This document summarizes a PowerPoint presentation about dealing with competition. It discusses identifying competitors and their strategies, designing competitive intelligence systems, deciding on a competitive positioning strategy as either a market leader, challenger, follower or nicher, and balancing a customer versus competitor orientation. The presentation covers Porter's five forces model of competition, different industry structures, methods for competitor analysis, strategies for defending or expanding market share, and general and specific competitive strategies.

1. Chapter 8
Dealing with the
Competition
PowerPoint by Karen E. James
Louisiana State University - Shreveport
©2003 Prentice Hall, Inc.
To accompany A Framework for
Slide 1 in

2. Objectives
 Understand how a company
identifies its primary competitors
and ascertains their strategies.
 Review how companies design
competitive intelligence systems.
©2003 Prentice Hall, Inc.
To accompany A Framework for
Slide 2 in

3. Objectives
 Learn how a company decides
whether to position itself as a
market leader, a challenger, a
follower, or a nicher.
 Identify how a company can
balance a customer vs. competitor
orientation.
©2003 Prentice Hall, Inc.
To accompany A Framework for
Slide 3 in

4. Competitive Markets
 Porter’s Five Forces that Determine
Market Attractiveness:
– Threat of intense segment rivalry
– Threat of new entrants
– Threat of substitute products
– Threat of buyers’ growing bargaining
power
– Threat of suppliers’ growing bargaining
power
©2003 Prentice Hall, Inc.
To accompany A Framework for
Slide 4 in

5. Competitive Markets
 Failing to identify competitors
can lead to extinction
 Internet businesses have led to
disintermediation of middlemen
 Competition can be identified
using the industry or market
approach
©2003 Prentice Hall, Inc.
To accompany A Framework for
Slide 5 in

6. Competitive Markets
Industries Can Be Classified By:
 Number of sellers  Entry, mobility and
exit barriers
and degree of
differentiation
 Degree of vertical
 Cost structure
integration
 Degree of globalization
©2003 Prentice Hall, Inc.
To accompany A Framework for
Slide 6 in

7. Competitive Markets
Industry Structures
 Pure Monopoly
 Pure Oligopoly
 Differentiated
Oligopoly
 Monopolistic
Competition
 Pure Competition
©2003 Prentice Hall, Inc.
 Only one firm offers
an undifferentiated
product or service
in an area
– Unregulated
– Regulated
 Example: Most
utility companies
To accompany A Framework for
Slide 7 in

8. Competitive Markets
Industry Structures
 Pure Monopoly
 Pure Oligopoly
 Differentiated
Oligopoly
 Monopolistic
Competition
 Pure Competition
©2003 Prentice Hall, Inc.
 A few firms produce
essentially identical
commodities and
little differentiation
exists
 Lower costs are the
key to higher profits
 Example: oil
To accompany A Framework for
Slide 8 in

9. Competitive Markets
Industry Structures
 Pure Monopoly
 Pure Oligopoly
 Differentiated
Oligopoly
 Monopolistic
Competition
 Pure Competition
©2003 Prentice Hall, Inc.
 A few firms produce
partially
differentiated items
 Differentiation is by
key attributes
 Premium price may
be charged
 Example: Luxury
autos
To accompany A Framework for
Slide 9 in

10. Competitive Markets
Industry Structures
 Pure Monopoly
 Pure Oligopoly
 Differentiated
Oligopoly
 Monopolistic
Competition
 Pure Competition
©2003 Prentice Hall, Inc.
 Many firms
differentiate items
in whole or part
 Appropriate market
segmentation is key
to success
 Example: beer,
restaurants
To accompany A Framework for
Slide 10 in

11. Competitive Markets
Industry Structures
 Pure Monopoly
 Pure Oligopoly
 Differentiated
Oligopoly
 Monopolistic
Competition
 Pure Competition
©2003 Prentice Hall, Inc.
 Many competitors
offer the same
product
 Price is the same
due to lack of
differentiation
 Example: farmers
selling milk, crops
To accompany A Framework for
Slide 11 in

12. Competitive Markets
 A broader group of competitors
will be identified using the
market approach
 Competitor maps plot buying
steps in purchasing and using
the product, as well as direct and
indirect competitors
©2003 Prentice Hall, Inc.
To accompany A Framework for
Slide 12 in

