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Ch11 dealing with competition marzo
1. TOP 10 Learning Concepts
Chapter 11: Dealing with Competition
Sherrylou M. Marzo
Sept. 8, 2011
http://sherryloumarzo.blogspot.com/
2. Outline: Dealing with
Competition
Forces that Determine Market
Structure
Identifying Competitors
Three Variables in Analyzing
Competitors
Selecting Competitors
Competitive Strategies for
Market Leaders
Other Competitive Strategies
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3. Outline: Dealing with
Competition
Market- Challenger Strategies
General Attack Strategies
Specific Attack Strategies
Market Follower Strategies
Market- Nicher Strategies
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4. Outline: Dealing with
Competition
Forces that Determine Market
Structure
Identifying Competitors
Three Variables in Analyzing
Competitors
Selecting Competitors
Competitive Strategies for Market
Leaders
Other Competitive Strategies
http://sherryloumarzo.blogspot.com/ 4
5. Concept 1:
Five Forces that Determine
Market Structure
Threat of
New Entrants
Segment Rivalry
Buyer
Supplier Industry
Competitors Power
Power
Threat of Michael Porter’s
Substitutes 5 Forces
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6. Concept 1:
Segment is Unattractive if
Threat of Rivalry is Intense
This Happens When:
• Fixed cost & Exit
Barriers are high
Segment Rivalry • Competitors have high
Industry stakes in staying in
Competitors the segment
• Plant Capacity must
be added in large
increments
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7. Concept 1:
Threat of Intense Segment
Rivalry will results to:
Segment Rivalry
Industry
Competitors Advertising Battle
Price Wars
New Product Intro
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8. Concept 1:
The Most Attractive segment is when
entry barriers are low & exit barriers
are high
Threat of
New Entrants
This Means:
Few New Firms can enter
the industry and poor Segment Rivalry
performing firms can Industry
easily exit. Competitors
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9. Concept 1:
A Segment is unattractive when there
are actual/potential substitutes for the
product.
Threat of Substitutes Can:
• Limit on prices and on
profits.
• And if technology
Segment Rivalry advances or competition
Industry increases in these
Competitors substitutes then prices &
profits might fall
Threat of
Substitutes
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10. Concept 1:
A Segment is unattractive if buyers
possess strong or growing bargaining
power
Buyers’ Bargaining Power
Grows When:
• Buyers become
concentrated or organized
• When product represents
significant costs to them
• When product is Segment Buyer
Rivalry
undifferentiated Power
• When switching costs are Industry
low Competitors
• When buyers are price
sensitive due to low profits
• When they can integrate
upstream
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11. Concept 1:
The Best Defense to Buyer Power is
Developing
Superior Segment Buyer
Rivalry
offers that Power
Industry
strong buyers Competitors
cannot refuse
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12. Concept 1:
A segment is unattractive if company’s
suppliers are able to raise price or
reduce quantity supplied
Suppliers Tend to be Powerful
When:
• They are concentrated or
organized
• There are few substitutes
• If the supplied product is an
Segment Rivalry
important input
Supplier Industry
• Costs of switching suppliers
Power Competitors
are high
• Suppliers can integrate
downstream
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13. Concept 1:
The best defenses to Supplier Power
is:
• Build Win-
win
Segment Rivalry relationships
Supplier Industry with them
Power Competitors • Use multiple
supply
sources
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14. Concept 1 Example:
Bottled Water Segment
Rivalry is Intense
Absolute
Nature’s Spring
Wilkins
Nestle Segment Rivalry
Water Industry
Competitors Hidden Spring
Summit
SM Bonus http://sherryloumarzo.blogspot.com/ 14
15. Concept 1 Example:
Substitutes to Bottled Water
House Brand Waters and Water
Refilling Stations are cheaper
than the usual Bottled Water
House Water Refilling Stations
Brands
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16. Concept 1 Example:
New Entrant
Threat of
New Entrants
Magnolia entered the segment as
a Purified Water and its pricing
strategy is very cheap.
