To accompany A Framework for Marketing Management, 2nd Edition Slide 1 in Chapter 8©2003 Prentice Hall, Inc.

Chapter 8Chapter 8

Dealing with the Dealing with the CompetitionCompetition

PowerPoint by Karen E. JamesPowerPoint by Karen E. JamesLouisiana State University - ShreveportLouisiana State University - Shreveport

To accompany A Framework for Marketing Management, 2nd Edition Slide 2 in Chapter 8©2003 Prentice Hall, Inc.

ObjectivesObjectives

Understand how a company identifies its primary competitors and ascertains their strategies.

Review how companies design competitive intelligence systems.

To accompany A Framework for Marketing Management, 2nd Edition Slide 3 in Chapter 8©2003 Prentice Hall, Inc.

ObjectivesObjectives

Learn how a company decides whether to position itself as a market leader, a challenger, a follower, or a nicher.

Identify how a company can balance a customer vs. competitor orientation.

To accompany A Framework for Marketing Management, 2nd Edition Slide 4 in Chapter 8©2003 Prentice Hall, Inc.

Competitive MarketsCompetitive Markets

Porter’s Five Forces that Determine Market Attractiveness:

– Threat of intense segment rivalry– Threat of new entrants– Threat of substitute products– Threat of buyers’ growing bargaining

power– Threat of suppliers’ growing bargaining

power

To accompany A Framework for Marketing Management, 2nd Edition Slide 5 in Chapter 8©2003 Prentice Hall, Inc.

Competitive MarketsCompetitive Markets

Failing to identify competitors can lead to extinction

Internet businesses have led to disintermediation of middlemen

Competition can be identified using the industry or market approach

To accompany A Framework for Marketing Management, 2nd Edition Slide 6 in Chapter 8©2003 Prentice Hall, Inc.

Competitive MarketsCompetitive Markets

Number of sellers and degree of differentiation

Cost structure

Entry, mobility and exit barriers

Degree of vertical integration

Degree of globalization

Industries Can Be Classified By:

To accompany A Framework for Marketing Management, 2nd Edition Slide 7 in Chapter 8©2003 Prentice Hall, Inc.

Competitive MarketsCompetitive Markets

Industry Structures

Pure Monopoly

Pure Oligopoly

Differentiated Oligopoly

Monopolistic Competition

Pure Competition

Only one firm offers an undifferentiated product or service in an area

– Unregulated– Regulated

Example: Most utility companies

To accompany A Framework for Marketing Management, 2nd Edition Slide 8 in Chapter 8©2003 Prentice Hall, Inc.

Competitive MarketsCompetitive Markets

Industry Structures

Pure Monopoly

Pure Oligopoly

Differentiated Oligopoly

Monopolistic Competition

Pure Competition

A few firms produce essentially identical commodities and little differentiation exists

Lower costs are the key to higher profits

Example: oil

To accompany A Framework for Marketing Management, 2nd Edition Slide 9 in Chapter 8©2003 Prentice Hall, Inc.

Competitive MarketsCompetitive Markets

Industry Structures

Pure Monopoly

Pure Oligopoly

Differentiated Oligopoly

Monopolistic Competition

Pure Competition

A few firms produce partially differentiated items

Differentiation is by key attributes

Premium price may be charged

Example: Luxury autos

To accompany A Framework for Marketing Management, 2nd Edition Slide 10 in Chapter 8©2003 Prentice Hall, Inc.

Competitive MarketsCompetitive Markets

Industry Structures

Pure Monopoly

Pure Oligopoly

Differentiated Oligopoly

Monopolistic Competition

Pure Competition

Many firms differentiate items in whole or part

Appropriate market segmentation is key to success

Example: beer, restaurants

To accompany A Framework for Marketing Management, 2nd Edition Slide 11 in Chapter 8©2003 Prentice Hall, Inc.

Competitive MarketsCompetitive Markets

Industry Structures

Pure Monopoly

Pure Oligopoly

Differentiated Oligopoly

Monopolistic Competition

Pure Competition

Many competitors offer the same product

Price is the same due to lack of differentiation

Example: farmers selling milk, crops

To accompany A Framework for Marketing Management, 2nd Edition Slide 12 in Chapter 8©2003 Prentice Hall, Inc.

Competitive MarketsCompetitive Markets

A broader group of competitors will be identified using the market approach

Competitor maps plot buying steps in purchasing and using the product, as well as direct and indirect competitors

To accompany A Framework for Marketing Management, 2nd Edition Slide 13 in Chapter 8©2003 Prentice Hall, Inc.

Competitor AnalysisCompetitor Analysis

Key characteristics of the competition must be identified:

– Strategies– Objectives– Strengths and Weaknesses

Effect a firm’s competitive position in the target market

– Reaction Patterns

To accompany A Framework for Marketing Management, 2nd Edition Slide 14 in Chapter 8©2003 Prentice Hall, Inc.

