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DEALING DEALING
WITH THEWITH THE
COMPETITIONCOMPETITION
DEALING DEALING
WITH THEWITH THE
COMPETITIONCOMPETITION
$7.1billion (1996)$7.1billion (1996) US Sales US Sales $4 billion (2003)$4 billion (2003)$7.1billion (1996)$7.1billion (1996) US Sales US Sales $4 billion (2003)$4 billion (2003)
Levi Levi
StraussStrauss
Classic Classic
501501
Trendy & high end Trendy & high end designer lines :designer lines :
Calvin Klein, Tommy Hilfiger &
GAP
Trendy & high end Trendy & high end designer lines :designer lines :
Calvin Klein, Tommy Hilfiger &
GAP
Popular & lower-priced Popular & lower-priced private labels:private labels:
JC Penney’s ‘Arizona’ &
Sears’ Canyon River Blues
Traditional brands:Traditional brands:
Western ‘Wranglers’ &
Urban ‘Lee cooper’
Hip/ youthful lines:Hip/ youthful lines:
American Eagle, Bugle Boy, JNCO, Lucky & Diesel
‘‘Signature’ brand – Signature’ brand –
discount stores like discount stores like Wal-MartWal-Mart
Redesigned Redesigned strategystrategy
Premium ‘Red Tab’ line – Premium ‘Red Tab’ line – upscale department upscale department stores like Nordstrom & stores like Nordstrom & Neiman MarcusNeiman Marcus
New EntrantsNew Entrants
BuyersBuyersSuppliersSuppliers
SubstitutesSubstitutes
IndustryIndustry
CompetitorsCompetitors
IntensityIntensity
of Rivalryof Rivalry
Threat ofThreat of
SubstitutesSubstitutes
Threat ofThreat of
New EntrantsNew Entrants
Bargaining PowerBargaining Power
of Suppliersof Suppliers
Bargaining PowerBargaining Power
of Buyersof Buyers
Determinants of Buyer PowerDeterminants of Buyer Power
Bargaining LeverageBargaining Leverage
Buyer concentration vs. Buyer concentration vs.
firm concentrationfirm concentration
Buyer volumeBuyer volume
Buyer switching costsBuyer switching costs
Buyer informationBuyer information
Price SensitivityPrice Sensitivity
Price/total purchasesPrice/total purchases
Product differencesProduct differences
Brand identityBrand identity
Impact on quality/Impact on quality/
performanceperformance
Determinants of Substitution ThreatDeterminants of Substitution Threat
Relative price performance of substitutesRelative price performance of substitutes
Switching costsSwitching costs
Buyer propensity to substituteBuyer propensity to substitute
Rivalry DeterminantsRivalry Determinants
Industry growthIndustry growth
Product differencesProduct differences
Brand identityBrand identity
Switching costsSwitching costs
Informational complexityInformational complexity
Diversity of competitorsDiversity of competitors
Corporate stakesCorporate stakes
Exit barriersExit barriers
Entry BarriersEntry Barriers
Economies of scaleEconomies of scale
product differencesproduct differences
Brand identityBrand identity
Switching costsSwitching costs
Capital requirementsCapital requirements
Access to distributionAccess to distribution
Absolute cost advantagesAbsolute cost advantages
Proprietary learning curveProprietary learning curve
Access to necessary inputsAccess to necessary inputs
Proprietary low-cost product designProprietary low-cost product design
Determinants of Supplier PowerDeterminants of Supplier Power
Differentiation of inputsDifferentiation of inputs
Switching costs of suppliers and firms in the industrySwitching costs of suppliers and firms in the industry
Presence of substitute inputsPresence of substitute inputs
Supplier concentrationSupplier concentration
Cost relative to total purchases in the industryCost relative to total purchases in the industry
Impact of inputs on cost or differentiationImpact of inputs on cost or differentiation
Threat of forward integration relative to threat of Threat of forward integration relative to threat of
backward integration by firms in the industrybackward integration by firms in the industry
Source: Porter's 5 Forces - Source: Porter's 5 Forces -
Elements of Industry Structure Elements of Industry Structure
(source: Porter, 1985, p.6)(source: Porter, 1985, p.6)
Substitute Substitute productsproducts
Porter’s 5 Forces model:Porter’s 5 Forces model:Buyers bargaining powerBuyers bargaining power
Buyers are Powerful if: Example
Buyers are concentrated - there are a few buyers with significant market share
Ministry of Defense purchases from defense contractors
Buyers purchase a significant proportion of output - distribution of purchases or if the product is standardized
Wal-Mart and Sears' large retail market provides power over manufacturers
Buyers possess a backward integration threat - can threaten to buy producing firm or rival
Large auto manufacturers' purchases of tires
Buyers are Weak if: Example
Producers threaten forward integration - producer can take over own distribution/retailing
Movie-producing companies have integrated forward to acquire theaters like Rajshree, PVRs.
Significant buyer switching costs - products not standardized and buyer cannot easily switch to another product
Buying of Medicines.
