Marketing Management MBA CP 205
Dealing with Competition
<ul><li>Learning Objectives: </li></ul><ul><li>Know how marketers identify primary competitors.  </li></ul><ul><li>Know ho...
Dealing with Competition Buyers (Buyer  power) Potential entrants (Threat of Mobility) Suppliers (Supplier  power) Substit...
<ul><li>Competitive rivals are organizations with similar products and  </li></ul><ul><li>services aimed at the same custo...
<ul><li>Strong customer loyalty. </li></ul><ul><li>Strong brand preference. </li></ul><ul><li>Large capital requirements. ...
<ul><li>The switching costs from one supplier to another are high. </li></ul><ul><li>There is a possibility of the supplie...
<ul><li>Identifying Competitors </li></ul><ul><li>Industry concept of competition </li></ul><ul><li>Market concept of comp...
Dealing with Competition Industry concept of competition Pure Monopoly Oligopoly Monopolistic Competition Pure Competition
<ul><li>Pure monopoly: Only one firm provides a product/service. </li></ul><ul><li>Oligopoly: A small number of usually la...
<ul><li>Entry, mobility and exit barriers </li></ul><ul><li>Entry barriers include:  </li></ul><ul><li>High capital requir...
<ul><li>Firms face exit barriers such as: </li></ul><ul><li>Legal obligations to customers, creditors and employees. </li>...
<ul><li>Market concept of competition </li></ul><ul><li>Competitors are firms that satisfy the same customer need. </li></...
Analyzing Competitors Dealing with Competition Strategies Objectives Strengths and weaknesses
<ul><li>Firms must analyze which strategic group does it belong to in the  </li></ul><ul><li>market. It helps in identifyi...
A competitor’s expansion plans Dealing with Competition Individual Users Individual & commercial Educational Personal  Com...
<ul><li>Finally, firms must study strengths and weaknesses of competitors’  </li></ul><ul><li>on product attributes, quali...
Hypothetical Market Structure Dealing with Competition 10% 30% 40% 20% Market  Nichers Market  follower Market challenger ...
<ul><li>Competitive strategies for market leaders </li></ul><ul><li>To remain a market leader, a firm must act in three wa...
Expanding the Total Market More Usage New Customers Dealing with Competition
<ul><li>Defending the market share </li></ul><ul><li>The leader can defend its position through continuous innovation. </l...
<ul><li>Defending the market share </li></ul><ul><li>Six types of defense strategies are possible. </li></ul><ul><li>Posit...
<ul><li>Counter-offensive defense : In counter-offensive, the leader can  </li></ul><ul><li>meet the attacker frontally or...
Dealing with Competition Six Types of Defense Strategies
<ul><li>Factors Relevant to Pursuing Increased Market Share  </li></ul><ul><li>Cost of buying market share may exceed its ...
Optimal Market Share Dealing with Competition
Other Competitive Strategies  Dealing with Competition Market  Challengers Market  Nichers Market  Followers
<ul><li>Market Challenger Strategies  </li></ul><ul><li>Define the strategic objective and opponents; involves increasing ...
<ul><li>Market Challenger Strategies  </li></ul><ul><li>Choose a general attack strategy. These include: </li></ul>Dealing...
<ul><li>In  frontal attack , the attacker matches the opponent’s product,  </li></ul><ul><li>advertising, price and distri...
Specific Attack Strategies  Dealing with Competition <ul><li>Price discounts </li></ul><ul><li>Lower-priced goods </li></u...
Market Follower Strategies Dealing with Competition Counterfeiter Cloner Imitator Adapter
<ul><li>Counterfeiter  duplicates the leader’s product and package and  </li></ul><ul><li>sells in the black market throug...
Balancing Orientations Dealing with Competition Competitor- Centered Customer- Centered
<ul><li>Recap: </li></ul><ul><li>How marketers identify primary competitors.  </li></ul><ul><li>How should we   analyze co...
