is a bypass strategy
practiced in high-tech
develops the next
launches an attack,
battleground to its
territory, where it has
Dealing with Competition
By Philip, Kevin Lane Keller, Abraham Koshy, Mithileshwar Jha
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.
• Number Of Sellers And Degree Of Differentiation
• Entry, Mobility, And Exit Barriers
• Cost Structure
• Degree Of Vertical Integration
• Degree Of Globalization
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.
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
• 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
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
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
Strong versus Weak:
Weak require fewer
resources per share
point gained. The firm
should also compete
competitors to keep
up with the best.
Close versus Distant:
resemble them the
"Good" versus "Bad":
should support its
(Play by the rules)
and attack its bad
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
• 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
• 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
• Geographic specialist: The firm sells only in a certain locality, region, or area of the
• 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
• Channel specialist: The firm specializes in serving only one channel of distribution
Chapter 9 - Dealing with Competition
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
• Counterfeiter -
leader's product and
package and sells it
• Cloner - emulates the
packaging, with slight
• Imitator - copies
some things from the
leader but maintains
terms of packaging,
• Adapter - takes the
leader's products and
adapts or improves