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17. Concept 1 Example:
Asia Brewery maintains few
suppliers
Asia Brewery has only one
Supplier supplier in their labels as well as
Power with carton packaging
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18. Concept 1 Example:
Buyers with Power
These accounts have the power
Buyer to dictate because main volume
Power of sales comes from these key
accouts
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19. Outline: Dealing with
Competition
Forces that Determine Market
Structure
Identifying Competitors
Three Variables in Analyzing
Competitors
Selecting Competitors
Competitive Strategies for Market
Leaders
Other Competitive Strategies
http://sherryloumarzo.blogspot.com/ 19
21. Concept 2:
Identifying Competitors
Competition
Industry is a group
of firms that offer a
product or class of
products that are
close substitutes for
one another.
From Industry
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22. Concept 2:
Identifying Competitors
Competition
From Industry From market point of view
Using the market approach, competitors are companies that
satisfy the same customer need.
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23. Concept 2:
Industry Classification
According to:
Number of Sellers
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24. Concept 2:
Industry Classification
According to:
Number of Sellers
Degree of Differentiation
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25. Concept 2:
Industry Classification
According to:
Presence/absence of entry
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26. Concept 2:
Industry Classification
According to:
Presence/absence of entry
Mobility
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29. Concept 2:
Industry Classification
According to:
Degree of Vertical
Integration
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30. Concept 2:
Industry Classification
According to:
Degree of Vertical
Integration
Degree of Globalization
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31. Concept 2 Example:
Asia Brewery’s Absolute Distilled
Water
Absolute is under the Beverage Industry particularly in
Distilled Water Category
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32. Concept 2 Example:
Asia Brewery’s Absolute Distilled Water
Competitors Based on Industry Point of
View
Pepsi Cola
Philippines
Coca Cola Philippines
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33. Concept 2 Example:
Asia Brewery’s Absolute Distilled Water
Competitors Based on Market Point of
View
Wilkins Hidden Spring
Nature’s Spring
House Brands of Summit
Nestle Water Retailers
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34. Outline: Dealing with
Competition
Forces that Determine Market
Structure
Identifying Competitors
Three Variables in Analyzing
Competitors
Selecting Competitors
Competitive Strategies for Market
Leaders
Other Competitive Strategies
http://sherryloumarzo.blogspot.com/ 34
35. Concept 3:
Three Variables in Analyzing
Competitors
Benchmarking to your most
successful competitor can
improve competitive
performance
Share of Market
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36. Concept 3:
Three Variables in Analyzing
Competitors
% of Customers who named the
competitor in respond to this
statement: “Name the 1st company
that comes to mind in this industry?”
Share of Mind
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37. Concept 3:
Three Variables in Analyzing
Competitors
% of Customers who named the competitor in respond
to this statement: “Name the company from which you
would prefer to buy the product
Share of Heart
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38. Concept 3:
Three Variables in Analyzing
Competitors
Share of Market Share of Mind
Share of Heart
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39. Concept 3 Example:
Wilkins still dominates the bottled water
segment in mind share and heart share thus
gaining higher market share
Wilkins is always on
top of mind because
Already Build Brand
advertisements are
Equity
everywhere
Preferred Brand because its
good for the family & doctors
actually recommends it
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40. Outline: Dealing with
Competition
Forces that Determine Market
Structure
Identifying Competitors
Three Variables in Analyzing
Competitors
Selecting Competitors
Competitive Strategies for Market
Leaders
Other Competitive Strategies
http://sherryloumarzo.blogspot.com/ 40
41. Concept 4:
Selecting Competitors
Classes
of
Competitors
Strong vs. Weak Good vs. Bad
Close vs. Distant
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42. Concept 4:
Classes of Competitors
• Most companies aims
their shots at weak
competitors because it
has fewer resources per
share point gained.
• But one should still
Strong vs. Weak compete with the strong
to keep up with the best
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43. Concept 4:
Classes of Competitors
• Most companies compete with the competitors
that resemble them the most.
• But one should still identify their distant
competitors.
