Principles of Marketing

1. PRINCIPLES OF
MARKETING
THE COMPETITIVE
ADVANTAGE
PRESENTATION BY
SHIRLENE GOMEZ
& NINA MARIE

2. COMPETITIVE
ADVANTAGE
• WHAT IS A COMPETITIVE
ADVANTAGE?

3. COMPETITIVE
ADVANTAGE
• A competitive advantage can be
described as what sets the
organization apart from others and
provides it with a distinctive edge
for meeting customer needs in the
market place
• For example, in the automotive
industry, Toyota is considered to be
a superior performer.

4. HOW IS IT ACHIEVED?
It is achieved either by means of
lower prices or by providing greater
benefits and service to the consumer.

5. COMPETITIVE
ADVANTAGE
To remain competitive companies often
focus on core competencies, develop
synergy, and create value for customers.

6. CORE COMPETENCE
• What is a Core Competence?
• A company’s core competence is
something the organization does
especially well in comparison to it’s
competitors.
• A core competence represents a
competitive advantage because the
company acquires expertise that
competitors do not have.

7. Core competence cont’d
• A core competence may be in the
area of superior research and
development (R&D), expert
technological know-how, process
efficiency, or exceptional
customer service.
• For example, Home Depot thrive
because of a strategy focused on
superior customer service

8. SYNERGY
• What is Synergy?
• When the output of some units can
be used as the input to other units,
or two organizations pool markets
and expertise, these relationships
lower cost, and generate profits.
• The organization may attain a
competitive advantage with respect
to cost, market power, technology,
or management skills.

9. SYNERGY Cont’d
• Examples exist in the merger of
banks and financial firms such
as JPMorgan Chase and Bank
One Corporation in the US

10. PORTER’S VIEW
• A competitive advantage exists
when the firm is able to deliver
the same benefits as
competitors but at a lower cost
(cost advantage), or deliver
benefits that exceed those of
competing products
(differentiation advantage).

11. PORTER’S COMPETITIVE
FORCE’S MODEL
Michael Porter identified five
types of competitive forces:
1. Potential new entrants.
2. Bargaining power of buyers.
3. Bargaining power of suppliers.
4. Threat of substitute products.
5. Rivalry among competitors.

12. POTENTIAL NEW
ENTRANTS.
• New companies are always
entering the market place. In some
industries, there are very low
barriers to entry, whereas in other
industries, entry is very difficult.
For example it is easier to start a
small retail business rather than a
computer chip business, which
would be more costly.

13. Cont’d
Advantages of new market entrants - :
• They are not limited by old plants,
equipment and tradition.
• They would hire younger workers,
more innovation, less expensive.
• More highly motivated than
traditional occupants of an industry.

14. DISADVANTAGES
• They depend on outside
financing for new plants and
equipment. This can be very
expensive.
• They have a less experienced
work force.
• They have little brand
recognition.

15. BARGAINING POWER OF
BUYERS
• Informed customers become
empowered customers. The
internet provides easy access
to information about products,
services, and competitors.
Thereby, greatly increasing the
bargaining power of end
consumers.

16. BARGAINING POWER OF
SUPPLIERS
• The concentration of suppliers
and the availability of substitute
suppliers are significant factors
in determining supplier power.
The sole supplier of a product
will have great negotiating
power.

17. THREAT OF SUBSTITUTE
PRODUCTS
• The power of alternatives and
substitutes for a company’s
product may be affected by
changes in cost or trends such
as increased health
consciousness that will deflect
buyer loyalty. Companies in the
sugar industry suffered from the

18. CONT’D
• Growth of sugar substitutes, and
manufacturer’s of aerosol spray cans
lost business as environmentally
conscious consumers choose other
products. The Internet has created a
greater threat of new substitutes by
enabling new approaches to meeting
consumer needs. For traditional
travel agents, low-cost online
purchases have hurt their business.

19. RIVALRY AMONG
COMPETITORS
• This is influenced by the preceding
four forces as well as cost and
product differentiation. With the
levelling force of the Internet and
Information Technology, many
companies are having trouble finding
ways to distinguish themselves from
their competitors, so the rivalry
between them would be intense.

20. CONT’D
• Famous examples include the
rivalry between PepsiCo and
Coca Cola, between UPS and
FEDEX, and between Home
Depot and Lowe’s

21. PORTER’S COMPETITIVE
STRATEGY
Porter suggested that a
company can adopt one of
three strategies -:
1. Differentiation
2. Cost Leadership
3. Focus

22. Differentiation
• Involves an attempt to distinguish
the firm’s product or services from
others in the industry.
• The organisation may use
advertising, distinctive product
features or exceptional service to
create the perception of uniqueness.
Examples of products that have
benefited from this type of strategy
include Mercedes Benz , Maytag
appliances.

23. COST LEADERSHIP
• This involves using cost reduction.
• Tight controls are used to produce
products more efficient than the
competitors.
• A low cost position means that the
company can undercut the
competitor’s price, still offer
comparable quality and earn a
reasonable profit. Example
Enterprise Rent a Car is a low-priced
alternative to Hertz

24. FOCUS STRATEGY
• A firm concentrates its attention on one or
more particular segments or niches of the
market.
• Advantages –
• A niche is more secure and a firm can
insulate itself from competition.
• The firm does not spread itself too thin.
• Disadvantages –
• Competitors can move into the segment eg
the Japanese moved into the American
luxury car market to compete with
Mercedes and BMW.

25. DIAGRAM OF
COMPETITIVE
ADVANTAGE BY PORTER
RIVALRY
AMONG
COMPETITORS
POTENTIAL
NEW
ENTRANTS
THREAT
OF
SUBSTITUTE
PRODUCTS
BARGAINING
POWER
OF BUYERS
BARGAINING
POWER
OF SUPPLIERS

26. CONCLUSION
• For competitive Advantage to be relevant,
it has to be sustained. This can come from
better products, customer perceptions,
assets, competencies to name a few.
Competitive advantage only really exists in
the mind of the consumer and can be
easily lost as a result of market changes or
new ways of doing business.
• Competitive advantage will be lost
gradually, if the organisation chosen
strategy loses its relevance, customers
needs are no longer met and market share
declines.

27. SOURCE OF INFORMATION
• CHARTERED INSTITUTE OF
MARKETING(CIM)
• MANAGEMENT-THE NEW
WORKPLACE-DAFT/ MARCIC
• MANAGEMENT INFORMATION
SYSTEMS- LAUDON & LAUDON

28. THE END