Strategic Planning

Chapters 8: Competition

The Marketing Plan

Marketing Strategy

Product

Promotion

Distribution

Price

Marketing Mix

Business Mission Statement

Objectives

Situation or SWOT Analysis

Target Market Strategy

ImplementationEvaluation

Control

Strategy Formulation - Competitive Advantage

• The set of unique features of a company and its

products that are perceived by the target market

as significant and superior to the competition.• Types:

– Cost Competitive Advantage (bottom line)– Differential (remember differentiation? Must be

relative to the competition)– Niche (doing one thing well – concentrated approach

Cost Competitive Advantage

Experience CurvesExperience Curves

Efficient LaborEfficient Labor

No-frills ProductsNo-frills Products

Government SubsidiesGovernment Subsidies

Product DesignProduct Design

ReengineeringReengineering

Production InnovationsProduction Innovations

New Delivery MethodsNew Delivery Methods

Differentiation (product/service) Competitive Advantage

• Advantage achieved when a firm provides

something that is unique and valuable to

buyers beyond simply offering a lower price

than the competition.• Brand name, dealer network, product

reliability, service, image are all possibilities

Niche Competitive Advantage

• Advantage achieved when a firm seeks to

target and effectively serve a small segment

of the market.– Used by small companies with limited resources

– May be used in a limited geographic market

– Product line may be focused on a specific product line

Strategic Alternatives

Present Product New Product

New Market

MarketPenetration

MarketDevelopment

ProductDevelopment

Diversification

Present Market

Market Penetration

• Seeks a larger market share in a market in which the organization already has an offering

• Increase buyers usage or consumption rates

• Attract the competition’s buyers

• Stimulating product trial

Market Development

• Introducing its existing offerings to markets other than those that the organization is currently serving

• Competitor SW and retaliation potential• Modification of basic offer• Different distribution outlets• Exporting, licensing, joint venture,

alliances and direct investments

Product Development

• Creating new offerings for existing markets

• Product innovation (gillette)

• Product augmentation (internet access)

• Product line extension (lite beer, low carb)

Diversification

• Development or acquisition of offerings new to the organization and introducing those offerings to publics not previously served by the organization

(consolidation in financial services)

Porter’s Five Forces(Group exercise: Analyze for plan after next slide)

Potential Entrants(Threat ofMobility)

Buyers(Buyer power)

IndustryCompetitors

(Segment rivalry)

Suppliers(Supplier power)

Substitutes(Threats ofsubstitutes)

The Industry Concept

• Number of sellers & degree of differentiation– Pure monopoly, oligopoly, monopolistic

competition (restaurant), pure competition (airline?)

• Entry, mobility and exist barriers (patents, tariffs, labeling)

• Costs• Degree of vertical integration (Good or bad?)• Degree of globalization

Analyzing Competitors: Things to consider

• Strategies – the strategic group (similarities in prod lines and attributes)

• Objectives (short or long term player)• Strengths and Weaknesses (p. 155)

– Dominant, strong, favorable, tenable, weak, nonviable

– GROUP EXERCISE: ID in your plan

• Reaction Patterns: Price Wars

If you are a market leader…

• Expand the total market– New users, new uses, more usage

• Defend the market share – the art of war• Defense strategies

– Position defense (brand power), flank defense (new products/advert), preemptive defense (envelop), counteroffensive defense (subsidize products), mobile defense (diversify)

• Expand market share

If you are a market challenger…

• Who are you targeting and what do you want to accomplish?

• Strategies– Frontal attack (matching), flank attack

(geography/micropolis), encirclement attack, bypass attack (buy big), guerrilla attack (internet)

• Specific strategies p.163– Price discount, cheaper goods, prestige goods,

product proliferation, product innovation, improved service, distribution innovation, cost reductions, promotion

If you are the market follower…

• Strategies– Counterfeiter, cloner, imitator, adapter

If you are the market niche(166)• End user specialist• Vertical level specialist• Customer size specialist• Specific customer specialist• Geographic specialist• Product/Product line specialist• Product feature specialist• Quality price specialist• Service specialist• Channel specialist

Final Group exercise

• Identify your place in the market (leader, challenger, follower)

• Match specific strategies to– Your organization as a whole.– Your specific product lines or business units.