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competitive advantage

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Creating competitive advantage

Published in: Marketing, Business

competitive advantage

  1. 1. Creating Competitive Advantage Chapter 18
  2. 2. Objectives Learn how to understand competitors as well as customers via competitor analysis. Learn the fundamentals of competitive marketing strategies based on creating value for customers. Realize the need for balancing customer and competitor organizations in order to become a truly market-centered organization.
  3. 3. c Intel Has dominated the chip industry Success is directly related to Intel’s competitive strategy Strategy focuses on superior value and product Heavy focus on product and advertising innovation and R&D investments Changing market needs have challenged Intel to adapt Intel is capitalizing on
  4. 4. Definition Competitive Advantage  An advantage over competitors gained by offering consumers greater value than competitors offer.
  5. 5. Definition Competitive Analysis  The process of identifying key competitors; assessing their objectives, strategies, strengths and weaknesses, and reaction patterns; and selecting which competitors to attack or avoid.
  6. 6. Figure 18-1: Steps in Analyzing Competitors
  7. 7. Competitor Analysis Steps in the Process: Identifying Competitors Assessing Competitors Selecting Competitors to Attack or Avoid Firms face a wide range of competition Be careful to avoid “competitor myopia” Methods of identifying competitors:  Industry point-of-view  Market point-of-view  Competitor can help maps
  8. 8. 230-year-old Encyclopedia Britannica viewed itself as competing with your publishers of printed encyclopedias. Big mistake! Its real competitors were software encyclopedias and the Internet.
  9. 9. Figure 18-2: Competitor Map
  10. 10. Discussion Question Create a competitor map for one of the following: • • • • • WalMart McDonald’s Nike Starbucks Google
  11. 11. Competitor Analysis Steps in the Process: Identifying Competitors Assessing Competitors Selecting Competitors to Attack or Avoid Determining competitors’ objectives Identifying competitors’ strategies  Strategic groups Assessing competitors’ strengths and weaknesses  Benchmarking Estimating competitors’ reactions
  12. 12. Competitor Analysis Steps in the Process: Identifying Competitors Assessing Competitors Selecting Competitors to Attack or Avoid Strong or weak competitors  Customer value analysis Close or distant competitors  Most companies compete against close competitors “Good” or “Bad” competitors  The existence of competitors offers several strategic benefits
  13. 13. Competitive Strategies Basic Winning Competitive Strategies: Porter  Overall cost leadership  Lowest production and distribution costs  Differentiation  Creating a highly differentiated product line and marketing program  Focus  Effort is focused on serving a few market segments
  14. 14. Hohner has successfully implemented a focus strategy to capture an 85% share of the harmonica market.
  15. 15. Competitive Strategies Basic Competitive Strategies: Value Disciplines  Operational excellence  Superior value via price and convenience  Customer intimacy  Superior value by means of building strong relationships with buyers and satisfying needs  Product leadership  Superior value via product innovation
  16. 16. Figure 18-3: Hypothetical Market Structure
  17. 17. Competitive Strategy Competitive Positions Market Leader Market Challenger Market Follower Market Nicher Expanding the total demand  Finding new users  Discovering and promoting new product uses  Encouraging greater product usage Protecting market share  Many considerations  Continuous innovation Expanding market share  Profitability rises with market share
  18. 18. Competitive Strategy WD-40 has a knack for developing new uses for its product. What other brands have adopted a similar strategy? WD40
  19. 19. Competitive Strategy Competitive Positions Market Leader Market Challenger Market Follower Market Nicher Option 1: challenge the market leader  High-risk but high-gain  Sustainable competitive advantage over the leader is key to success Option 2: challenge firms of the same size, smaller size or challenge regional or local firms Full frontal vs. indirect attacks
  20. 20. Pepsi is an example of market challenger that has chosen to use a full frontal attack
  21. 21. Competitive Strategy Competitive Positions Market Leader Market Challenger Market Follower Market Nicher Follow the market leader  Focus is on improving profit instead of market share  Many advantages:  Learn from the market leader’s experience  Copy or improve on the leader’s offerings  Strong profitability
  22. 22. Dial Corporation successfully uses a market follower strategy
  23. 23. Competitive Strategy Competitive Positions Market Leader Market Challenger Market Follower Market Nicher Serving market niches means targeting subsegments Good strategy for small firms with limited resources Offers high margins Specialization is key  By market, customer, product, or marketing mix lines
  24. 24. Balancing Customer and Competitor Orientations Companies can become so competitor centered that they lose their customer focus. Types of companies:    Competitor-centered companies Customer-centered companies Market-centered companies
  25. 25. Game playing industry a. Nintendo a. Wii hyperlink b. Microsoft a. Xbox 360 c. Sony a. Play Station
  26. 26. Threat of New Entry the existence of barriers to entry economies of product differences brand equity switching costs capital requirements access to distribution absolute cost advantages learning curve advantages expected retaliation government policies
  27. 27. Competitive Rivalry number of competitors rate of industry growth intermittent industry overcapacity exit barriers diversity of competitors informational complexity and asymmetry brand equity fixed cost allocation per value added level of advertising expense
  28. 28. Supplier Power supplier switching costs relative to firm switching costs degree of differentiation of inputs presence of substitute inputs supplier concentration to firm concentration ratio threat of forward integration by suppliers relative to the threat of backward integration by firms cost of inputs relative to selling price of the product
  29. 29. Buyer Power buyer concentration to firm concentration ratio bargaining leverage buyer volume buyer switching costs relative to firm switching costs buyer information availability ability to backward integrate availability of existing substitute products buyer price sensitivity price of total purchase
  30. 30. Threat of Substitution buyer propensity to substitute relative price performance of substitutes buyer switching costs perceived level of product differentiation

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