Competitors Analysis
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This document provides an overview of competitor analysis and competitive strategies. It discusses identifying competitors through industry concepts of competition and market share. Key aspects of analyzing competitors are their strategies, objectives, strengths, weaknesses and reaction patterns. The document also outlines designing a competitive intelligence system through collecting, evaluating and disseminating competitor data. Competitive positions like market leaders can pursue strategies of expanding the total market or defending market share. Other strategies discussed include those of market challengers, followers and market niches. The document concludes with balancing customer and competitor orientations.
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Competitors Analysis
- 1. COMPETITOR S ANALYSIS REPORTED BY: GAYLE MAGAS JOY AMOR MANO
- 2. DEALING WITH THE COMPETITION Competitive forces Identifying competitors Analyzing competitors Designing the competitive intelligence system Designing competitive strategies Balancing customer and competitor orientation
- 4. Five Forces Determining Segment Structural Attractiveness 1. Threat of intense segment rivalry – A segment is unattractive if it already contains numerous, strong, or aggressive competitors. 2. Threat of new entrants – A segment’s attractiveness varies with the height of its entry and exit barriers. 3. Threat of substitute products – A segment is unattractive when there are actual or potential substitutes for the product. 4. Threat of buyer’s growing bargaining power – A segment is unattractive if the buyers possess strong or growing bargaining powers. 5. Threat of supplier’s growing bargaining power – A segment is unattractive if the company’s suppliers are able to raise prices or reduced quantity supplied.
- 6. Industry Concept of Competition Number of sellers and degree of differentiation 1.Pure monopoly : Only one firm provides a certain product or service in a certain country or area. 2.Oligopoly : A small number of large firms produce products that range from highly differentiated to standardized. 3.Monopolistic competition: Competitors focus on market segments where they can meet customer needs in a superior way and command a price premium. 4.Pure competition : Many competitors offer the same product and service. Because there is no basis for differentiation, competitors’ prices will be the same.
- 7. Entry, Mobility and Exit Barriers 1. Entry Barriers : Include high capital requirements, economies of scale, patents and licensing requirements; scare locations, raw materials, or distributors; and reputation requirements. 2.Mobility Barriers : when it tries to enter more attractive market segments. 3.Exit Barriers : such as legal or moral obligations to customers, creditors, and employees; government restrictions; low asset salvage value due to overspecialization or obsolescence; lack of alternative opportunities; high vertical integration; and emotional barriers.
- 8. Cost Structure – Each industry has a certain cost burden that shapes much of each strategic conduct. Degree of vertical integration – Vertical integration often lowers costs, and the company gains a larger share of the value- added stream Degree of globalization – Companies in global industries need to compete on a global basis if they are to achieve economies of scale and keep up with the latest advances in technology.
- 9. Market Concept of competition Competitors – are companies that satisfy the same customer need. The market concept of competition reveals a broader set of actual and potential competitors
- 11. Analyzing Competitors Share of market—target marketShare of market—target market Share of mind--% of customers who names companies Share of mind--% of customers who names companies Share of heart--% of customers who prefer a company Share of heart--% of customers who prefer a company
- 12. Strategies : A company must continuously monitor competitors strategies. Objectives Strengths and weaknesses Dominant Strong Favorable Tenable Weak Nonviable
- 13. Reaction patterns Companies react differently to competitive assaults. Some are slow to respond. Others respond only to certain types of attacks, such as price cuts. Still others strike back swiftly and strongly to any assault. Some industries are marked by relative accord among the competitors, and others by constant fighting.
- 14. Designing the competitive intelligence system
- 15. Four Main Steps Setting up the system : The first step calls for identifying vital types of competitive information, identifying the best sources of this information, and assigning a person who will manage the system and its services. Collecting the data : The data are collected on a continuous basis from the field, from people who do business with competitors, from observing competitors, and from published data. Evaluating and Analyzing the data : The data are checked for validity and reliability, interpreted and organized. Disseminating Information and responding : Key information is sent to relevant decision makers, and managers inquiries are answered. With a well designed system, company managers receive timely information about competitors via email, phone calls, bulletins, newsletters and reports.
- 16. Selecting Competitors With good competitive intelligence, managers will find it easier to formulate competitive strategies. Customer Value Analysis – Managers conduct CVA to reveal the company’s strengths and weaknesses relative to various competitors.