Competitor AnalysisCompetitor Analysis

Dominant

Strong

Favorable

Tenable

Weak

Nonviable

Competitive Positions in the Target Market

To accompany A Framework for Marketing Management, 2nd Edition Slide 15 in Chapter 8©2003 Prentice Hall, Inc.

Competitive Intelligence Competitive Intelligence SystemsSystems

Designing the system involves:

– Setting up the system

– Collecting the data

– Evaluating and analyzing the data

– Disseminating information and responding to queries

To accompany A Framework for Marketing Management, 2nd Edition Slide 16 in Chapter 8©2003 Prentice Hall, Inc.

Competitive Intelligence Competitive Intelligence SystemsSystems

Value analysis helps firms to select competitors to attack and to avoid

– Customers identify and rate attributes important in the purchase decision for the company and competition

Attacking strong, close, and bad competitors will be most beneficial

To accompany A Framework for Marketing Management, 2nd Edition Slide 17 in Chapter 8©2003 Prentice Hall, Inc.

Designing Competitive Designing Competitive StrategiesStrategies

Major Strategies

Market-Leader

Market-Challenger

Market-Follower

Market-Nicher

Expanding the total market

Defending market share

Expanding market share

To accompany A Framework for Marketing Management, 2nd Edition Slide 18 in Chapter 8©2003 Prentice Hall, Inc.

Designing Competitive Designing Competitive StrategiesStrategies

Expanding the Total Market:

– Targeting Product to New UsersMarket-penetration strategyNew-market strategyGeographical-expansion strategy

– Promoting New Uses of Product

– Encouraging Greater Product Use

To accompany A Framework for Marketing Management, 2nd Edition Slide 19 in Chapter 8©2003 Prentice Hall, Inc.

Designing Competitive Designing Competitive StrategiesStrategies

Position defense

Flank defense

Preemptive defense

Counteroffensive defense

Mobile defense

Contraction defense

Defending Market Share

To accompany A Framework for Marketing Management, 2nd Edition Slide 20 in Chapter 8©2003 Prentice Hall, Inc.

Designing Competitive Designing Competitive StrategiesStrategies

Before Attempting to Expand Market Share, Consider:

– Probability of invoking antitrust action

– Economic costs involved

– Likelihood that marketing mix decisions will increase profits

To accompany A Framework for Marketing Management, 2nd Edition Slide 21 in Chapter 8©2003 Prentice Hall, Inc.

Designing Competitive Designing Competitive StrategiesStrategies

Major Strategies

Market-Leader

Market-Challenger

Market-Follower

Market-Nicher

First define the strategic goals and opponent(s)

Choose general attack strategy

Choose specific attack strategy

To accompany A Framework for Marketing Management, 2nd Edition Slide 22 in Chapter 8©2003 Prentice Hall, Inc.

Designing Competitive Designing Competitive StrategiesStrategies

General Attack Strategies:

– Frontal attacks match competition

– Flank attacks serve unmet market needs or underserved areas

– Encirclement “blitzes” opponent

– Bypassing opponent and attacking easier markets is also an option

To accompany A Framework for Marketing Management, 2nd Edition Slide 23 in Chapter 8©2003 Prentice Hall, Inc.

Competitive MarketsCompetitive Markets

Price-discount

Lower-price goods

Prestige goods

Improved services

Product proliferation

Product innovation

Distribution innovation

Manufacturing cost reduction

Intensive advertising promotion

Specific Attack Strategies Include:

To accompany A Framework for Marketing Management, 2nd Edition Slide 24 in Chapter 8©2003 Prentice Hall, Inc.

Designing Competitive Designing Competitive StrategiesStrategies

Major Strategies

Market-Leader

Market-Challenger

Market-Follower

Market-Nicher

Imitation may be more profitable than innovation

Four broad strategies:– Counterfeiter– Cloner– Imitator– Adapter

To accompany A Framework for Marketing Management, 2nd Edition Slide 25 in Chapter 8©2003 Prentice Hall, Inc.

Designing Competitive Designing Competitive StrategiesStrategies

Major Strategies

Market-Leader

Market-Challenger

Market-Follower

Market-Nicher

Niche specialties:– End-user– Vertical-level– Customer-size– Specific customer– Geographic– Product/product line– Product feature– Job-shop– Quality-price– Service– Channel

To accompany A Framework for Marketing Management, 2nd Edition Slide 26 in Chapter 8©2003 Prentice Hall, Inc.

Balancing Customer and Balancing Customer and Competitor OrientationsCompetitor Orientations

Competitor-centered companies evaluate what competitors are doing, then formulate competitive reactions

Customer-centered companies focus on customer developments when formulating strategy