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Mm.07.10 (not studied)

  1. 1. Marketing Management MBA CP 205
  2. 2. Dealing with Competition
  3. 3. <ul><li>Learning Objectives: </li></ul><ul><li>Know how marketers identify primary competitors. </li></ul><ul><li>Know how should we analyze competitors’ strategies, objectives, </li></ul><ul><li>strengths, and weaknesses. </li></ul><ul><li>Know how market leaders can expand the total market and defend </li></ul><ul><li>market share. </li></ul><ul><li>Know how market challengers should attack market leaders. </li></ul><ul><li>Know how market followers or nichers can compete effectively. </li></ul>Dealing with Competition
  4. 4. Dealing with Competition Buyers (Buyer power) Potential entrants (Threat of Mobility) Suppliers (Supplier power) Substitutes (Threat of Substitutes) Industry Competitors (Segment rivalry) Competitive analysis-Five forces model
  5. 5. <ul><li>Competitive rivals are organizations with similar products and </li></ul><ul><li>services aimed at the same customer group. </li></ul><ul><li>Factors affecting competitive rivalry are: </li></ul><ul><li>Market growth rate. </li></ul><ul><li>High fixed costs. </li></ul><ul><li>Extent to which competitors are in balance. </li></ul><ul><li>High exit barriers. </li></ul><ul><li>Intensity of competition increases with decreased entry barriers. </li></ul><ul><li>Entry barriers may include: </li></ul><ul><li>Lack of experience. </li></ul>Dealing with Competition
  6. 6. <ul><li>Strong customer loyalty. </li></ul><ul><li>Strong brand preference. </li></ul><ul><li>Large capital requirements. </li></ul><ul><li>Lack of adequate distribution channels. </li></ul><ul><li>Competitive pressures from substitute products increase as the </li></ul><ul><li>relative price of substitute products declines and as the consumers’ </li></ul><ul><li>switching costs decrease. </li></ul><ul><li>Supplier power is high when: </li></ul><ul><li>There is concentration of suppliers, rather than fragmented source </li></ul><ul><li>of supply. </li></ul>Dealing with Competition
  7. 7. <ul><li>The switching costs from one supplier to another are high. </li></ul><ul><li>There is a possibility of the supplier integrating forwards. </li></ul><ul><li>The brand of the supplier is powerful. </li></ul><ul><li>The suppliers customers are highly fragmented. </li></ul><ul><li>Buyer power is likely to be high when: </li></ul><ul><li>There is concentration of buyers particularly if the volume </li></ul><ul><li>purchases of the buyers are high. </li></ul><ul><li>The supplier industry consists of a large number of small </li></ul><ul><li>players. </li></ul><ul><li>The cost of switching a supplier is low or involves little risk. </li></ul>Dealing with Competition
  8. 8. <ul><li>Identifying Competitors </li></ul><ul><li>Industry concept of competition </li></ul><ul><li>Market concept of competition </li></ul><ul><li>Industry concept of competition </li></ul><ul><li>Industries are classified according to: </li></ul><ul><li>Number of sellers and degree of differentiation. </li></ul><ul><li>Entry, mobility, and exit barriers. </li></ul><ul><li>Cost structure. </li></ul><ul><li>Degree of vertical integration. </li></ul><ul><li>Degree of globalization. </li></ul>Dealing with Competition
  9. 9. Dealing with Competition Industry concept of competition Pure Monopoly Oligopoly Monopolistic Competition Pure Competition
  10. 10. <ul><li>Pure monopoly: Only one firm provides a product/service. </li></ul><ul><li>Oligopoly: A small number of usually large firms produce products </li></ul><ul><li>that range from highly differentiated to standardized. </li></ul><ul><li>It can be pure or differentiated oligopoly. </li></ul><ul><li>Monopolistic competition: Many competitors are able to differentiate </li></ul><ul><li>their offers. </li></ul><ul><li>Pure competition: Many competitors offer the same product/service. </li></ul>Dealing with Competition
  11. 11. <ul><li>Entry, mobility and exit barriers </li></ul><ul><li>Entry barriers include: </li></ul><ul><li>High capital requirements. </li></ul><ul><li>Economies of scale. </li></ul><ul><li>Patents and licensing requirements. </li></ul><ul><li>Scarce locations, raw materials and distributors. </li></ul><ul><li>A company may face mobility barriers when it tries to enter more </li></ul><ul><li>attractive market segments. </li></ul>Dealing with Competition
