Competitive positions

And competitive marketing strategy

Based on ch. 20 in Jobber

Henning Knudsen EAL 1

The strategic triangle

Company

Customers Competitors

Competitive behaviourForms:

1. Conflict.

2. Competition.

3. Co-existence.

4. Co-operation.

5. Collusion.

Porters 1980 classic Competitive Strategy: Techniques for Analysing Industries and Competitors

Market Leader:Objectives: To stay No. 1 !

• Largest market share• Most likely the initiator of price changes in the market• Typically first in product development (largest R/D budget)• Financial ability to cover many segments• Widest distribution• Largest promotional budget • Examples:

– McDonalds– Coca Cola– TDC – Kellogg's – Maersk

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Hold objectives

Attractive conditionsMarket leader in a mature or declining marketCosts exceed benefits of building

Strategic focusMonitoring the competitionConfronting the competition

Defender

Defence strategies

1Positiondefence

2Flanking defence

4 counteroffensive defence

3 Pre-emptive defence

Attacker 6 Strategic

withdrawal

5 Mobile defence

Defense strategies

• Position defense– Defend your position/share through e.g.:

• Advertising/promotion• New product varieties• ..will often outspend competition

• (Coca Cola/TDC)• Flank defense

– Avoid competitive entry in segments not covered…• Colgate Toothpaste

• Pre-emptive defense– Attack first

• TDC ?

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Defense strategies cont.

• Counter offensive defense– Head On Counter Attack

• Match/exceed what the attacker is offering– Pricing/discount– New products/new features

• Mobile defense– Diversify/enter broader market

• Phillip MorrisKraft General Food Kraft Jacobs Suchard……….. ==>

• US entertainment industry….– Cinemas entertainment

• Contraction defense– Leave business where you cannot compete.

• Nokia

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Market Leader Strategies

• Expanding the Market ….?– Attract new users to the market

• likely strategy in early stages of the PLC• the market leader's ”responsibility” • (the market leader will most likely gain major part of growth)

– Introduce new ways and situations to use the product– Achieve increased usage among existing users

• B) Defending your Share ……?• Objectives….:

– to reduce probability of attack– to divert attacks to less threatening areas– to lessen intensity of attacks

• C) Winning Share of the Market …… ?– Most companies are likely to focus on gaining market share – (being the one of the most important factors explaining level of

profitability).

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Market Challenger Objectives: To take the market

leader's position!

• Will focus on adding value / new features /lower prices as a tool to gain share

• Will constantly aim at identifying and exploiting weaknesses in leader’s position

• Examples:– Pepsi– Burgerking– Stimorol is the market leader in Denmark, Russia, and Sweden – - ….but challenger in Norway. – Carlsberg in England

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Build objectives

Attractive conditionsGrowth markets

Exploitable competitive weaknessesExploitable corporate strengthsAdequate corporate resources

Strategic focusMarket expansionNew users New usesIncreased frequency of useWinning market shareProduct innovationDistribution innovationPromotional innovationPenetration pricingCompetitor confrontationMerger or acquisitionForming strategic alliances

Defender

Attack strategies

1. Frontal attack

2. Flanking attack

4. Bypass attack

3. Encirclement

5.Guerrilla

attack

Attacker

MARKET CHALLENGER STRATEGIES

• Frontal / head on Attack – Key …resources

• Flanking Attack– Concentrate your strength on the leaders weakness…

• Encirclement Attack– Attack the leader from "all sides"– Example: Seiko’s 2000 new watches

• Bypass Attack– Seek new business through major technological development or going for new

markets with new products • Example: Scandinavian Tobacco Company (House of Prince) Furniture • Guerrilla Attack

– Targeting limited part of the market

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Frontal - HEAD ON - Attack

• Success depends on four factors:

– …the challenger should have a clear and sustainable competitive advantages

– …the challenger should achieve proximity in other areas

– …success is more likely if it is difficulty for market leader to retaliate.– – the challenger must have adequate resources to withstand the leaders

potential retaliation.

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Flanking - How is it done ???• Flanking with low price

– Example: Budget Rent- a- Car / Rent a Wreck• Virgin air / Ryan air• Flanking with high price

– Example: Orville Redenbacher's Gourmet Popping Corn:– "The world most expensive popping corn".

• Flanking with small size:– Example: Volkswagen (Beetle) in the US

• Flanking with large size:– Example: The oversized tennis racket

• Flanking with distribution– Examples: Hjemis door-to-door

• Flanking with product form– Examples: Aquafresh– Softsoap / Ren&Mild

• Flanking with fewer calories– Example: Lean cusine

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Market FollowerWill "follow" the market leader.

Objectives: Keep existing customers + gain a few new ones.

• Will often avoid "Rocking the Boat".• Examples:

– Many Private label products act as followers in the market

– (e.g. Jolly Cola vs. Coca Cola)– Discount labels are most often followers

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Market Nicher.Objectives : Be the "Market Leader" in a

small segment of the market.

• Avoid direct competition with larger competitors - hoping that niche is of no interest to large competitors.

• Might be a “nicher” within:• Product category :

– (with a limited, highly specialised assortment)• Customers:

– (meeting very specific requirements for limited number of customers)• Geographical market area:

– (covering limited geographical area, only)• Examples.

– B&O– Ecological food items – ALBANI is a "geographical nicher"

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Niche objectives

Attractive conditionsSmall budgetStrong competitors dominating major segmentsPockets existing for profitableoperationsCreating a competitive advantage

Strategic focusMarket segmentationFocused R&DDifferentiationThinking small

Harvest objectives

Attractive conditions:Market is mature or declining (dog products)In growth markets where costs of building or holding exceed thebenefits (selected problem children)Care of loyal customersFuture breadwinners exist

Strategic focusEliminate R&D expenditureProduct reformulationRationalise product lineCut market supportConsider increasing price

Divest objectives

Attractive conditionsLoss-making products or businessdrain on resourcesOften low share in declining marketsCosts of turnaround exceed benefitsRemoval will not significantly affect sales of other products

Strategic focusGet out quickly:Minimise the costs