Chapter 4 discusses the importance of identifying competitors in various forms, including direct and indirect competition, and emphasizes the concept of marketing myopia, which is a narrow focus on current competitors without recognizing emerging threats. It outlines strategies for analyzing competitors, including understanding their strengths and weaknesses, and selecting targets based on their market position. Additionally, strategies for market leaders, challengers, followers, and nichers are examined, highlighting different approaches for maintaining and increasing market share.

1. Dealing With Competition
Chapter 4

2. Identifying Competitors
Competitors can include:
 All firms making the same product or class of products
 All firms making products that supply the same service
 All firms competing for the same consumer dollars
• The range of a company’s actual and potential competitors can be
much broader than the obvious.
• A company is more likely to be hurt by emerging competitors or
new technologies than by current competitors.
• Competition can be direct or indirect.
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3. Competitors can be examined from both an industry point of view
and a market point of view.
• Industry point of view refers to competitors within the same
industry. Here, marketers classify industries according to--
Number of sellers
Degree of product differentiation
Presence or absence of entry, mobility, and exit barriers
Cost structure
Degree of vertical integration
Degree of globalization
• Market point of view refers to competitors trying to satisfy the same
customer need or build relationships with the same customer group.
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4. Marketing Myopia
The concept of marketing myopia was discussed in an article (titled "Marketing
Myopia," in July-August 1960 issue of the Harvard Business Review) by
Harvard Business School emeritus professor of marketing, Theodore C.
Levitt (1925-2006).
Marketing myopia is a short-sighted and inward-looking approach to
marketing that focuses on the needs of the company instead of defining the
company and its products in terms of the customers’ needs and wants. It
results in the failure to see and adjust to the rapid changes in their markets.
Competitor myopia refers to a firm focusing on what it considers to be its
direct competition and not being aware of indirect or new competitors.
Coca-Cola focused on its soft-drink business, but the market for coffee bars
and fresh-fruit-juice bars also impinged on its soft-drink business.
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5. Analyzing Competitors
After identifying its primary competitors, a company must ascertain competitor’s
strategies, objectives, strengths, and weaknesses.
Strategies:
• In order to understand and out-maneuver competitors, it is required to analyze
their current and future strategies and activities.
• The two main sources of information about a competitor’s strategy is what the
competitor says and what it does.
 What a competitor is saying about its strategy is revealed in its annual
shareholder reports, interview with analysts, statements by managers, press
releases.
 What the competitor is doing is evident in where its cash flow is directed, such
as hiring activity, R&D projects, capital investments, promotional campaigns,
strategic partnerships, mergers and acquisition.
• A strategic group is a group of firms in an industry following the same or similar
strategy in a given target market. 5

6. Objectives:
• Once a company has identified its main competitors and their strategies, it must
ask: what is each competitor seeking in the marketplace? What drives each
competitor’s behavior?
• Competitor’s objectives include:
 Profit maximization
 Sales growth (volume, revenue)
 Market share
 Technological leadership
 Service leadership
• Competitor’s objectives are shaped by many factors- such as size, history, current
management, financial situation.
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7. Strengths and Weakness:
• A company needs to gather information about each competitor’s strengths and
weaknesses. After that it could attack in the weak areas of its competitors.
• In general, a company should monitor three variables when analyzing
competitors:
1. Share of market: The competitor’s share of the market.
2. Share of mind: The percentage of customers who named the competitor in
responding to the statement, “Name the first company that comes to mind in
this industry”
3. Share of heart: The percentage of customers who named the competitor in
responding to the statement, “Name the company from which you would
prefer to buy the product”
• Companies that make steady gains in mind share and heart share will inevitably
make gains in market share and profitability.
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8. Selecting Competitors
After the company has conducted customer value analysis and
examined its competitors carefully, it can focus its attack on one of
the following classes of competitors:
1. Strong versus Weak: Most companies aim their shots at weak
competitors. Even strong competitors have some weaknesses.
2. Close versus Distant: Coca-Cola’s close competitor is Pepsi, distant
competitor is tap-water.
3. Good versus Bad: Good competitors play by the industry’s rules; set
prices in reasonable relationship to costs; favor a healthy industry.
Bad Competitors try to buy share rather than earn it; take large
risks; invest in overcapacity; upset industrial equilibrium. 8