Close vs. Distant
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44. Concept 4:
Classes of Competitors
Good competitors: Bad Competitors:
• Play by the • Try to buy
industry’s rules shares than
• They set prices earn it.
in reasonable • Take large risks
relationship to • Invest in over-
cost. capacity.
• They favor a • Upset industrial
healthy industry. equilibrium Good vs. Bad
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45. Concept 4 Example:
Asia Brewery’s 100 Plus
Sports Drink
Strong Weak
Pocari Sweat (Smallest
Gatorade (Market Leader)
Share in the Market)
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46. Concept 4 Example:
Asia Brewery’s Cobra Energy
Drink
Close Distant
Sting (Energy Drink) Gatorade (Sports Drink)
http://sherryloumarzo.blogspot.com/ 46
47. Outline: Dealing with
Competition
Forces that Determine Market
Structure
Identifying Competitors
Three Variables in Analyzing
Competitors
Selecting Competitors
Competitive Strategies for Market
Leader
Other Competitive Strategies
http://sherryloumarzo.blogspot.com/ 47
49. Concept 5:
Characteristics of a Market
Leaders
• The firm with the
largest market share.
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50. Concept 5:
Characteristics of a Market
Leaders
Market
Price Changes Distribution Coverage
Leaders
Leads other
Firms in
New Product Intro Promotional Intensity
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51. Concept 5:
Strategies of Market Leaders
Expand Total Market Demand
Defending Market Share
Expanding Market Share
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52. Concept 5:
Expanding the Total Market
Adding New
Customers
More Usage
Increase Total
Market Demand
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53. Concept 5:
Defending Market Share
6 Types of Defense Strategies
• Position Defense- occupying the most desirable
market space in consumers’ minds
• Flank Defense- erect outposts to protect a weak
front or possibly serve as a counterattack
• Preemptive Defense- more aggressive way to
attack before the enemy starts its offense.
• Counteroffensive Defense- meet the attacker
frontally.
• Mobile Defense- stretches its domain over new
new territories.
• Contraction Defense-strategic withdrawal or
giving up weaker territories & reassigning
resources to stronger ones.
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54. Concept 5:
Exanding Market Share
Factors before Pursuing Increased Share:
• The possibility of provoking antitrust action
- jealous competitors would cry monopoly if a
dominant firm makes further inroads.
• Economic Cost
• Pursuing wrong marketing activities
- go with the right activities.
• Effect of increased market share on actual and
perceived quality
- too many customers can put strain on the
firm’s resources hurting product value & service
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55. Concept 5 Example:
Cobra Energy Drink as Market
Leader with 60% share
New Product Intro Promotional Intensity
Distribution Coverage
Cobra Smart
Placement already
Nationwide
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56. Outline: Dealing with
Competition
Forces that Determine Market
Structure
Identifying Competitors
Three Variables in Analyzing
Competitors
Selecting Competitors
Competitive Strategies for Market
Leader
Other Competitive Strategies
http://sherryloumarzo.blogspot.com/ 56
58. Concept 6:
Other Competitive Strategies
• They have gained ground or even
overtaken the leader.
• They have high aspirations
• They leverage their resources
Market
Challengers
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59. Concept 6:
Other Competitive Strategies
• They usually imitate the leader by
Market improving the product.
Followers
• They bring distinction to its target
market
• They usually keep manufacturing
costs low & its product quality and
services high.
• They define growth path but does
not invite competitive retaliation
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60. Concept 6:
Other Competitive Strategies
• They are the leader in the small
markets.