Buyers are fragmented (many, different) - no buyer has any particular influence on product or price
Confectioneries
Producers supply critical portions of buyers' input - distribution of purchases
Intel's relationship with PC manufacturers
Porter’s 5 Forces model:Porter’s 5 Forces model:Suppliers bargaining powerSuppliers bargaining power
Suppliers are Powerful if: Example
Forward integration threat by suppliers
Chemical manufacturers started producing pharmaceutical products
Suppliers concentratedDrug industry's relationship to hospitals
e.g. high cost surgical items
Significant cost to switch suppliers
Microsoft's relationship with PC manufacturers
Suppliers are Weak if: Example
Many competitive suppliers - product is standardized
Confectionery products like cookies, breads etc.
Purchase commodity products Grocery store brand label products
Backward integration threat by purchasers
Tea producers relationship to Tea estate companies
Concentrated purchasersGarment industry relationship to major
retail stores like Wal-Mart
Porter’s 5 Forces model:Porter’s 5 Forces model:Barrier/ Threat to entryBarrier/ Threat to entry
Easy to Enter if there is:
- Common technology
- Little brand loyalty
- Access to distribution
channels
- Low scale threshold
(break even) e.g.
Confectionery.
Difficult to Enter if there
is:
- Patented or proprietary
know-how
- Difficulty in brand
switching
- Restricted distribution
channels- High scale threshold - e.g. knowledge based
industries.
Easy to Exit if there are:
- Salable assets- Low exit costs- Independent businesses e.g. exclusive
distributors, ancillary
manufacturers.
Difficult to Exit if there are:
- Specialized assets- High exit costs- Interrelated businesses e.g. Capital intensive
industries.
Competitive analysis of Global Airline Competitive analysis of Global Airline IndustryIndustry
• Rivalry within Airline Industry:– Competition is intenseCompetition is intense– Several airlines are operating on the same route.Several airlines are operating on the same route.– Compete aggressively on offering like fares, frequent flyer Compete aggressively on offering like fares, frequent flyer
membership privileges etc.membership privileges etc.
• Threat of New EntrantsThreat of New Entrants::– Require capital investment but due to offerings like long-term bank Require capital investment but due to offerings like long-term bank
loans on less interest to business sectors, increased the threat of loans on less interest to business sectors, increased the threat of new entrants.new entrants.
• Threat of SubstitutesThreat of Substitutes::– Options of cheaper travel means like trains etc.Options of cheaper travel means like trains etc.– Domestic airlines have greater threats than the international Domestic airlines have greater threats than the international
carriers.carriers.
• Bargaining power of SuppliersBargaining power of Suppliers::– Limited suppliers i.e. Boeing and Airbus.Limited suppliers i.e. Boeing and Airbus.
• Bargaining power of BuyersBargaining power of Buyers::– Customers have higher bargaining power in the domestic airlines Customers have higher bargaining power in the domestic airlines
compared to the international routes.compared to the international routes.
Driving forces in the Porter’s 5 Driving forces in the Porter’s 5 Forces ModelForces Model
Directions of New Directions of New CompetitionCompetition
Global competitors Global competitors entering in new entering in new markets/ categoriesmarkets/ categories
Global competitors Global competitors entering in new entering in new markets/ categoriesmarkets/ categories
Online competitors Online competitors seeking cost-effective seeking cost-effective ways to expand ways to expand distributiondistribution
Online competitors Online competitors seeking cost-effective seeking cost-effective ways to expand ways to expand distributiondistribution
Private labeling and Private labeling and
store brands store brands
designed to provide designed to provide
low-priced low-priced
alternativesalternatives
Private labeling and Private labeling and
store brands store brands
designed to provide designed to provide
low-priced low-priced
alternativesalternatives
Brand extensions from Brand extensions from
strong mega brands strong mega brands
leveraging their leveraging their
strengths to move into strengths to move into
new categoriesnew categories
Brand extensions from Brand extensions from
strong mega brands strong mega brands
leveraging their leveraging their
strengths to move into strengths to move into
new categoriesnew categories
Intensity of Intensity of
new new
competitive competitive
forcesforces
Intensity of Intensity of
new new
competitive competitive
forcesforces
Analyzing CompetitorsAnalyzing Competitors
CompetitorCompetitorActionsActions
CompetitorCompetitorActionsActions
ObjectivesObjectivesObjectivesObjectives
Strengths &Strengths &WeaknessesWeaknessesStrengths &Strengths &WeaknessesWeaknesses
ReactionReactionPatternsPatternsReactionReactionPatternsPatterns
StrategiesStrategiesStrategiesStrategies
Analyzing Competitors cont…Analyzing Competitors cont…
Company need to gather information about competitor’s strengths and weaknesses on three parameters:
– Share of marketShare of market: competitors share of the target market.
– Share of mindShare of mind: percentage of customers remember competitors features.
– Share of heartShare of heart: percentage of customers prefer competitors features.