- 17. Classes of Competitors Strong versus weak – Most companies aim their shots at weak competitors, because this requires 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 the competitors who resemble them the most. Yet companies should also recognize distant competitors. At the same time, the company should avoid trying to destroy the closest competitor. “Good” versus “Bad”
- 19. Market-Leader ois the firm with the largest market share and leads the market price changes, product innovations, distribution coverage, and promotion spending STRATEGIC OBJECTIVES Expanding the total market Defending Market Share
- 20. oExpanding the total market New Customers More usage oDefending Market Share oExpanding Market Share Six Types of Defense Strategies 1) Position Defense fortify firm’s existing position 2) Flank-positioning extend firm’s offerings into new segments to protect existing 3) Preemptive Defense Attacking first (first strike) 4) Counter-offensive Defense gathering resources and counter-attacking when threatened 5) Mobile Defense Market broadening 6) Strategic Withdrawal Six Types of Defense Strategies 1) Position Defense fortify firm’s existing position 2) Flank-positioning extend firm’s offerings into new segments to protect existing 3) Preemptive Defense Attacking first (first strike) 4) Counter-offensive Defense gathering resources and counter-attacking when threatened 5) Mobile Defense Market broadening 6) Strategic Withdrawal
- 21. Other Competitive Strategies • Market challengers oare firms fighting to increase market share – Attack the market leader – Attack firms of its own size that are not doing the job and are underfinanced – Attack small local and regional firms
- 22. . . General Attack Strategies Frontal Attack Encirclement Attack Bypass Attack Flank Attack Guerrilla Attack
- 23. General Attack Strategies • Frontal attack —Matching
- 24. General Attack Strategies • Flank attack—weak spots are natural targets • Geographic & Segmental • Encirclement attack—Blitz the territory
- 25. General Attack Strategies • Bypass attack -indirect assault -Unrelated product -new geographical markets -leapfrogging into new technologies (e.g., Google search overtook Yahoo • Guerilla warfare--Small, intermittent attacks (e.g., Princeton Review successfully challenged Kaplan Educational Centers for test preparation)
- 27. 8-27 Specific Attack Strategies • Price discounts • Lower-priced goods —lower quality • Value-priced goods and services —low price and high quality (Southwestern Airlines) • Prestige goods — high quality and high price (Mercedes) • Product proliferation —large product variety • Product innovation — improvement or breakthrough (3M) • Improved services— new or better services--Avis • Distribution innovation —developing a new channel (Avon) • Manufacturing -cost reduction, Lower production costs • Intensive advertising promotion —increased spending
- 28. Other Competitive Strategies • Market followers oare firms that want to hold onto theirmarket share –Follow the market leader
- 29. 8-29 Market Follower Strategies Counterfeiter (Duplication) Cloner (Emulates) Imitator (Copy/Differentiation) Adapter (Modifies or improves)
- 30. Other Competitive Strategies • Market niches oare firms that serve small market segments not being pursued by otherfirms
- 31. Market Nicher Strategies THREE TASK: creating niches expanding niches protecting niches
- 33. THANK YOU
Editor's Notes
- MARKET LEADER Market leader is the firm with the largest market share and leads the market price changes, product innovations, distribution coverage, and promotion spending To stay number one, the firm must first find ways to expand total market demand. Second, it must protect its current share through good defensive and offensive actions. Third, it should increase market share, even if market size remains constant. Let’s look at each strategy
- Expanding the total market-When the total market expands, the dominant firm usually gains the most. In general the market leader should look for new customer and more usage of its products. New Customer– Every product class has the potential to attract buyers who are unaware ofthe product or are resisting it because of price or lack of certain features. Three groups can be search by company: those who might use it but do not (market penetration strategy), those who have never used it (new-market segment strategy), or those who liveelsewhere (geographical-expansion strategy). More usage – A third market-expansion strategy is to convince people to use more products per use occasion. Defending Market Share – While trying to expand total market size, the dominant firm must continuously defend its current business. Protect current market by: Fixing or preventing weaknesses