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Analysis of competition_1


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Analysis of competition_1

  1. 1. Competitor analysisAt the end of this module the learning outcomes are: - Importance of understanding competition - Approaches to competitor analysis - Identifying competitors likely response 1
  2. 2. Competitor analysisSuggested Readings• Strategic Marketing Management by Wilson & Gilligan (chapter 4)• Strategic Marketing by: David Cravens (chapter 7) 2
  3. 3. Competitor analysisWho are the competitors of• Brooke Bond Red Label Tea• Samsung fax machine• Titan Watch• Rajdhani express 3
  4. 4. Competitor analysisThink again• Have the sales of Samsung fax machines gone down because of e-mail?• Who is your competitor? 4
  5. 5. Competitor analysisAre they• Water• E-mail• Arrow shirt• Spice Jet 5
  6. 6. Competitor analysisHarley Davidson perception of competition• Last American motorcycle• Symbol of freedom and adventure• Technically antiquated• Not seen as form of transport• Social statements• Compete against various recreations 6
  7. 7. Competitor analysisASIAN PAINTS• Indian paint industry• Highly concentrated• Top four players• 95% of the market share• Asian Paints• Market leader 7
  8. 8. Competitor analysisASIAN PAINTS• Next player has less than half market share• How it has maintained• Strong value proposition• Higher customer perceived benefits• Lower costs 8
  9. 9. Competitor analysisASIAN PAINTSHigher customer perceived benefits• Initial foray in semi-urban and rural market• Required extensive distribution network• Bypasses wholesaler arrangement• Appointed retailers in semi-urban areas all over India 9
  10. 10. Competitor analysisASIAN PAINTSHigher customer perceived benefits• Rural areas• Smaller size paint products• Risk of inventory build up• Invested in IT to ensure strict inventory control• Networking of offices and depots 10
  11. 11. Competitor analysisHigher customer perceived benefits• Urban areas• Paints for every price points• Competitively priced thus encouraging economies of scale• Launch of premium paints• Launch of color world tinting system• Customers mix shade before buying 11
  12. 12. Competitor analysisHigher customer perceived benefits• Entry into painting solutions• Dominated by unorganized sector• Offer solutions• Higher margins in services 12
  13. 13. Competitor analysisLower costs• Color world tinting• Means lower stocks• Reducing inventory and working capital• Tight control on receivables• Inventory in number of days and receivables lower than industry average 13
  14. 14. Competitor analysisThese initiatives have helped Asian Paints to maintain its competitive advantage and distinct edge over competitors 14
  15. 15. Competitor analysisImportance- Provides an understanding of your competitive advantage / disadvantage relative to your competitor’s position.- Insights into competitors strategies- Developing future strategies to sustain/establish advantages over your competitors. 15
  16. 16. Competitor analysisSeeking competitive advantageTwo types of analysis• Industry analysis• Comparative analysis 16
  17. 17. Competitor analysisIndustry analysis• Every industry• Peculiar characteristics• Porter’s five-force model 17
  18. 18. Competitor analysisPorters approach to competitive structureanalysis Nature and intensity of competition within any industry is determined by the interaction of five key forces: 1. The threat of new entrants 2. Power of buyers 3. Threat of substitutes 4. Extent of competitive rivalry 18 5. Power of suppliers
  19. 19. Competitor analysis1. Threat of new entrants - Depends on barriers to entry - How heavy is the capital investment Intels huge investment into research - Strong brand image to overcome Coke investments required to build brands - Cost incurred to create distribution channels Hindustan Lever’s huge investments in distribution in rural areas 19
  20. 20. Competitor analysis2. Power of buyers - Is likely to be higher if: 1. There are large number of suppliers 2. Alternative sources of supply 3. Threat of backward integrationExampleReliance Industries 1. Started as textiles company 2. Makes raw materials to produce textiles 3. Vertically integrated 4. Bargains on price for huge quantities it picks20up.
