Dealing with competition 09
- 1. Marketing Management By Philip, Kevin Lane Keller, Abraham Koshy, Mithileshwar Jha logo copy.tif SUMMARY by Chapter 9 Dealing with Competition Building strong brands requires a keen understanding of competition. To effectively devise and implement the best possible brand positioning strategies, companies must pay attention to their competitors. Markets have become too competitive to just focus on the consumer alone. Vertical Integration is to integrate backward or forward i.e. with suppliers and costumers which often lowers costs and can manipulate prices and costs in different parts of Technological the value chain. leapfrogging Benchmarking is the art of learning from companies that perform certain tasks better than other companies. is a bypass strategy practiced in high-tech Competitive Forces (Michael Porter’s 5 forces) 1. Threat of intense segment rivalry - segment is unattractive if it contains numerous, strong, industries. The or aggressive competitors. challenger patiently 2. Threat of new entrants - segment's attractiveness varies with the height of its entry and exit barriers. The most attractive segment has high entry barriers and low exit barriers. researches and 3. Threat of substitute products - A segment is unattractive when there are actual or potential develops the next substitutes for the product. 4. Threat of buyers' growing bargaining power - A segment is unattractive if buyers possess technology and strong or growing bargaining power. launches an attack, 5. Threat of suppliers' growing bargaining power - A segment is unattractive if the company's suppliers are able to raise prices or reduce quantity supplied. shifting the battleground to its Identifying Competitors territory, where it has Industry Concept an advantage. • Number Of Sellers And Degree Of Differentiation • Entry, Mobility, And Exit Barriers • Cost Structure • Degree Of Vertical Integration • Degree Of Globalization Marketing Concept According to marketing approach, competitors are companies that satisfy the same customer need. The market concept of competition reveals a broader set of actual and potential competitors. By mapping the buyer's steps in obtaining and using the product a company's direct and indirect competitors can be identified.
- 2. Chapter 9 - Dealing with Competition Trends Analyzing Competitors • Strategies: What strategies a company uses to enter/survive in the market? • Objectives: What are the objectives of the competitor’s and what drives its behavior? Factors shaping a competitor’s objectives include size, history, current management, and financial situation. Selecting • Strengths and Weaknesses: A company needs to gather information on each competitor's strengths and weaknesses. Competitors: Three Important Variables for analyzing competitors • Share of market - The competitor's share of the target market. • 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 Strong versus Weak: industry." Weak require fewer • 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 resources per share the product." point gained. The firm Companies that make steady gains in mind share and heart share will inevitably make gains in should also compete market share and profitability. with strong competitors to keep up with the best. Competitive Strategies for Market Leaders Expanding the Total Market New customers: Potential new users maybe divided into three groups: Close versus Distant: • Those who might use it but do not (market-penetration strategy) • Those who have never used it (new-market segment strategy) Most companies • Those who live elsewhere (geographical-expansion strategy) compete with More usage: Two ways of increasing usage competitors who • Increasing the level or quantity of consumption: through packaging or product resemble them the design or by increasing the availability of product • Increasing the frequency of consumption: identifying completely new and different most ways to use the brand and communicate the advantages of using the brand more frequently "Good" versus "Bad": Defending Market Share The most constructive response is continuous innovation. The leader leads the industry in should support its developing new product and customer services, distribution effectiveness, and cost cutting. It good competitors keeps increasing its competitive strength and value to customers. • Position Defense: It involves occupying the most desirable market space in the minds (Play by the rules) of the consumers and attack its bad • Flank Defense: the market leader should also erect outposts to protect a weak front or possibly serve as an invasion base for counterattack. competitors. • Preemptive Defense: A more aggressive maneuver is to attack before the enemy starts its offense. A company can launch a preemptive defense in several ways • Counteroffensive Defense: the leader can meet the attacker frontally or hit its flank or launch a pincer movement. An effective counterattack is to invade the attacker's main territory so that it will have to pull back to defend the territory. • Mobile Defense: In mobile defense, the leader stretches its domain over new territories that can serve as future centers for defense and offense through market broadening and market diversification. • Contraction Defense: giving up weaker territories and reassigning resources to stronger territories.
- 3. Chapter 9 - Dealing with Competition Competitive Expanding Market Share A company should consider four factors before pursuing increased market share: Strategies for • The possibility of provoking antitrust action • Economic cost Market • Pursuing the wrong marketing-mix strategy • The effect of increased market share on actual and perceived quality Follower: A market follower must Competitive Strategies for Market Challengers know how to hold Defining the Strategic Objective and Opponent(S) current customers and A market challenger must decide whom to attack: win a fair share of new It can attack the market leader. This is a high-risk but potentially high-payoff strategy It can attack firms of its own size that are not doing the job and are underfinanced customers. It must keep It can attack small local and regional firms its manufacturing costs Choosing a General Attack Strategy low and its product • Frontal Attack: The attacker matches its opponent's product, advertising, price, and distribution quality and services • Flank Attack: Identifying shifts in market segments geographic areas that are causing high. Four broad gaps to develop, and then rushing in to fill the gaps and develop them into strong segments. strategies can be • Encirclement Attack: The encirclement involves launching a grand offensive on distinguished: several fronts. Make sense when the challenger commands superior resources • Bypass Attack: It means bypassing the enemy and attacking easier markets to • Counterfeiter - broaden one's resource base. Three lines of approach: diversifying into unrelated duplicates the products, diversifying into new geographical markets, and leapfrogging into new technologies to supplant existing products. leader's product and • Guerrilla Warfare: Small, intermittent attacks to harass and demoralize the package and sells it opponent and eventually secure permanent footholds (selective price cuts, intense promotional blitzes, and occasional legal action) • Cloner - emulates the leader's products, Few more specific strategies: Price discount, Lower price goods, Value-priced goods and services, Prestige goods, Product proliferation, Product innovation, improved services, name, and Distribution innovation, Manufacturing-cost reduction, Intensive advertising promotion packaging, with slight variations. Competitive Strategies for Market-Nicher • Imitator - copies The nicher achieves high margin, whereas the mass marketer achieves high volume. Nichers some things from the have three tasks: creating niches, expanding niches, and protecting niches. Because niches can weaken, the firm must continually create new ones therefore multiple niching is leader but maintains preferable to single niching. The key idea in successful nichemanship is specialization. Here differentiation in are some possible niche roles: • End-user specialist: The firm specializes in serving one type of end-use customer. terms of packaging, • Customer-size specialist: The firm concentrates on selling to small, medium-sized, or advertising, pricing, large customers. • Geographic specialist: The firm sells only in a certain locality, region, or area of the or location. world. • Adapter - takes the • Product-feature specialist: The firm specializes in producing a certain type of product or product feature leader's products and • Quality-price specialist: The firm operates at the low- or high-quality ends of the adapts or improves market • Channel specialist: The firm specializes in serving only one channel of distribution them.