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Ch09a

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Ch09a

  1. 1. Chapter 9 Dealing with the Competition by <ul><li>PowerPoint by </li></ul><ul><li>Milton M. Pressley </li></ul><ul><li>University of New Orleans </li></ul>
  2. 2. Kotler on Marketing <ul><ul><li>Poor firms ignore their competitors; average firms copy their competitors; winning firms lead their competitors. </li></ul></ul>
  3. 3. <ul><li>In this chapter, we focus on five things companies need to know about their competition: </li></ul><ul><ul><li>Who the primary competitors are </li></ul></ul><ul><ul><li>How to ascertain their strategies, objectives, strengths and weaknesses, and reaction patterns </li></ul></ul><ul><ul><li>How to design a competitive intelligence system </li></ul></ul><ul><ul><li>Whether to position as market leader, challenger, follower, or nicher </li></ul></ul><ul><ul><li>How to balance a customer versus competitor orientation </li></ul></ul>Chapter Objectives
  4. 4. Figure 9-1: Five Forces Determining Segment Structural Attractiveness Competitive Forces <ul><li>Threat of: </li></ul><ul><li>intense segment rivalry </li></ul><ul><li>new entrants </li></ul><ul><li>substitute products </li></ul><ul><li>buyers’ growing bargaining power </li></ul><ul><li>suppliers’ growing bargaining power </li></ul>
  5. 5. Figure 9-2: Barriers and Profitability
  6. 6. Identifying Competitors <ul><li>Industry Concept of Competition </li></ul><ul><ul><ul><li>Industry </li></ul></ul></ul><ul><ul><li>Number of Sellers and Degree of Differentiation </li></ul></ul><ul><ul><ul><li>Pure monopoly </li></ul></ul></ul><ul><ul><ul><li>Oligopoly </li></ul></ul></ul><ul><ul><ul><ul><li>Pure oligopoly </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Differentiated oligopoly </li></ul></ul></ul></ul><ul><ul><ul><li>Monopolistic competition </li></ul></ul></ul><ul><ul><ul><li>Pure competition </li></ul></ul></ul>
  7. 7. Identifying Competitors <ul><ul><li>Entry, Mobility, Exit Barriers </li></ul></ul><ul><ul><ul><li>Entry barriers </li></ul></ul></ul><ul><ul><ul><li>Mobility barriers </li></ul></ul></ul><ul><ul><ul><li>Exit barriers </li></ul></ul></ul><ul><ul><li>Cost Structure </li></ul></ul><ul><ul><li>Degree of Vertical Integration </li></ul></ul><ul><ul><ul><li>Vertical integration </li></ul></ul></ul><ul><ul><li>Degree of Globalization </li></ul></ul><ul><li>Market Concept of Competition </li></ul>
  8. 8. Figure 9-3: Competitor Map – Eastman Kodak
  9. 9. <ul><li>Objectives </li></ul>Analyzing Competitors Figure 9-5: A Competitor’s Expansion Plans
  10. 10. Table 9-1: Customer’s Ratings of Competitors on Key Success Factors Note: E = excellent, G = good, F = fair, P = poor. F F G P F Competitor C E G E G G Competitor B G P P E E Competitor A Selling Staff Technical Assistance Product Availability Product Quality Customer Awareness
  11. 11. Analyzing Competitors <ul><ul><li>Three Variables to Monitor When Analyzing Competitors: </li></ul></ul><ul><ul><ul><li>Share of market </li></ul></ul></ul><ul><ul><ul><li>Share of mind </li></ul></ul></ul><ul><ul><ul><li>Share of heart </li></ul></ul></ul>
  12. 12. Table 9-2: Market Share, Mind Share, and Heart Share 8 11 11 11 11 10 19 19 20 Competitor C 53 47 44 35 31 30 37 34 30 Competitor B 39% 42% 45% 54% 58% 60% 44% 47% 50% Competitor A 2002 2001 2000 2002 2001 2000 2002 2001 2000 Heart Share Mind Share Market Share