  21. 21. Competitor analysis3. Threat of substitutes - Will be more prevalent if: - Customers perceive other offers to perform the same function as ours - Substitute products offer higher value for money - Substitute products earn higher profits 21
  22. 22. Competitor analysis– Onion versus ready to make paste » Dabur Hommade pastes– Tomato versus tomato puree– Scooters versus Motorcycles » Hero Honda sales at the expense of Bajaj– Vanaspati versus edible oils 22
  23. 23. Competitor analysis4. Extent of competitive rivalryIntensity of rivalry will be greater if: - Competitors are of equal size and are seeking dominance - High fixed costs provoke price wars to maintain capacity. E.g: Airlines industry 23
  24. 24. Competitor analysis– New addition of capacity have created excess capacity Hotel industry Automobile industry– Product homogeneity necessitates activity to maintain share. » Coke versus Pepsi 24
  25. 25. Competitor analysis5.Power of suppliersIs likely to be higher if: - There are few suppliers - Cost of switching from one supplier to another is high E.g: IntelSuppliers are likely to integrate forward Kirloskar compressors into airconditioners. Reliance entry into petroleum products retailing 25
  26. 26. Competitor analysisComparative analysis• Specific advantage of competitors within a given marketTwo types• Structural advantage• Responsive advantage 26
  27. 27. Competitor analysisStructural advantage• Built into business• A manufacturing plant at Chennai for Hyundai to carry out exports 27
  28. 28. Competitor analysisResponsive advantage• Position of comparative advantage that have accrued to business over time• Leveraging strategic phenomena at work in the business• Either cost or unique value• Indigo over Air India 28
  29. 29. Competitor analysisIntensity and Degree of competitionFactors• Opportunity potential• Ease of entry• Nature of product• Exit barriers• Homogeneity of market 29
  30. 30. Competitor analysisIntensity and Degree of competitionFactors• Industry structure or competitive position of firms• Commitment to the industry• Feasibility of technological innovations• Scale economies• Economic climate• Diversity of firms 30
  31. 31. Competitor analysisOpportunity potential• Promising industry attracts rivals• Telecom service operators 31
  32. 32. Competitor analysisEase of entry• Easy entry• Attracts marginal players• Committed players discourage potential entrants• Colgate trying to thwart Anchor with Brands 32
  33. 33. Competitor analysisNature of product• Offerings perceived to be similar• Tends to go on price• Severe competition 33
  34. 34. Competitor analysisExit barriers• Regulated• Exit difficultMobile services 34
  35. 35. Competitor analysisHomogeneity of market• Intensity is higher than segmentedTelecom services versus Telecom handset players 35
  36. 36. Competitor analysisIndustry structure or competitive position of firms• Large number of firms• Intensity higher• Aggression leads to retaliation• Fewer players leads to less retaliation 36
  37. 37. Competitor analysisCommitment to the industry• Contribution to overall sales• Maintain position at any costWipro versus Infosys 37
  38. 38. Competitor analysisFeasibility of technological innovations• Frequent innovations• Do their best in short time• Intensity is higher 38
  39. 39. Competitor analysisScale economies• Economies of scale benefits are high• Will do everything to get volume• Aggressive competition for market share• Escalates pressureAirlines industry 39
  40. 40. Competitor analysisEconomic climate• Boom times• Relatively moderate• Recession• Companies bite each other• Intensity is higher 40
  41. 41. Competitor analysisDiversity of firms• Old players in the industry• Display a predictable behavior• New participants• Can do many unconventional behavior to upset existing playersDell’s model 41
  42. 42. Competitor analysisMarketing Myopia• Theodore Levitt• Marketing Guru• How business is defined• Why American rail business a massive decline• Onslaught of airlines 42
  43. 43. Competitor analysisTHE COURIER MARKET• came in 70s• Launch of fax• Later email• How players handled competition 43
  44. 44. Competitor analysisTwo approaches• Adopt new products• Strengthen existing business 44