that provide opportunities to competitors Maintaining consistent prices that provide value Keeping strong customer relationships Continuous innovation Defense Strategies – The aim is to reduce the probability of attack, divert attack to less threatening areas, and lessen their intensity. Position Defense —most desirable market space in the minds of the consumers, making the brand almost impregnable. Tide laundry detergent with cleaning; crest toothpaste with cavity prevention; and Pampers diapers with dryness. Flank Defense —must protect against weak front or possibly serve as a weak invasion base for counterattacked. Preemptive Defense —attack before the enemy starts its offense Counteroffensive Defense —meet the attacker frontally or hit its flank (i.e., invade the attacker’s main territory so that it will pull back to defend it) (e.g., FedEx watched UPS successfully invade its airborne delivery system, FedEx invested heavily in ground delivery service to challenge UPS on its home turf) Mobile Defense -stretches its domain over new territories that can serve future centers for defense and offense; Market broadening (e.g., BP recast itself from oil to energy); Diversification (e.g., Reynolds and Philip Morris moved into new industries—beer, liquor, soft drinks and frozen foods). Contraction Defense —giving up weaker territories and reassigning resources to stronger territories (e.g., Sara Lee spun off products that accounted for 40% of its profits, such as Hanes hosiery brand, to concentrate on food brand) Expand market share by: Increasing market share in served markets, thus increasing profitability Producing high-quality products Creating good service experiences Building close customer relationships
- So what is Market Challenger? Market Challenger- strategic objective is to gain market share and to become the leader eventually How? The market challenger has three options whom to attack: Attack the market leader. Challenge the leader with an aggressive bid for more market share. This is a high risk but potentially high-payoff strategy and makes good sense if the leader is not serving the market well. And a sustainable competitive advantage over the leader is key to success. Attack firms of its own size that are not doing the job and are underfinanced. These firms have aging products, that are charging excessive prices, or are not satisfying customers in other ways. Attack small local and regional firms. If the attacking company goes after a small local company, its objective might be to drive that company out of existence.
- Market Challenger Strategy Given clear opponents and objectives we need to know to what kind of strategies the competitive positions are using. Let’s start with Market Challenger Strategy: These can either: Choose a general attack strategy Choose a specific attack strategy There are 5 types of Attack Strategies for Market Challenger. Frontal attack Flank attack Encirclement attack Bypass attack Guerrilla attack
- For Frontal Attack – a Pure frontal attack involves a head on attack on the competitor which the attacker matches its opponent’s product, advertising, price and distribution. The one which has better and more resources wins the market. Frontal attack is a highly risky marketing strategy, it has only a better chances of success if the player attacks the weakest element of the opponent, and also if the opponent is constrained in its ability to react. Seldom work unless -The challenger has have more than three times the fire power of the opponent. A good example of this is the wars between Pepsi and Coke starting from the early 1900s.
- For Flank Attack –here the enemy’s weak spots are natural targets. It is also ideal for challenger who does not have sufficient resources. A flank attack can be directed along two strategic dimensions – geographic and segmental. For geographic attack, the challenger spots areas where the opponents areunderperforming. For example some of the former mainframe rivals, such as Honeywell, chose to set up strong sales branches in medium and smaller sized cities that were relatively neglected by IBM. For segmental attack strategy its purpose to serve uncovered market needs as Japanese automakers did when they developed more fuel-efficient cars. The purpose of marketing here is to discover needs and satisfy them. Encirclement attack here it attempts to capture a wide slice of enemy’s territory through blitz. Here Challenger attacks the big company by offensive attack in all fronts, by superior product & high quality service. Challenger almost attacks in offensive way to the established company. And it is ideally for challenger having superior resources (e.g., Google attacked on Yahoo in all front like search Engine, mail, News, Chat etc.)