9. As part of the competitive analysis, firms must evaluate its customer base and think
about which customers it’s willing to lose and which it wants to retain. One way to
divide up the customer base in terms of whether a customer is valuable or
vulnerable is creating a grid of four segments. See the following table:
• Customer Selection Grid:
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10. Market Members
Market leaders have the higher market share and usually base-line in
terms of price. Leaders also lead the market in new-product
introductions, distribution coverage, and promotional intensity.
Historic market leaders include: McDonald’s, Microsoft, Intel,
Gillette, LG, and Visa.
Other market members include challengers, followers, and nichers.
Other firms enter and exit the markets, primarily during the maturity
and decline stage of the product life cycle.
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11. Strategies for Market Leader
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Staying the number-one firm calls for action on three fronts:
1. Expand total market demand (new customers, more usage,
replacement rate, new uses)
2. Protect current market share (offensive strategy, defensive
strategy)
3. Increase market share (decrease profitability, anti-trust
strategy)

12. 1. Expanding Total Market Demand
New customers:
• Every product class has the potential to attract buyers who are
unaware of the product or who are resisting it because of price or
lack of certain features.
• A company can search for new users among three groups:
Those who might use it but do not (market-penetration strategy)
Those who have never used it (new-market segment strategy)
Those who live elsewhere (geographical-expansion strategy)
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13. More usage:
Marketers can try to increase the amount, level, or frequency of consumption.
• The amount of consumption can sometimes be increased through
packaging or product redesign. Larger package sizes have been shown to
increase the amount of product that consumers use at one time.
• The usage of impulse consumption products such as soft drinks and snacks
increases when the product is made more available.
• Increasing frequency of consumption requires either (1) identifying
additional opportunities to use the brand in the same basic way or (2)
identifying completely new and different ways to use the brand.
• To generate additional opportunities to use the brand in the same basic
way, a marketing program can communicate the appropriateness and
advantages of using the brand more frequently in new or existing situations
or remind consumers to actually use the brand as close as possible to those
situations. 13

14. Replacement rate:
• Another opportunity arises when consumers’ perceptions of their usage
differs from the reality. Consumers may fail to replace a short-lived product
when they should, because they overestimate how long it stays fresh.
• Gillette razor cartridges feature colored stripes that slowly fade with
repeated use, signaling the user to move on to the next cartridge.
New product uses:
• After discovering that consumers used ‘Arm & Hammer’ baking soda brand
as a refrigerator deodorant, company launched a heavy promotion
campaign focusing on this single use and encouraged consumers to place an
open box of baking soda in the refrigerator.
• Product development can also spur new uses. Chewing gum manufacturers
are producing “nutraceutical” products to strengthen or whiten teeth.
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15. 2. Protect Current Market Share
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While trying to expand total market size, the dominant firm must
continuously and actively defend its current business.
What can the market leader do to defend its terrain? The most
constructive response is continuous innovation. The leader should
lead the industry in developing new products and customer services,
distribution effectiveness, and cost cutting. It keeps increasing its
competitive strength and value to customers by providing
comprehensive solutions.
The aim of defensive strategy is to reduce the probability of attack,
divert attacks to less-threatening areas, and lessen their intensity.

16. Defense Strategies
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17. 1. Position defense is one of the marketing warfare strategies
wherein the brand or company occupies the most desirable
space in the minds of the customer and in no case intends to
divert from that position thus making the brand impregnable.
2. Flank defense is a competitive marketing strategy in which the
market leader attempts to identify and strengthen its own
weak points, commonly geographic areas or market segments
in which it is under-performing, before a smaller rival can
mount an attack against it.
3. Preemptive defense is an aggressive defense strategy in
which, the market leader attacks the challenger before it
attacks.
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18. 4. Counteroffensive defense is a business strategy adopted by a
market leader when attacked by another company. This involves
that the market leader will attack the challenger in its main
territories so that the challenger will have to put back some
resources for the attacked territories and will have to divert its
attention from launching attack on the market leader.
5. Mobile defense is a strategy where market leader stretches its
domain over new territories that can serve as future centers for
defense and offense through market broadening and market
diversification.
6. Contraction defense is a strategy where the market leader
withdraws from one segment of the market where it is not strong
or profitable enough.
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19. 3. Increase Market Share
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Antitrust action
Lower overall quality
Decreased profitability
2014 2015
“Actual” quality
“Perceived” quality