  13. 13. <ul><li>Reaction Patterns </li></ul><ul><ul><li>1. If competitors are nearly identical and make their living the same way, then their competitive equilibrium is unstable. </li></ul></ul><ul><ul><li>2. If a single major factor is the critical factor, then the competitive equilibrium is unstable. </li></ul></ul><ul><ul><li>3. If multiple factors may be critical factors, then it is possible for each competitor to have some advantage and be differentially attractive to some customers. The more factors that may provide an advantage, the more competitors who can coexist. Competitors all have their segment, defined by the preference for the factor trade-offs they offer. </li></ul></ul><ul><ul><li>4. The fewer the number of critical competitive variables, the fewer the number of competitors. </li></ul></ul><ul><ul><li>5. A ratio of 2 to 1 in market share between any two competitors seems to be the equilibrium point at which it is neither practical nor advantageous for either competitor to increase or decrease share. </li></ul></ul>Analyzing Competitors
  14. 14. Designing The Competitive Intelligence System <ul><li>Selecting Competitors </li></ul><ul><ul><li>Customer Value Analysis (CVA) </li></ul></ul><ul><ul><ul><li>Customer Value = Customer Benefits – Customer Costs </li></ul></ul></ul><ul><ul><ul><li>Customer Benefits = product benefits, service benefits, personnel benefits, image benefits </li></ul></ul></ul><ul><ul><ul><li>Customer Costs = purchase price, acquisition costs, usage costs, maintenance costs, ownership costs, disposal costs </li></ul></ul></ul>
  15. 15. Table 9-3: Customer Cost of Three Brands $140 $135 $130 Total costs 8 5 6 Disposal costs 5 3 3 Ownership costs 7 3 2 Maintenance costs 10 7 4 Usage costs 30 25 15 Acquisition costs $ 80 $ 90 $100 Price C B A
  16. 16. Figure 9-6: Hypothetical Market Structure Designing Competitive Strategies
  17. 17. Designing Competitive Strategies <ul><li>Market-Leader Strategies </li></ul><ul><ul><li>Expanding the Total Market </li></ul></ul><ul><ul><ul><li>New Users </li></ul></ul></ul><ul><ul><ul><ul><li>Market-penetration strategy </li></ul></ul></ul></ul><ul><ul><ul><ul><li>New-market segment strategy </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Geographical-expansion strategy </li></ul></ul></ul></ul><ul><ul><ul><li>New Uses </li></ul></ul></ul><ul><ul><ul><li>More Usage </li></ul></ul></ul><ul><ul><li>Defending Market Share </li></ul></ul>
  18. 18. Figure 9-7: Six Types of Defense Strategies Designing Competitive Strategies
  19. 19. <ul><ul><li>Defense Strategies </li></ul></ul><ul><ul><ul><li>Position Defense </li></ul></ul></ul><ul><ul><ul><li>Flank Defense </li></ul></ul></ul><ul><ul><ul><li>Preemptive Defense </li></ul></ul></ul><ul><ul><ul><li>Counteroffensive Defense </li></ul></ul></ul><ul><ul><ul><li>Mobile Defense </li></ul></ul></ul><ul><ul><ul><ul><li>Market broadening </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Principle of the objective </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Principle of mass </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Market diversification </li></ul></ul></ul></ul><ul><ul><ul><li>Contraction Defense </li></ul></ul></ul><ul><ul><ul><ul><li>Planned contraction (Strategic withdrawal) </li></ul></ul></ul></ul>Designing Competitive Strategies
  20. 20. Figure 9-8: Relationship Between Market Share and Profitability <ul><ul><li>Expanding Market Share </li></ul></ul>Designing Competitive Strategies
  21. 21. Figure 9-9: The Concept of Optimal Market Share Designing Competitive Strategies
  22. 22. Designing Competitive Strategies <ul><li>Two Case Studies: Procter & Gamble and Caterpillar </li></ul><ul><ul><li>Proctor & Gamble </li></ul></ul><ul><ul><ul><li>Customer knowledge </li></ul></ul></ul><ul><ul><ul><li>Long-term outlook </li></ul></ul></ul><ul><ul><ul><li>Product innovation </li></ul></ul></ul><ul><ul><ul><li>Quality strategy </li></ul></ul></ul><ul><ul><ul><li>Line-extension strategy </li></ul></ul></ul>