13. Competitor Analysis
 Key characteristics of the
competition must be identified:
– Strategies
– Objectives
– Strengths and Weaknesses
Effect
a firm’s competitive position in
the target market
– Reaction Patterns
©2003 Prentice Hall, Inc.
To accompany A Framework for
Slide 13 in

14. Competitor Analysis
Competitive Positions in
the Target Market
 Dominant
 Tenable
 Strong
 Weak
 Favorable
 Nonviable
©2003 Prentice Hall, Inc.
To accompany A Framework for
Slide 14 in

15. Competitive Intelligence Systems
 Designing the system involves:
– Setting up the system
– Collecting the data
– Evaluating and analyzing the data
– Disseminating information and
responding to queries
©2003 Prentice Hall, Inc.
To accompany A Framework for
Slide 15 in

16. Competitive Intelligence Systems
 Value analysis helps firms to select
competitors to attack and to avoid
– Customers identify and rate attributes
important in the purchase decision for
the company and competition
 Attacking strong, close, and bad
competitors will be most beneficial
©2003 Prentice Hall, Inc.
To accompany A Framework for
Slide 16 in

17. Designing Competitive Strategies
Major Strategies
 Market-Leader
 MarketChallenger
 Market-Follower
 Expanding the
total market
 Defending
market share
 Expanding
market share
 Market-Nicher
©2003 Prentice Hall, Inc.
To accompany A Framework for
Slide 17 in

18. Designing Competitive Strategies
 Expanding the Total Market:
– Targeting Product to New Users
Market-penetration
strategy
New-market strategy
Geographical-expansion strategy
– Promoting New Uses of Product
– Encouraging Greater Product Use
©2003 Prentice Hall, Inc.
To accompany A Framework for
Slide 18 in

19. Designing Competitive Strategies
Defending Market Share
 Position
defense
 Flank defense
 Counteroffensive
defense
 Preemptive
defense
 Contraction
defense
©2003 Prentice Hall, Inc.
 Mobile defense
To accompany A Framework for
Slide 19 in

20. Designing Competitive Strategies
 Before Attempting to Expand
Market Share, Consider:
– Probability of invoking antitrust
action
– Economic costs involved
– Likelihood that marketing mix
decisions will increase profits
©2003 Prentice Hall, Inc.
To accompany A Framework for
Slide 20 in

21. Designing Competitive Strategies
Major Strategies
 Market-Leader
 MarketChallenger
 Market-Follower
 Market-Nicher
©2003 Prentice Hall, Inc.
 First define the
strategic goals
and opponent(s)
 Choose general
attack strategy
 Choose specific
attack strategy
To accompany A Framework for
Slide 21 in

22. Designing Competitive Strategies
 General Attack Strategies:
– Frontal attacks match competition
– Flank attacks serve unmet market
needs or underserved areas
– Encirclement “blitzes” opponent
– Bypassing opponent and attacking
easier markets is also an option
©2003 Prentice Hall, Inc.
To accompany A Framework for
Slide 22 in

23. Competitive Markets
Specific Attack Strategies Include:
 Price-discount
 Lower-price goods
 Prestige goods
 Improved services
 Product
innovation
 Distribution
innovation
 Manufacturing
cost reduction
 Product proliferation
 Intensive advertising promotion
©2003 Prentice Hall, Inc.
To accompany A Framework for
Slide 23 in

24. Designing Competitive Strategies
Major Strategies
 Market-Leader
 MarketChallenger
 Market-Follower
 Market-Nicher
©2003 Prentice Hall, Inc.
 Imitation may be
more profitable
than innovation
 Four broad
strategies:
–
–
–
–
Counterfeiter
Cloner
Imitator
Adapter
To accompany A Framework for
Slide 24 in

25. Designing Competitive Strategies
Major Strategies
 Market-Leader
 MarketChallenger
 Market-Follower
 Market-Nicher
©2003 Prentice Hall, Inc.
 Niche specialties:
–
–
–
–
–
–
–
–
–
–
–
End-user
Vertical-level
Customer-size
Specific customer
Geographic
Product/product line
Product feature
Job-shop
Quality-price
Service
Channel
To accompany A Framework for
Slide 25 in

26. Balancing Customer and
Competitor Orientations
 Competitor-centered companies
evaluate what competitors are
doing, then formulate competitive
reactions
 Customer-centered companies
focus on customer developments
when formulating strategy
©2003 Prentice Hall, Inc.
To accompany A Framework for
Slide 26 in