Identifying CompetitorsIdentifying CompetitorsIdentifying CompetitorsIdentifying Competitors
Assessing CompetitorsAssessing CompetitorsAssessing CompetitorsAssessing Competitors
Determining ObjectivesDetermining ObjectivesDetermining ObjectivesDetermining Objectives
Selecting Competitors toSelecting Competitors toAttack and to AvoidAttack and to Avoid
Selecting Competitors toSelecting Competitors toAttack and to AvoidAttack and to Avoid
Competitor AnalysisCompetitor Analysis
Identifying StrategiesIdentifying StrategiesIdentifying StrategiesIdentifying Strategies
Assessing Strengths andAssessing Strengths andWeaknessesWeaknesses
Assessing Strengths andAssessing Strengths andWeaknessesWeaknesses
Estimating ReactionEstimating ReactionPatternsPatterns
Estimating ReactionEstimating ReactionPatternsPatterns
Competitor AnalysisCompetitor AnalysisThe The Strength of Strength of the the CompetitorCompetitor’s ’s positioningpositioning
• What market share does each competitor have? (secondary sources)• How strong is each competitor’s image? (primary sources- highly sensitivity)• how is the financial performance of each competitor? (secondary sources)• Is there any focus or areas of concentration of competitors? (published & primary sources – highly sensitive data)
The The Strength of Strength of the the CompetitorCompetitor’s offerings’s offerings
• How is each element of marketing mix deployed by competitors? (secondary & primary sources)• How satisfied is competitor’s customer base? (primary sources- highly sensitive data)• What are the loyalty levels exists for competitors? (primary sources- highly sensitive data)• How satisfied are each distribution channels with the competitors (primary sources- moderately sensitive data)
The The Strength of Strength of the the CompetitorCompetitor’s ’s resourcesresources
• Size of the resource base.• Level of efficiency of production base• Effectiveness of product development process – support of R&D.
UnderstandUnderstanding the ing the competitor’competitor’s strategiess strategies
• What is the competitor’s strategic motive?• What are their moves and reactions?
Competitive environmentCompetitive environment for for Eastman Kodak products in 1970sEastman Kodak products in 1970s
Kodak’s Kodak’s productproductss
Principal Principal competitocompetitorsrs
Kodak’s market Kodak’s market positionposition
Intensity and Intensity and bases of bases of competitioncompetition
LikelihooLikelihood of new d of new entrantsentrants
Kodak’s core Kodak’s core strategystrategy
Instant
camera
s &
instant
film
PolaroidChallenger to
a well-
established
leader
High &
increasing
with greater
emphasis on
innovation
High Penetration
pricing to
sell cameras
faster than
competitors
Photog
raphic
paper
Fuji Photo Film Co.
Leader but
being
threatened by
Fuji & other
Japanese
companies
High – the
attack is due
to stress on
lower prices &
quality
Medium Sustaining share by emphasizing quality of Kodak paper & educating consumers
Office
copiers
Xerox, IBM, 3M Late entrant
to highly
competitive
market- Xerox
held 75%
share
Very high –
due to greater
emphasis to
innovation,
cost & service
Very
high
(from
Japanes
e firms)
Separate sales & service network- leveraging firm’s image and marketing capabilities in microfilm equipment area
Industry CompetitionIndustry Competition
•Number of Sellers & Degree Number of Sellers & Degree
of Differentiationof Differentiation
•Entry, Mobility, Exit barriersEntry, Mobility, Exit barriers
•Cost StructureCost Structure
•Degree of Vertical IntegrationDegree of Vertical Integration
•Degree of GlobalizationDegree of Globalization
Industry Structure typesIndustry Structure types• Absolute Monopoly: Absolute Monopoly: Due to patent protection, license, economies-of-scale: Due to patent protection, license, economies-of-scale:
only one firm provides the product or service. (e.g. only one firm provides the product or service. (e.g. Pharmaceutical Co.s Pharmaceutical Co.s formulationsformulations))
• Differentiated Oligopoly: Differentiated Oligopoly: few firms produce specialized products- few firms produce specialized products- partially differentiated. (e.g. partially differentiated. (e.g. Zhandu & Dabur ChawanprashZhandu & Dabur Chawanprash))
• Pure Oligopoly: Pure Oligopoly: few firms produce the same product (e.g. few firms produce the same product (e.g. BHEL & BHEL & Crompton’s - Switchgears divisionCrompton’s - Switchgears division))
• OligopolisticOligopolistic: : Small number of producers who often act together to Small number of producers who often act together to
control the supply of a particular good and its market pricecontrol the supply of a particular good and its market price It is It is
dominated by a dominated by a few large suppliers who are interdependent on each few large suppliers who are interdependent on each otherother, before making any pricing and investment decisions. e.g. , before making any pricing and investment decisions. e.g. OPEC OPEC (The (The Organization of the Petroleum Exporting Countries, twelve countriesOrganization of the Petroleum Exporting Countries, twelve countries made up of Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria,
Qatar, Saudi Arabia, UAE and Venezuela) is an example of Oligopolistic is an example of Oligopolistic
since few countries control the production of oilsince few countries control the production of oil.. • