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Mm.07.10 (not studied)


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