This document discusses competition and competitive strategy. It defines direct, indirect, and replacement competitors. It also outlines Porter's five forces model of competition, which examines the threat of new entrants, threat of substitutes, bargaining power of buyers and suppliers, and rivalry inside the industry. Environmental scanning and management are introduced as ways to identify trends and influence competitive environments. The document provides examples of how each force impacts competition within an industry.

1. Lesson 5: Competition

2. Targets
At the end of the lesson, the students will be able to:
• Identify the products’ potential direct and indirect competitors.
• Develop your competitive advantage.
• Apply the result of the conducted market research.

3. Socratic method!
Devise a technique on how you will be able to generate a sale.
1. What is the unique characteristic of your product?

4. 2. How are you going to sale your product?

5. 3. What is the type of market you would like to serve?

6. 4. How much can your market afford to spend?

7. Competition
• Is the rivalry between companies selling similar products and
services with the goal of achieving revenue, profit and market-
share growth.
• Motivates companies to increase sales volume by utilizing the four
components of the marketing mix, also referred to as the 7p’s

8. • The Philippines is a free market, any business is vulnerable to
competition.
• This economic challenge cannot be avoided.

9. • An entrepreneur can conduct an environmental study in order to
determine the possible strategies to prepare and minimize the
impact of the threat of competition.

10. Environmental scanning
• Is the process of collecting information about the external
marketing environment to identify and interpret potential trends.

11. Environmental management
• Involves marketers’ efforts towards achieving organizational
objectives by predicting and influencing the competitive,
political-legal, economic, technological, and social-cultural
environments.

12. Three types of competition
1. Direct competitors
2. Indirect competitors
3. Replacement competitors

13. Direct competitors
• Is someone that offers the same products
• Create profit all in the same way

14. Indirect competitors
• Offer the same products but have different goals
• They do not get revenue the same way

15. Replacement competitors
• Offer substitute products
• Usually, the substitute products are of a different price or quality
than the dominant product in the market

16. Porter’s five forces of industry competition
model
This model assumes that there are five important forces that
determine competitive power in a business situation.

18. Threat of new entry/entrants
• The market is full of competition.
• Not only the existing firms, but the arrival of new entrants is also
a challenge.
• The market is always open for entry and exits, resulting in
comparable profits to all the firms.
• New competitors weaken your market.
• In the case where there are very minimal requirements in opening
a business, anyone who have what it takes can always join the
competition.

19. Threat of substitutes
• Can be defined as the products of other industries that have the
ability to satisfy similar needs.
• When price of a substitute product changes, the demand of a
related product also get affected.
• When the number of substitute product increases, the competition
also increases as the costumers have more alternatives to select
from.

20. Bargaining power of buyers/costumers
• Costumers drive down prices, handful buyers dictate the prices.
• When there many producers and there is a single costumer in the
market, then that situation is called as ‘monopsony’.
• In these market the position of the buyer is very strong and he
sets the price.
• The bargaining power of the buyers compels the firms to reduce
the prices and many also demand a product or service of higher
quality at low price.

21. Bargaining power of suppliers
• Drive up the prices of inputs.
• The fewer the number of suppliers present, the more suppliers
can dictate prices.
• When suppliers have the power in their hands, they can exert
influence on the producing firms by selling them raw materials at
higher prices.
• Costumers are left with no choice but to buy than to sacrifice
their production.
• They charge their finished goods higher to the costumers.

22. Rivalry inside the industry
For most industries the intensity of competitive rivalry is the major
determinant of the competitiveness of the industry.
Potential factors:
• Sustainable competitive advantage through innovation
• Competition between online and offline companies
• Level of advertising expense
• Powerful competitive strategy
• Firm concentration ratio
• Degree of transparency