  12. 12. <ul><li>Firms face exit barriers such as: </li></ul><ul><li>Legal obligations to customers, creditors and employees. </li></ul><ul><li>Government restrictions. </li></ul><ul><li>Low asset salvage value due to over-specialization. </li></ul><ul><li>High vertical integration. </li></ul><ul><li>Cost structure: Some industry sectors involve high cost structure. </li></ul><ul><li>Degree of vertical integration: Companies have advantage in going </li></ul><ul><li>for vertical integration. </li></ul>Dealing with Competition
  13. 13. <ul><li>Market concept of competition </li></ul><ul><li>Competitors are firms that satisfy the same customer need. </li></ul><ul><li>The market concept of competition reveals a broader set of actual </li></ul><ul><li>and potential competition. </li></ul><ul><li>Companies can profile their direct and indirect competitors by </li></ul><ul><li>mapping the buyer’s steps in obtaining and using a product. </li></ul><ul><li>Competitor mapping highlights both opportunities and challenges </li></ul><ul><li>faced by the company. </li></ul>Dealing with Competition
  14. 14. Analyzing Competitors Dealing with Competition Strategies Objectives Strengths and weaknesses
  15. 15. <ul><li>Firms must analyze which strategic group does it belong to in the </li></ul><ul><li>market. It helps in identifying its key competitors. </li></ul><ul><li>A group of companies following the same strategy in a given target </li></ul><ul><li>market is called a strategic group. </li></ul><ul><li>What are the short and long term objectives of the competitors i.e. </li></ul><ul><li>growth, profitability or cash generation. </li></ul><ul><li>Company must monitor competitors’ expansion plans by mapping </li></ul><ul><li>product-market battlefield map. </li></ul>Dealing with Competition
  16. 16. A competitor’s expansion plans Dealing with Competition Individual Users Individual & commercial Educational Personal Computers Hardware accessories Software Dell
  17. 17. <ul><li>Finally, firms must study strengths and weaknesses of competitors’ </li></ul><ul><li>on product attributes, quality, availability and service. In general, </li></ul><ul><li>Firms must analyze three variables when analyzing competitors: </li></ul><ul><li>Share of market. </li></ul><ul><li>Share of mind: Percentage customers who named the competitor </li></ul><ul><li>when asked: Name the first company that comes to mind in an </li></ul><ul><li>industry. </li></ul><ul><li>Share of heart: Percentage customer who named the company </li></ul><ul><li>while responding to statement: name the company from whom you </li></ul><ul><li>would prefer to buy the product. </li></ul>Dealing with Competition
  18. 18. Hypothetical Market Structure Dealing with Competition 10% 30% 40% 20% Market Nichers Market follower Market challenger Market leader
  19. 19. <ul><li>Competitive strategies for market leaders </li></ul><ul><li>To remain a market leader, a firm must act in three ways. </li></ul><ul><li>It must find ways to expand the total market demand. </li></ul><ul><li>The firm must protect its current market share through defensive </li></ul><ul><li>and offensive actions. </li></ul><ul><li>Finally, it can try to increase its market share even when it is </li></ul><ul><li>constant. </li></ul>Dealing with Competition
  20. 20. Expanding the Total Market More Usage New Customers Dealing with Competition
  21. 21. <ul><li>Defending the market share </li></ul><ul><li>The leader can defend its position through continuous innovation. </li></ul><ul><li>In addition, it can defend its terrain through: </li></ul><ul><li>Premium performance. </li></ul><ul><li>Extensive and efficient distribution system. </li></ul><ul><li>Superior service. </li></ul><ul><li>Full line strategy. </li></ul><ul><li>Good financial terms. </li></ul>Dealing with Competition
  22. 22. <ul><li>Defending the market share </li></ul><ul><li>Six types of defense strategies are possible. </li></ul><ul><li>Position defense : It involves building superior brand power. </li></ul><ul><li>Flank defense : Market leader must construct outposts to protect a </li></ul><ul><li>weak front that may also serve as a base for counter attack. </li></ul><ul><li>Pre-emptive defense : It involves attacking the competitor before it </li></ul><ul><li>starts its offense. </li></ul><ul><li>This can be done by waging a guerilla action, achieving great </li></ul><ul><li>market envelopment and/or sending market signals to dissuade </li></ul><ul><li>competition from attacking. </li></ul>Dealing with Competition