- Bypass attack the most indirect assault strategy is the bypass. It means bypassing the enemy and attacking easier markets to broaden ones resource base. Attackers attack where opponents are not looking and by finding a new market segment. These strategies offer three lines of approach -by diversifying into unrelated products, -diversifying into new geographical markets(markets neglected by the leader) -and technological leapfrogging is the strategy practiced in high tech industries. ( Could overtake the leader by using new technologies) An example of bypass strategy is when Pepsi bough the quaker Oats Company, owner of Gatarade Thirst Quaenchers, which has a much larger share of sports drink market than Coca-Cola’s Powerade. 5. Guerilla warfare-consists of launching small, intermittent hit-and-run attacks to harass and demoralize the opponent (usually the leader) and eventually secure permanent footholds. A guerrilla campaign can be expensive, although admittedly less expensive than a frontal, encirclement, or flank attack, but it typically must be backed by a stronger attack to beat the opponent (e.g., Princeton Review successfully challenged Kaplan Educational Centers for test preparation)
- So let’s move on to another market challenger strategy which is the specific attack strategy. Price discounts -The challenger can offer a comparable product at a lower price. This is usually the strategy of discounts retailers. Three conditions must be fulfilled. First, the challenger must convince the buyers that its product and service are comparable to the leaders. Second, buyers must be price sensitive. Third, the market leader must refuse to cut its price in spite of the competitors attack. Lower-priced goods -The challenger can offer an average or lower quality product at a market lower price. Value-priced goods and services -Combining lower prices and high quality to snag market share from leader. Example of this is the Cebu Pac & Tiger airlines Prestige goods -A market challenger can launch a higher quality product and change higher price than the leader. Example Mercedes Product proliferation -The challenger can attack the leader by launching a larger product variety thus giving buyers more choice. Product innovation -The challenger can pursue product innovation by introducing product improvement and breakthrough Improved services -The challenger can offer new or better services to customers Distribution innovation -A challenger might develop a new channel of distribution Example- Avon Manufacturing cost reduction -The challenger might achieve lower manufacturing costs than its competitor through more efficient purchasing, lower labor costs and more modern production equipment. Intensive advertising promotion -Some challenger attacks the leader by increasing expenditures on advertising and promotion. Substantial promotional spending however is usually not a sensible strategy unless the challenger’s product or advertising message is superior
- Market Follower- these are firms that want to hold onto their market share. They follow the market leader which focusing on improving profit instead of market share. Each follower tries to bring distinctive advantages by: Learning from the market leader’s experience Copy or improve on the leader’s offerings Strong profitability
- Market Follower Strategy Now let’s move on to 3rd competitive strategy which is the Market Follower Strategy. Each follower tries to bring distinctive advantages to its target market by its location, services, financing–while defensively keeping its manufacturing costs low and its product quality and services high. So there are four broad follower strategies, we can distinguish it Counterfeiter it duplicates the leader’s product and packages and sells it on the black market or through disreputable dealers (which is illegal). The best example of counterfeiting is selling the originals via piracy. Example of this is the pirated DVDs and CDs of movies and music that have been plagued by the counterfeiter problem, especially in Asia. Cloner- The cloner emulates the leader’s products, name, and packaging, with slight variations. Cloning means making the same product as yours, but with very subtle difference. For example, if you get watches made from Rado, or bags of Gucci, with Rado spelled as RADA and Gucci spelled as GUCCA, so that’s cloning. Imitator The imitator copies some things from the leader but differentiates on packaging, advertising, pricing, or location. Imitators make use of your hard earned brand equity and give a product which has the same characteristics as yours, albeit at a lower price. The difference might be that the new product is made from poor material or that it does not have the service or promise that your brand can offer. The leader doesn’t mind as long as the imitator doesn’t attack aggressively . Example: many car companies are now imitating the hatchback car models of one another as it is the most successful in Indian market. Adapter- The adapter takes the leader’s products and adapts or improves them. The adapter may choose to sell to different markets, but often it grows into a future challenger, Example of this is that many Japanese firms are excellent adapters initially before developing into challengers and eventually leaders These are the four main market follower strategies existing in the market. In these four categories, it is the adapter and possibly the imitator who has a chance to take over the market leader. However, the cloner and counterfeiter can never overtake the market leader because they are not present in the market with their own manufactured products or with their own brand equity.
- Market Nicher- these are firms that serve small market segments not being pursued by other firms. Serving market niches means targeting subsegments. It is a good strategy for small firms with limited resources and offers high margins. The Key to market niching is specialization: By market, customer, product, or marketing mix lines
- Market Nicher Strategy An alternative to being a follower in a large market is to be a leader in a small market, or niche, which is our last competitive strategy. Smaller firms normally avoid competing with larger firms by targeting small markets of little or no interest to the larger firms. But even large, profitable firms may choose to use niching strategies for some of their business units or companies. Nichers have three tasks create niches, expand the niches and protect them. What is the major risk faced by nichers? This is when Market niche may be attacked by larger firms once they notice the niches are successful