  45. 45. Competitor analysisAdopt new productsIBM• Hardware in 70s• Threat from low-cost producers• Shifted focus to software 45
  46. 46. Competitor analysisStrength existing businessFED EX• Earlier couriers• Competition from fax, email• Shifted focus on parcel market• Physical distribution required• Offered door-to-door delivery 46
  47. 47. Competitor analysisFED EX• Offer complete logistics solutions• Found existing players not offering these solutions• Gradually left the space for document courier to smaller companies 47
  48. 48. Competitor analysisMOSQUITO REPELLANT DEVICESBALSARA• Launched ODOMOS in 1964• Unattended need• Cream based product• Inhouse R & D• Earlier smoke sensing devices were used 48
  49. 49. Competitor analysisMOSQUITO REPELLANT DEVICES• Now creams• Held 97% share of the cream market• What are the concerns• Later Tortoise was launched• Used ‘smoke’ concept• Economical• Gained 70% market share• Odomos 20% share 49
  50. 50. Competitor analysisMOSQUITO REPELLANT DEVICES• 1984• Goodknight brand• No use of cream or coil• Value proposition – Cleaner – Less messy – Convenient 50
  51. 51. Competitor analysisMOSQUITO REPELLANT DEVICESBy late 90s• Mats/liquid-70%• Coils-22%• Creams-9%• Balsara tried to launch mats/liquidBALSARA lost the market which it createdin 1964 51
  52. 52. Competitor analysisPoor understanding of the competition• Decline – Air coolers – Mopeds – Soya-based drinks 52
  53. 53. Competitor analysisCompetition happens at four levels1.Companies offering only similar products - Kitkat versus Perk - Nescafe versus Bru 53
  54. 54. Competitor analysisCompetition happens at four levels2 Companies consisting of all companies operating in the same category - Cadburys Eclairs versus. Nestle Kitkat - Canada Dry versus Pepsi Cola 54
  55. 55. Competitor analysisCompetition at four levels3. Competitor consists of all companies manufacturing or supplying products which deliver the same service - Airlines versus Railways - Second hand cars versus scooters versus Tata Nano 55
  56. 56. Competitor analysisCompetition happens at four levels4. Competition consists of all companies competing for the same spending power - Dishwasher versus Microwave oven - Designer jewelry versus Ritu Beris fabrics - Debeer’s versus Nokia mobile phones 56
  57. 57. Competitor analysisCOMPETITIVE EQUILIBRIUMFive scenariosIf competitors are nearly identical and make their living in the same way, then the competitive equilibrium is unstable.• Identical products• Commodity industries• Competitive equilibrium gets upset if one cuts prices 57
  58. 58. Competitor analysisIf a single major factor is the critical factor, then competitive equilibrium is unstable• Differentiation is possible• Breakthrough in technologies• Cut costs• Change habits of consumers• Apple’s Iphone• 58
  59. 59. Competitor analysis• If multiple factors may be critical factors, then it is possible for each competitor to have some advantage and be differentially attractive to some customers. The more the multiple factors that may provide an advantage, the more the number of competitors who can coexist. Each competitor has his competitive segment defined by the preference for the factor trade-offs that he offers.• Retailing industry in India 59
  60. 60. Competitor analysis• The fewer the number of competitive variables that are critical, the fewer the number of competitors.• If one factor is critical, fewer competitors.• More variables, larger number of competitors, but smaller in size. 60
  61. 61. Competitor analysis• Is it always prudent to increase your market share? 61
  62. 62. Competitor analysis• A ratio of 2 in 1 in market share between two competitors seems to be the equilibrium point at which it is neither practical nor advantageous for other competitor to increase or decrease share. 62
  63. 63. Competitor analysisMarketing Myopia• Traditional way of looking competition• Narrow definition• Identify direct and indirect competition
  64. 64. Competitor analysisRed-Ocean thinking• Seeking bloody• Head-to-head battles with competitor• Based on improvements in costs, quality or both
