Ch09a
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The document discusses strategies for dealing with competition, including: 1) Identifying primary competitors, their strategies, strengths/weaknesses, and reaction patterns. 2) Designing a competitive intelligence system to monitor competitors' market share, brand awareness, and customer satisfaction. 3) Developing strategies as a market leader, challenger, follower, or niche player based on factors like market share and profitability.
Ch09a
- 1. Chapter 9 Dealing with the Competition by PowerPoint by Milton M. Pressley University of New Orleans
- 2. Kotler on Marketing Poor firms ignore their competitors; average firms copy their competitors; winning firms lead their competitors.
- 3. In this chapter, we focus on five things companies need to know about their competition: Who the primary competitors are How to ascertain their strategies, objectives, strengths and weaknesses, and reaction patterns How to design a competitive intelligence system Whether to position as market leader, challenger, follower, or nicher How to balance a customer versus competitor orientation Chapter Objectives
- 4. Figure 9-1: Five Forces Determining Segment Structural Attractiveness Competitive Forces Threat of: intense segment rivalry new entrants substitute products buyers’ growing bargaining power suppliers’ growing bargaining power
- 5. Figure 9-2: Barriers and Profitability
- 6. Identifying Competitors Industry Concept of Competition Industry Number of Sellers and Degree of Differentiation Pure monopoly Oligopoly Pure oligopoly Differentiated oligopoly Monopolistic competition Pure competition
- 7. Identifying Competitors Entry, Mobility, Exit Barriers Entry barriers Mobility barriers Exit barriers Cost Structure Degree of Vertical Integration Vertical integration Degree of Globalization Market Concept of Competition
- 8. Figure 9-3: Competitor Map – Eastman Kodak
- 9. Objectives Analyzing Competitors Figure 9-5: A Competitor’s Expansion Plans
- 10. Table 9-1: Customer’s Ratings of Competitors on Key Success Factors Note: E = excellent, G = good, F = fair, P = poor. F F G P F Competitor C E G E G G Competitor B G P P E E Competitor A Selling Staff Technical Assistance Product Availability Product Quality Customer Awareness
- 11. Analyzing Competitors Three Variables to Monitor When Analyzing Competitors: Share of market Share of mind Share of heart
- 12. Table 9-2: Market Share, Mind Share, and Heart Share 8 11 11 11 11 10 19 19 20 Competitor C 53 47 44 35 31 30 37 34 30 Competitor B 39% 42% 45% 54% 58% 60% 44% 47% 50% Competitor A 2002 2001 2000 2002 2001 2000 2002 2001 2000 Heart Share Mind Share Market Share
- 13. Reaction Patterns 1. If competitors are nearly identical and make their living the same way, then their competitive equilibrium is unstable. 2. If a single major factor is the critical factor, then the competitive equilibrium is unstable. 3. 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 factors that may provide an advantage, the more competitors who can coexist. Competitors all have their segment, defined by the preference for the factor trade-offs they offer. 4. The fewer the number of critical competitive variables, the fewer the number of competitors. 5. A ratio of 2 to 1 in market share between any two competitors seems to be the equilibrium point at which it is neither practical nor advantageous for either competitor to increase or decrease share. Analyzing Competitors
- 14. Designing The Competitive Intelligence System Selecting Competitors Customer Value Analysis (CVA) Customer Value = Customer Benefits – Customer Costs Customer Benefits = product benefits, service benefits, personnel benefits, image benefits Customer Costs = purchase price, acquisition costs, usage costs, maintenance costs, ownership costs, disposal costs
- 15. Table 9-3: Customer Cost of Three Brands $140 $135 $130 Total costs 8 5 6 Disposal costs 5 3 3 Ownership costs 7 3 2 Maintenance costs 10 7 4 Usage costs 30 25 15 Acquisition costs $ 80 $ 90 $100 Price C B A
- 16. Figure 9-6: Hypothetical Market Structure Designing Competitive Strategies
- 17. Designing Competitive Strategies Market-Leader Strategies Expanding the Total Market New Users Market-penetration strategy New-market segment strategy Geographical-expansion strategy New Uses More Usage Defending Market Share
- 18. Figure 9-7: Six Types of Defense Strategies Designing Competitive Strategies
- 19. Defense Strategies Position Defense Flank Defense Preemptive Defense Counteroffensive Defense Mobile Defense Market broadening Principle of the objective Principle of mass Market diversification Contraction Defense Planned contraction (Strategic withdrawal) Designing Competitive Strategies
- 20. Figure 9-8: Relationship Between Market Share and Profitability Expanding Market Share Designing Competitive Strategies
- 21. Figure 9-9: The Concept of Optimal Market Share Designing Competitive Strategies
- 22. Designing Competitive Strategies Two Case Studies: Procter & Gamble and Caterpillar Proctor & Gamble Customer knowledge Long-term outlook Product innovation Quality strategy Line-extension strategy
- 23. Designing Competitive Strategies Brand-extension strategy Multibrand strategy Heavy advertising and media pioneer Aggressive sales force Effective sales promotion Competitive toughness Manufacturing efficiency and cost cutting Brand-management system
- 24. Designing Competitive Strategies Market-Challenger Strategies Defining the Strategic Objective and Opponent(s) It can attack the market leader It can attack firms of its own size that are not doing the job and are underfinanced It can attack small local and regional firms Choosing a General Attack Strategy
- 25. Figure 9-10: Attack Strategies
- 26. Designing Competitive Strategies Choosing a Specific Attack Strategy Price-discount Lower price goods Prestige goods Product proliferation Product innovation Improved services Distribution innovation Manufacturing cost reduction Intensive advertising promotion
- 27. Designing Competitive Strategies Market-Follower Strategies Innovative imitation (Product imitation) Product innovation Four Broad Strategies: Counterfeiter Cloner Imitator Adapter
- 28. Designing Competitive Strategies Market-Nicher Strategies High margin versus high volume Nicher Specialist Roles End-user specialist Value-added reseller Vertical-level specialist Customer-size specialist Specific-customer specialist Geographic specialist Product or product-line specialist Product-feature specialist Job-shop specialist Quality-price specialist Service specialist Channel specialist
- 29. Balancing Customer and Competitor Orientations Competitor-centered company Customer-centered company Retreat is often the best (niche) strategy!