  23. 23. Designing Competitive Strategies <ul><ul><ul><li>Brand-extension strategy </li></ul></ul></ul><ul><ul><ul><li>Multibrand strategy </li></ul></ul></ul><ul><ul><ul><li>Heavy advertising and media pioneer </li></ul></ul></ul><ul><ul><ul><li>Aggressive sales force </li></ul></ul></ul><ul><ul><ul><li>Effective sales promotion </li></ul></ul></ul><ul><ul><ul><li>Competitive toughness </li></ul></ul></ul><ul><ul><ul><li>Manufacturing efficiency and cost cutting </li></ul></ul></ul><ul><ul><ul><li>Brand-management system </li></ul></ul></ul>
  24. 24. Designing Competitive Strategies <ul><li>Market-Challenger Strategies </li></ul><ul><ul><li>Defining the Strategic Objective and Opponent(s) </li></ul></ul><ul><ul><ul><li>It can attack the market leader </li></ul></ul></ul><ul><ul><ul><li>It can attack firms of its own size that are not doing the job and are underfinanced </li></ul></ul></ul><ul><ul><ul><li>It can attack small local and regional firms </li></ul></ul></ul><ul><li>Choosing a General Attack Strategy </li></ul>
  25. 25. Figure 9-10: Attack Strategies
  26. 26. Designing Competitive Strategies <ul><ul><li>Choosing a Specific Attack Strategy </li></ul></ul><ul><ul><ul><li>Price-discount </li></ul></ul></ul><ul><ul><ul><li>Lower price goods </li></ul></ul></ul><ul><ul><ul><li>Prestige goods </li></ul></ul></ul><ul><ul><ul><li>Product proliferation </li></ul></ul></ul><ul><ul><ul><li>Product innovation </li></ul></ul></ul><ul><ul><ul><li>Improved services </li></ul></ul></ul><ul><ul><ul><li>Distribution innovation </li></ul></ul></ul><ul><ul><ul><li>Manufacturing cost reduction </li></ul></ul></ul><ul><ul><ul><li>Intensive advertising promotion </li></ul></ul></ul>
  27. 27. Designing Competitive Strategies <ul><li>Market-Follower Strategies </li></ul><ul><ul><ul><li>Innovative imitation (Product imitation) </li></ul></ul></ul><ul><ul><ul><li>Product innovation </li></ul></ul></ul><ul><ul><ul><li>Four Broad Strategies: </li></ul></ul></ul><ul><ul><ul><ul><li>Counterfeiter </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Cloner </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Imitator </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Adapter </li></ul></ul></ul></ul>
  28. 28. Designing Competitive Strategies <ul><li>Market-Nicher Strategies </li></ul><ul><ul><li>High margin versus high volume </li></ul></ul><ul><ul><li>Nicher Specialist Roles </li></ul></ul><ul><ul><ul><li>End-user specialist </li></ul></ul></ul><ul><ul><ul><ul><li>Value-added reseller </li></ul></ul></ul></ul><ul><ul><ul><li>Vertical-level specialist </li></ul></ul></ul><ul><ul><ul><li>Customer-size specialist </li></ul></ul></ul><ul><ul><ul><li>Specific-customer specialist </li></ul></ul></ul><ul><ul><ul><li>Geographic specialist </li></ul></ul></ul><ul><ul><ul><li>Product or product-line specialist </li></ul></ul></ul><ul><ul><ul><li>Product-feature specialist </li></ul></ul></ul><ul><ul><ul><li>Job-shop specialist </li></ul></ul></ul><ul><ul><ul><li>Quality-price specialist </li></ul></ul></ul><ul><ul><ul><li>Service specialist </li></ul></ul></ul><ul><ul><ul><li>Channel specialist </li></ul></ul></ul>
  29. 29. Balancing Customer and Competitor Orientations <ul><ul><ul><li>Competitor-centered company </li></ul></ul></ul><ul><ul><ul><li>Customer-centered company </li></ul></ul></ul><ul><ul><ul><li>Retreat is often the best (niche) strategy! </li></ul></ul></ul>

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