  65. 65. Competitor analysisBlue-Ocean thinking• Creating products and services• There are no direct competitors• Go beyond conventional boundaries• Find unoccupied competitions• Represent real value innovation
  66. 66. Competitor analysisBlue-Ocean thinkingEASYJET• Low-cost carrier• European carrier• Quite successful• ‘Fly to Scotland for a pair of jeans.’• Competitor to full-price carriers like British Airways, Lufthansa• How 3Vs were used? 66
  67. 67. Competitor analysisValued customer-who to serve• Traditional carriers targeted everyone• Mainly business travelers• Travel mostly on company expensesEasyJet• Target those customers who pay from their own pocket,• Predominantly entrepreneurs, small business owners 67
  68. 68. Competitor analysisEasyJet• Target those customers who pay from their own pocket• Predominantly entrepreneurs, small business owners• Large segment in Europe• Were unhappy with offerings of full-price carriersTwo strategic segments identified 68
  69. 69. Competitor analysisValued-proposition-what to offer?• Major differences between two segments• Business segment – Demanding – Freebies such as newspaper, meals – Want seamless connections – Less waiting 69
  70. 70. Competitor analysis• Small business travel• Willing to forgo these services• Lower prices• EasyJet’s value proposition answers four issues 70
  71. 71. Competitor analysisWhich attributes that our industry takes for granted should be eliminated?• Free meals and travel agents to be eliminated.• Sells food on aircraft• Eliminated travel agents• Tickets sold on internet 71
  72. 72. Competitor analysisWhich attributes should be reduced to below industry standards?• Have the offering been overdesigned?• What can be reduced• Flexibility in flight changes and seat selection• Non-refundable fares• Seat on first-come, first-served basis• Incentive for passengers to board earlier 72
  73. 73. Competitor analysisWhich attributes should be increased to above industry standards?• Lower prices• Punctuality• Younger fleet of aircraft 73
  74. 74. Competitor analysisWhich new attributes should be created that the industry has never offered?• New sources of value creation• One-way fares refund if the flight is delayed beyond four hours 74
  75. 75. Competitor analysisValue curve• Compare the value proposition of various players in the industry• Full-price carriers are superior on every dimension• Which attributes are most important to air travelers?• Reach safely• Low prices a concern 75
  76. 76. Competitor analysisEasy Jet• Streamlined operations• Fast turnaround• Greater utilization• single type of aircraft (Boeing 737)• Reduces spare parts inventory• Increases bargaining power with vendors• Lower pilot training costs• Elimination of business class means more seats can be accommodated 76
  77. 77. Competitor analysisFIVE PRINCIPLES OF EASYJET VALUE NETWORK1. Avoid fixed costs wherever possible No secretarial staff1. Cover fixed costs quickly Aircrafts remain in air for 11 hours1. Eliminate variable costs wherever possible Avoid use of travel agents1. Keep variable costs low Avoid landing at major ports1. Convert fixed costs into revenue generators Sell food items in aircraft 77
  78. 78. Customer and Competitor OrientationsCompetitor-Centered CompaniesExample• Competitor launching a new product next brand of soap in Delhi region• Float a scheme for retailers for our existing soap
  79. 79. Customer and Competitor OrientationsCompetitor-Centered CompaniesAdvantages• Organization develops a fighter orientation• Trained to be on constant alertDisadvantages• Too reactive• Too much dependent on competitor moves
  80. 80. Customer and Competitor Orientations Customer-Centered Companies• Focus on customer developments• The market of children is getting saturated• Let us reposition the product to widen the market to include youth.
  81. 81. Customer and Competitor OrientationsCustomer-Centered CompaniesAdvantages• Better position to identify new opportunities• Choose a course which delivers long-term growth and profits• Monitoring customer needs•
  82. 82. Customer and Competitor OrientationsCustomer-Centered CompaniesDisadvantages• Counter attack by competitors• Odomos by Good Knight mosquito repellant• Good Knight became the leader