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Mm.07.10 (not studied)

Mm.07.10 (not studied)






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    Mm.07.10 (not studied) Mm.07.10 (not studied) Presentation Transcript

    • Marketing Management MBA CP 205
    • Dealing with Competition
      • 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
    • 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
      • 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
      • 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
      • 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
      • 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
    • Dealing with Competition Industry concept of competition Pure Monopoly Oligopoly Monopolistic Competition Pure Competition
      • 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
      • 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
      • 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
      • 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
    • Analyzing Competitors Dealing with Competition Strategies Objectives Strengths and weaknesses
      • 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
    • A competitor’s expansion plans Dealing with Competition Individual Users Individual & commercial Educational Personal Computers Hardware accessories Software Dell
      • 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
    • Hypothetical Market Structure Dealing with Competition 10% 30% 40% 20% Market Nichers Market follower Market challenger Market leader
      • 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
    • Expanding the Total Market More Usage New Customers Dealing with Competition
      • 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
      • 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
      • 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
    • Dealing with Competition Six Types of Defense Strategies
      • 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
    • Optimal Market Share Dealing with Competition
    • Other Competitive Strategies Dealing with Competition Market Challengers Market Nichers Market Followers
      • 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
      • Market Challenger Strategies
      • Choose a general attack strategy. These include:
      Dealing with Competition Frontal Attack Encirclement Attack Bypass Attack Flank Attack Guerrilla Warfare
      • 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
    • 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
    • Market Follower Strategies Dealing with Competition Counterfeiter Cloner Imitator Adapter
      • 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
    • Balancing Orientations Dealing with Competition Competitor- Centered Customer- Centered
      • 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