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Summary of Marketing Management, 11Ed. Chapter 9


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Phil Kotler, Kevin Keller and Abraham Koshy

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Summary of Marketing Management, 11Ed. Chapter 9

  1. 1. logo copy.tif Technological leapfrogging is a bypass strategy practiced in high-tech industries. The challenger patiently researches and develops the next technology and launches an attack, shifting the battleground to its territory, where it has an advantage. Dealing with Competition Chapter 9 Marketing Management By Philip, Kevin Lane Keller, Abraham Koshy, Mithileshwar Jha SUMMARY by Building strong brands requires a keen understanding of competition. To effectively devise and implement the best possible brand positioning strategies, companies must pay attention to their competitors.Markets have become too competitive to just focus on the consumer alone. Vertical Integration is to integrate backward or forward i.e. with suppliers and costumers which often lowers costs and can manipulate prices and costs in different parts of the value chain. Benchmarking is the art of learning from companies that perform certain tasks better than other companies. Competitive Forces (Michael Porter’s 5 forces) 1. Threat of intense segment rivalry - segment is unattractive if it contains numerous, strong, or aggressive competitors. 2. Threat of new entrants - segment's attractiveness varies with the height of its entry and exit barriers. The most attractive segment has high entry barriers and low exit barriers. 3. Threat of substitute products - A segment is unattractive when there are actual or potential substitutes for the product. 4. Threat of buyers' growing bargaining power - A segment is unattractive if buyers possess strong or growing bargaining power. 5. Threat of suppliers' growing bargaining power - A segment is unattractive if the company's suppliers are able to raise prices or reduce quantity supplied. Identifying Competitors Industry Concept • Number Of Sellers And Degree Of Differentiation • Entry, Mobility, And Exit Barriers • Cost Structure • Degree Of Vertical Integration • Degree Of Globalization Marketing Concept According to marketing approach, competitors are companies that satisfy the same customer need. The market concept of competition reveals a broader set of actual and potential competitors. By mapping the buyer's steps in obtaining and using the product a company's direct and indirect competitors can be identified.
  2. 2. Chapter 9 - Dealing with Competition Trends Analyzing Competitors • Strategies: What strategies a company uses to enter/survive in the market? • Objectives: What are the objectives of the competitor’s and what drives its behavior? Factors shaping a competitor’s objectives include size, history, current management, and financial situation. • Strengths and Weaknesses: A company needs to gather information on each competitor's strengths and weaknesses. Three Important Variables for analyzing competitors • Share of market - The competitor's share of the target market. • Share of mind - The percentage of customers who named the competitor in responding to the statement, "Name the first company that comes to mind in this industry." • Share of heart - The percentage of customers who named the competitor in responding to the statement, "Name the company from which you would prefer to buy the product." Companies that make steady gains in mind share and heart share will inevitably make gains in market share and profitability. Competitive Strategies for Market Leaders Expanding the Total Market New customers: Potential new users maybe divided into three groups: • Those who might use it but do not (market-penetration strategy) • Those who have never used it (new-market segment strategy) • Those who live elsewhere (geographical-expansion strategy) More usage: Two ways of increasing usage • Increasing the level or quantity of consumption: through packaging or product design or by increasing the availability of product • Increasing the frequency of consumption: identifying completely new and different ways to use the brand and communicate the advantages of using the brand more frequently Defending Market Share The most constructive response is continuous innovation. The leader leads the industry in developing new product and customer services, distribution effectiveness, and cost cutting. It keeps increasing its competitive strength and value to customers. • Position Defense: It involves occupying the most desirable market space in the minds of the consumers • Flank Defense: the market leader should also erect outposts to protect a weak front or possibly serve as an invasion base for counterattack. • Preemptive Defense: A more aggressive maneuver is to attack before the enemy starts its offense. A company can launch a preemptive defense in several ways • Counteroffensive Defense: the leader can meet the attacker frontally or hit its flank or launch a pincer movement. An effective counterattack is to invade the attacker's main territory so that it will have to pull back to defend the territory. • Mobile Defense: In mobile defense, the 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: giving up weaker territories and reassigning resources to stronger territories. Selecting Competitors: Strong versus Weak: Weak require fewer resources per share point gained. The firm should also compete with strong competitors to keep up with the best. Close versus Distant: Most companies compete with competitors who resemble them the most "Good" versus "Bad": should support its good competitors (Play by the rules) and attack its bad competitors.
  3. 3. Expanding Market Share A company should consider four factors before pursuing increased market share: • The possibility of provoking antitrust action • Economic cost • Pursuing the wrong marketing-mix strategy • The effect of increased market share on actual and perceived quality Competitive Strategies for Market Challengers Defining the Strategic Objective and Opponent(S) A market challenger must decide whom to attack: It can attack the market leader. This is a high-risk but potentially high-payoff strategy It can attack firms of its own size that are not doing the job and are underfinanced It can attack small local and regional firms Choosing a General Attack Strategy • Frontal Attack: The attacker matches its opponent's product, advertising, price, and distribution • Flank Attack: Identifying shifts in market segments geographic areas that are causing gaps to develop, and then rushing in to fill the gaps and develop them into strong segments. • Encirclement Attack: The encirclement involves launching a grand offensive on several fronts. Make sense when the challenger commands superior resources • Bypass Attack: It means bypassing the enemy and attacking easier markets to broaden one's resource base. Three lines of approach: diversifying into unrelated products, diversifying into new geographical markets, and leapfrogging into new technologies to supplant existing products. • Guerrilla Warfare: Small, intermittent attacks to harass and demoralize the opponent and eventually secure permanent footholds (selective price cuts, intense promotional blitzes, and occasional legal action) Few more specific strategies: Price discount, Lower price goods, Value-priced goods and services, Prestige goods, Product proliferation, Product innovation, improved services, Distribution innovation, Manufacturing-cost reduction, Intensive advertising promotion Competitive Strategies for Market-Nicher The nicher achieves high margin, whereas the mass marketer achieves high volume. Nichers have three tasks: creating niches, expanding niches, and protecting niches. Because niches can weaken, the firm must continually create new ones therefore multiple niching is preferable to single niching. The key idea in successful nichemanship is specialization. Here are some possible niche roles: • End-user specialist: The firm specializes in serving one type of end-use customer. • Customer-size specialist: The firm concentrates on selling to small, medium-sized, or large customers. • Geographic specialist: The firm sells only in a certain locality, region, or area of the world. • Product-feature specialist: The firm specializes in producing a certain type of product or product feature • Quality-price specialist: The firm operates at the low- or high-quality ends of the market • Channel specialist: The firm specializes in serving only one channel of distribution Chapter 9 - Dealing with Competition Competitive Strategies for Market Follower: A market follower must know how to hold current customers and win a fair share of new customers. It must keep its manufacturing costs low and its product quality and services high. Four broad strategies can be distinguished: • Counterfeiter - duplicates the leader's product and package and sells it • 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 the leader's products and adapts or improves them.