20. If the size of the market remains constant, market leaders often look to
increase share. The payoffs can be rewarding. For example, the
Carbonated Soft Drink (CSD) market has about $70 billion in annual
sales. A 1% point market share increase by Coke or Pepsi is worth
around $700 million.
However, firms must exercise caution. Marketers must consider the
cost needed to gain share.
Market leaders can face issues such as:
– Antitrust actions:
– Higher economic costs:
– Loss of focus:
– Impact on actual and perceived quality: By serving too many
customers, actual quality can decrease. This may result in lower
market share over time as customers switch to competitors.
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21. 21
The figure above outlines that profitability may decline with an increase in market
share. This occurs if the firm expenditure to gaining market share above the
optimal point exceeds the value of bringing in new customers to the company.
Increasing market share may require the firm to pursue customers that are loyal to
competitors by launching price promotion.
Firms can eventually increase profitability by decreasing market share through the
elimination of unprofitable customers.

22. Strategies for Market-Challenger
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23. 1. Defining Objectives and Choosing Opponents
A market challenger must first define its strategic objective. A typical
objective for challengers is to increase market share.
Next, the challenger must decide whom to attack. The decision on
whom to attack is determined by who the competitors are.
It can attack the market leader: Attacking market leaders is
typically a high-risk, high-reward strategy, if successful.
It can attack firms of its own size: The challenger can attack
firms of its own size that are not doing well and are
underfinanced.
It can attack small local and regional firms: Smaller firms can
be the focus of the attack through expansion or acquisition.
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24. 2. Evaluating Alternative Attack Strategies
There are five available attack strategies:
Frontal attack: Attacking the opponent head on in terms of
product, price, advertising, and distribution.
Flank attack: An enemy’s weak spots are natural targets. The
challenger spots areas where the opponent is underperforming.
The challenger also serves uncovered market needs.
Encirclement attack: The encirclement maneuver is an attempt to
capture a wide slice of the enemy’s territory through a blitz. It
means launching a grand offensive attack on several fronts.
Bypass attack: The most indirect assault strategy is bypassing the
enemy altogether and attacking easier, smaller markets that the
leader does not bother about.
Guerilla attack: Guerilla attacks are used to harass and demoralize
the opponent. These include selective price cuts, intense
promotional blitzes, and occasional legal action. 24

25. Guerilla Advertising
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26. 3. Choosing a specific attack strategy
The challenger must go beyond the five broad strategies and develop
more specific strategies.
Any aspects of the marketing program can serve as the basis for
attack, such as--
Lower-priced or discounted products
New or improved products and services
A wider variety of offerings
Innovative distribution strategies
A challenger’s success depends on combining several strategies to
improve its position over time.
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27. Strategies for Market-Follower
Followers can achieve success by taking advantage of the groundwork
that market leaders laid. They can hold an advantage over
competitors through their location or service offerings, and keeping
manufacturing costs low.
Followers can use a variety of strategies including:
Counterfeiter: Duplicate the leader’s products and package and
sell on the black market or through disreputable dealers.
Cloner: Emulate the leader’s products, name, and packaging, but
with slight variations.
Imitator: Copy some things from the leader but differentiates on
packaging, advertising, pricing, or location. Leaders do not protest
too much unless the imitator seeks to attack aggressively.
Adapter: Take the leader’s products and improves them. May
select a different market than the leader’s.
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28. Strategies for Market-Nicher
• Nichers can be successful by focusing on smaller, highly profitable
segments of the market. These segments are typically underserved
by larger competitors who are focused on high volume.
• The risk comes if the niche become so profitable that competitors
(such as challengers) take notice and attack.
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