strategies <ul><li>Why has AOL had such success in the online portal business? </li></ul><ul><li>Which value discipline has led to AOL’s success? </li></ul><ul><ul><li>Operational excellence </li></ul></ul><ul><ul><li>Customer intimacy </li></ul></ul><ul><ul><li>Product leadership </li></ul></ul>Marketing in Action Click on screenshot for Website 17 -
  22. 22. Competitive Positions Figure 17.3 17 -
  23. 23. Competitive Strategy <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 demand </li></ul><ul><ul><li>Finding new users </li></ul></ul><ul><ul><li>Discovering and promoting new product uses </li></ul></ul><ul><ul><li>Encouraging greater product usage </li></ul></ul><ul><li>Protecting market share </li></ul><ul><ul><li>Prevent or fix weaknesses </li></ul></ul><ul><ul><li>Fulfill value promise </li></ul></ul><ul><ul><li>Keep prices consistent with value </li></ul></ul><ul><ul><li>Build relationships </li></ul></ul><ul><ul><li>Continuous innovation </li></ul></ul><ul><li>Expanding market share </li></ul><ul><ul><li>Profitability rises with market share </li></ul></ul>Competitive Positions
  24. 24. Competitive Strategy <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>Challenge the market leader </li></ul><ul><ul><li>High-risk but high-gain </li></ul></ul><ul><ul><li>Sustainable competitive advantage over the leader is key to success </li></ul></ul><ul><li>Challenge firms of the same size or smaller regional and local firms </li></ul><ul><li>Full frontal vs. indirect attacks </li></ul>Competitive Positions
  25. 25. Competitive Strategy <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>Follow the market leader </li></ul><ul><ul><li>Many advantages: </li></ul></ul><ul><ul><ul><li>Learn from the market leader’s experience </li></ul></ul></ul><ul><ul><ul><li>Copy or improve on the leader’s offerings </li></ul></ul></ul><ul><ul><ul><li>Strong profitability </li></ul></ul></ul><ul><ul><li>Does not mean being a carbon copy of the leader </li></ul></ul>Competitive Positions
  26. 26. Competitive Strategy <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>Serving market niches means targeting subsegments </li></ul><ul><li>Good strategy for small firms with limited resources </li></ul><ul><li>Earns high margins rather than high volume </li></ul><ul><li>Specialization is key </li></ul><ul><ul><li>Customer size, geographic, quality-price, service </li></ul></ul>Competitive Positions
  27. 27. Which is this? <ul><li>Market Leader </li></ul><ul><li>Market Challenger </li></ul><ul><li>Market Follower </li></ul><ul><li>Market Nicher </li></ul>Marketing in Action 17 -
  28. 28. Learning Goals <ul><li>Learn how to understand competitors as well as customers via competitor analysis. </li></ul><ul><li>Understand the fundamentals of competitive marketing strategies based on creating value for customers. </li></ul><ul><li>Realize the need for balancing customer and competitor organizations in order to become a truly market-centered organization. </li></ul>
  29. 29. Balancing Customer and Competitor Orientations <ul><li>Companies can become so competitor centered that they lose their customer focus </li></ul><ul><li>Types of companies: </li></ul><ul><ul><li>Competitor-centered companies </li></ul></ul><ul><ul><li>Customer-centered companies </li></ul></ul><ul><ul><li>Market-centered companies </li></ul></ul>
  30. 30. Competitor-Centered Company <ul><li>Vonage offers Internet phone service. </li></ul><ul><li>They are competitor centered with a service that will save most people money compared to their current phone service. </li></ul><ul><li>Their advertising messages convey their competitor- centered approach. </li></ul>Marketing in Action Click on screenshot for Website 17 -
  31. 31. Learning Goals <ul><li>Learn how to understand competitors as well as customers via competitor analysis. </li></ul><ul><li>Understand the fundamentals of competitive marketing strategies based on creating value for customers. </li></ul><ul><li>Realize the need for balancing customer and competitor organizations in order to become a truly market-centered organization. </li></ul>

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