• They avoid competing with larger
firms
Market
Nichers
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61. Concept 6 Example:
Absolute Distilled Water as
Market Challenger
Market Challenger
Market Leader
TO
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62. Concept 6 Example:
Absolute Distilled Water as
Market Challenger
Market Challenger
Market Leader
TO
Share of Absolute is not that
far and there are even
months that Absolute’s share
is larger than the leader
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63. Concept 6 Example:
Pacific Sun Ice Tea as Market
Follower
Market Follower
Market Leader
TO
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64. Concept 6 Example:
Pacific Sun Ice Tea as Market
Follower
Market Follower
Market Leader
TO
Pacific Sun is pattern to C2,
its flavors are the leading
flavors of C2 and it follows C2
in promoting Healthy Drinks
to people
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65. Concept 6 Example:
Nature’s Spring as Market
Niche
Market Niche
Nature Spring is the
Preferred brand of
water in Visayas
Region
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66. Outline: Dealing with
Competition
General Attack Strategies
Specific Attack Strategies
Market Follower Strategies
Market- Nicher Strategies
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68. Concept 7:
General Attack Strategies
• Matches the opponent’s
Frontal Attack
product, advertising, price,
distribution
distribution
Advertisement
Product Price
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69. Concept 7:
General Attack Strategies
• An Enemy’s weak spots are
Flank Attack natural targets
Weak Spot
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70. Concept 7:
General Attack Strategies
• An attempt to capture a
Encirclement Attack wide slice of enemy’s
territory through a blitz.
To capture a slice
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71. Concept 7:
General Attack Strategies
• Bypassing the enemy
Bypass Attack
altogether and attacking
easier markets to broaden
the firm’s resource base.
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72. Concept 7:
General Attack Strategies
• Consists of waging small,
Guerilla Warfare intermittent, attacks to harass
and demoralize the opponent
& eventually secure permanent
footholds.
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73. Concept 7 Example:
Frontal Attack of Manila Beer
to San Miguel
Concerts
Bundlings
Billboards
Walking Advertisements
http://sherryloumarzo.blogspot.com/ 73
74. Outline: Dealing with
Competition
General Attack Strategies
Specific Attack Strategies
Market Follower Strategies
Market- Nicher Strategies
http://sherryloumarzo.blogspot.com/ 74
80. Concept 9:
Market Follower Strategies
• Duplicates the leader’s product
and packages and sells it on
the black market or through
disreputable dealers
Counterfeiter
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81. Concept 9:
Market Follower Strategies
• Emulates the leader’s
products, name, and
packaging with slight variation
Cloner
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82. Concept 9:
Market Follower Strategies
• Copies some things from the
leader but maintains
differentiation in terms of
packaging, advertising, pricing,
or location.
Imitator
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83. Concept 9:
Market Follower Strategies
• Takes the leader’s products
and adapts or improves them
Adapter
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84. Concept 9 Example:
Samurai Energy Drink as an
Imitator to Cobra Energy Drink
• Copied the packaging,
color, and size but is
price a little lower than
Cobra
Samurai Energy Cobra Energy
Drink Drink
http://sherryloumarzo.blogspot.com/ 84
85. Outline: Dealing with
Competition
General Attack Strategies
Specific Attack Strategies
Market Follower Strategies
Market- Nicher Strategies
http://sherryloumarzo.blogspot.com/ 85
88. Concept 10 Example:
Virgin Cola as Geographic
Specialist
• Asia Brewery Decided to
Pull Out Virgin Cola in
Luzon and Visayas and
concentrate its
distribution in Mindanao
Area particularly in CDO.
Virgin Cola
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89. SUMMARY
1. Forces that Determine Market Structure
- Michael Porter’s 5 Forces
2. Identifying Competitors
- Competitors in Industry & Market Point of View
3. Three Variables in Analyzing Competitors
- Share of Market, Share of Mind, Share of Heart
4. Selecting Competitors
- Strong vs. Weak, Close vs. Distant, Good vs. Bad
5. Competitive Strategies for Market Leaders
- Expand Total Demand, Defend Market Share, Expand Market Share
6. Other Competitive Strategies
- Market Challenger, Market Follower, Market Nitcher
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90. SUMMARY
7. General Attack Strategies
- Frontal, Flank, Encirclement, By Pass, & Guerrilla Attack
8. Specific Attack Strategies
- 10 strategies for Attacking specifically
9. Market Follower Strategies
- Counterfeiter, Cloner, Imitator, Adapter
10. Market- Nicher Strategies
- 10 Strategies for Market Nitchers
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91. TOP 10 Learning Concepts
Chapter 11: Dealing with Competition
Sherrylou M. Marzo
Sept. 8, 2011
http://sherryloumarzo.blogspot.com/