  23. 23. <ul><li>Counter-offensive defense : In counter-offensive, the leader can </li></ul><ul><li>meet the attacker frontally or hit its flank. </li></ul><ul><li>Mobile defense : The market leader stretches its domain over new </li></ul><ul><li>territories that can serve as future centers for defense and offense </li></ul><ul><li>through market broadening and market diversification. </li></ul><ul><li>Contraction defense : Market leader, sometimes resorts to planned </li></ul><ul><li>contraction giving up weaker territories and reassigning resources </li></ul><ul><li>to stronger territories. </li></ul>Dealing with Competition
  24. 24. Dealing with Competition Six Types of Defense Strategies
  25. 25. <ul><li>Factors Relevant to Pursuing Increased Market Share </li></ul><ul><li>Cost of buying market share may exceed its revenue value, hence, </li></ul><ul><li>the firm should consider following factors: </li></ul><ul><li>Possibility of provoking MRTP provisions. </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 </li></ul><ul><li>quality. </li></ul><ul><li>Too many customers put a strain on firm’s resources, hurting </li></ul><ul><li>product value and service delivery. </li></ul>Dealing with Competition
  26. 26. Optimal Market Share Dealing with Competition
  27. 27. Other Competitive Strategies Dealing with Competition Market Challengers Market Nichers Market Followers
  28. 28. <ul><li>Market Challenger Strategies </li></ul><ul><li>Define the strategic objective and opponents; involves increasing </li></ul><ul><li>market share and deciding whom to attack. </li></ul><ul><ul><ul><li>Firm can choose to attack market leader; high risk but </li></ul></ul></ul><ul><li>potentially high pay-off strategy. </li></ul><ul><li>Firm decides to attack firm of its size; the firms have ageing </li></ul><ul><li>products, charging excessive prices & not satisfying customers. </li></ul><ul><li>Firm decides to attack small, local firms. </li></ul><ul><li>Choose a general attack strategy. </li></ul><ul><li>Choose a specific attack strategy. </li></ul>Dealing with Competition
  29. 29. <ul><li>Market Challenger Strategies </li></ul><ul><li>Choose a general attack strategy. These include: </li></ul>Dealing with Competition Frontal Attack Encirclement Attack Bypass Attack Flank Attack Guerrilla Warfare
  30. 30. <ul><li>In frontal attack , the attacker matches the opponent’s product, </li></ul><ul><li>advertising, price and distribution. </li></ul><ul><ul><ul><li>Competitors weak spots are natural targets. A flank attack can be </li></ul></ul></ul><ul><ul><ul><li>geographical or segmental. </li></ul></ul></ul><ul><li>The encirclement maneuver is an attempt to capture a wide slice </li></ul><ul><li>of the enemy’s territory through a ‘blitz’, involves launching a </li></ul><ul><li>grand offensive on several fronts. </li></ul><ul><li>In bypass attack , the firm ignores the enemy and attack easier </li></ul><ul><li>markets to broaden one’s resource base. </li></ul>Dealing with Competition
  31. 31. Specific Attack Strategies Dealing with Competition <ul><li>Price discounts </li></ul><ul><li>Lower-priced goods </li></ul><ul><li>Value-priced goods </li></ul><ul><li>Prestige goods </li></ul><ul><li>Product proliferation </li></ul><ul><li>Product innovation </li></ul><ul><li>Improved services </li></ul><ul><li>Distribution innovation </li></ul><ul><li>Manufacturing-cost reduction </li></ul><ul><li>Intensive advertising promotion </li></ul>
  32. 32. Market Follower Strategies Dealing with Competition Counterfeiter Cloner Imitator Adapter
  33. 33. <ul><li>Counterfeiter duplicates the leader’s product and package and </li></ul><ul><li>sells in the black market through disreputable firms. </li></ul><ul><ul><ul><li>Cloner emulates the leader’s products, name and packaging with </li></ul></ul></ul><ul><ul><ul><li>slight variations. </li></ul></ul></ul><ul><li>Imitator copies some things from the leader but maintains </li></ul><ul><li>differentiation in terms of packaging, advertising, pricing or </li></ul><ul><li>location. </li></ul><ul><li>Adapter takes leader’s products and improves them. </li></ul>Dealing with Competition
  34. 34. Balancing Orientations Dealing with Competition Competitor- Centered Customer- Centered
  35. 35. <ul><li>Recap: </li></ul><ul><li>How marketers identify primary competitors. </li></ul><ul><li>How should we analyze competitors’ strategies, objectives, </li></ul><ul><li>strengths, and weaknesses. </li></ul><ul><li>How market leaders can expand the total market and defend </li></ul><ul><li>market share. </li></ul><ul><li>How market challengers should attack market leaders. </li></ul><ul><li>How market followers or nichers can compete effectively. </li></ul>Dealing with Competition

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