Session 17 MG220 BBA - 13 Oct 10


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Session 17
MG 220 Marketing Management
BBA 09 Sec C

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Session 17 MG220 BBA - 13 Oct 10

  1. 1. Part 4: Building Strong Brands<br />> Competitive forces<br />> Identifying Competitors<br />> Analyzing Competitors <br />> Competitive Strategies for Market Leaders<br />Class Presentation | Session 17 | 13 Oct 2010<br />
  2. 2. Competitive Forces<br />Michael Porter’s Five Forces Model<br />Threat of intense segment rivalry<br />INDUSTRY COMPETITORS’ intense rivalry can make a segment unattractive<br />Threat of new entrants<br />Depending on what kind of entry & exit barriers exist<br />If both are high: profits are high and risks are high too<br />If entry is high but exit is low: firms enter <br />If both are low: returns are low and stable<br />Threat of substitute products<br />If there are actual or potential substitute products<br />Threat of buyer’s growing bargaining power<br />If buyers possess strong or even growing bargaining power, it can erode margins<br />Threat of suppliers’ growing bargaining power<br />If suppliers can raise prices or reduce quantity supplied and have bargaining power it can make an industry unattractive <br />MG 220 Marketing Management<br />2<br />
  3. 3. Identifying Competitors<br />Taking a broad view of competitors is very important - examples<br />Two key views of Competition<br />Industry concept of competition<br />Industry is a group of firms that offer a product or class of products that are close substitutes for one another<br />Industries are classified according to:<br />Number of sellers & Degree of Differentiation<br />Pure Monopoly<br />Only one firm provides product/service in a category or area<br />E.g. PTCL (previously) or LESCO in Lahore etc.<br />Oligopoly<br />Few (generally large) companies in same category<br />E.g. OMCs in Pakistan<br />Monopolistic Competition<br />Many competitors able to offer and differentiate their offer<br />Fast food industry in Pakistan<br />Pure Competition<br />Too many competitors offer same product and compete at same level<br />Commodity market / stock market etc.<br />MG 220 Marketing Management<br />3<br />
  4. 4. Identifying Competitors<br />Industry concept of competition (…contd)<br />Entry, mobility & Exit barriers<br />Entry barriers (how easy it is to enter a market)<br />Mobility barriers (how easy it is to move to attractive segments)<br />Exit barriers (how easy it is to move out)<br />Cost Structure<br />Some industries are capital intensive e.g. steel manufacturing<br />Degree of Vertical Integration<br />Degree of Globalization<br />Market Concept of Competition<br />Marketers need to stay away from ‘marketing myopia’ and identify direct & indirect competitors<br />A broad set of competitors exist need to be profiled carefully<br />Examples<br />MG 220 Marketing Management<br />4<br />
  5. 5. Analyzing Competitors<br />Strategies<br />Strategic Group: a group of firms following same strategy in a given market<br />Objectives<br />Generally competitors try to maximize profits<br />But other concepts may also exist and may be followed e.g. short-term or long-term profits<br />An alternative assumption: Companies pursue a mix of strategies, profit, market share growth, tech leadership etc.<br />MG 220 Marketing Management<br />5<br />
  6. 6. Analyzing Competitors<br />Strengths & Weaknesses<br />Monitoring competitors’ strengths & weaknesses<br />Three variables<br />Share of market (%age share)<br />Share of mind (name brand coming to your mind for a category)<br />Share of heart (brand you ll prefer to buy for a category)<br />Companies gaining share of mind and share of heart eventually gain share of market<br />Selecting Competitors<br />How to select competitors<br />Strong vs. weak<br />Close vs. Distant<br />“Good” vs. “Bad”<br />MG 220 Marketing Management<br />6<br />
  7. 7. Competitive Strategies for Market Leaders<br />Different roles firms can have in a target market: <br />Leader<br />Challenger<br />Follower<br />Nicher<br />In most of industry, there is an established market leader.<br />Mobilink (Celcos), Gillette (Razors), TCS (Courier) etc.<br />Although they have distinct place but unless they are a legal monopoly, they face tough time always!<br />Staying a leader requires careful strategic action:<br />Finding ways to Expand Total Market Size<br />Must Protect current Market Share<br />Try to increase Market Share (even if current market size is not increasing)<br />MG 220 Marketing Management<br />7<br />
  8. 8. Competitive Strategies for Market Leaders<br />Expanding the Total Market<br />If overall market size increases, biggest gainer is Market Leader<br />Different ways of doing it:<br />New Customers<br />Market Penetration strategy Users who might use it but don’t<br />New-Market segment strategy Users who have never used it<br />Geographical-expansion strategy Users who live elsewhere<br />More Usage<br />Increase level/quantity of consumption<br />Increase frequency of consumption<br />Identify other uses (food products finding new recipes)<br />Communicating effectively as to when it should be replaced<br />Product development can also spur new uses<br />Consider Maggi<br />MG 220 Marketing Management<br />8<br />
  9. 9. Competitive Strategies for Market Leaders<br />Protecting/Defending Current Market Share<br />Leader is like a large elephant swarmed by bees<br />While increasing share and market size, it must also continuously defend its current business<br />Continuous innovation – to keep increasing its competitive strength and value to consumers<br />In this process of satisfying customer needs, a firm may be engaged in:<br />Responsive marketing – finding needs and fulfilling them<br />Anticipative marketing – looking ahead into what needs a customer may have in future<br />Creative marketing – Discovering & creating solutions not asked for!<br /> Sony is a market-driving firm not a market-driven firm. <br /> Sony doesn’t serve markets, Sony creates markets<br />MG 220 Marketing Management<br />9<br />
  10. 10. Competitive Strategies for Market Leaders<br />Protecting/Defending Current Market Share (…contd.)<br />Defending is just like military defensive strategy. Any of these six positions can be taken<br />All of these points have examples in branding strategies by brands. If their strategies are observed carefully, these patterns of defensive strategy can be seen clearly<br />Position defense – Occupying most desirable position in market & minds of consumers and making it impregnable<br />Flank defense – Creating outposts to protect weak fronts or even launch counterattacks<br />Preemptive defense – Attack before enemy does<br />Counteroffensive defense – Responding to attack by launching own strategy against rival<br />Mobile defense – Leader can stretch its domain and move into new territories<br />Contraction defense – Companies at times realize that they cannot defend all of their territory and go for a planned contraction (also known as strategic withdrawal)<br />MG 220 Marketing Management<br />10<br />
  11. 11. Competitive Strategies for Market Leaders<br />Increase/Expand Market Share<br />Gaining one share point can be worth millions in revenue<br />Leader must always focus on carefully increasing market share<br />Market share increase may not always imply increased profitability and has its own share of problems<br />Key considerations<br />Possibility of provoking anti-trust<br />Economic cost – Concept of optimal market share. Ahead of this value, profitability may actually decline<br />Pursuing wrong marketing-mix strategy<br />Effect of increased market share on actual perception and perceived quality<br />MG 220 Marketing Management<br />11<br />
  12. 12. Part 4: Building Strong Brands<br />> Other Competitive Strategies<br />> Balancing Customer & Competitive Orientations<br />> LEFTOVER TOPIC FROM CHAP 10: Devising Brand Strategy<br />> Quiz 5: Part 4 (Chap 9 & 10 – 12/ed. OR Chap 10 & 11 – 13/ed.)<br />Class Presentation | Session 18 | 18 Oct 2010<br />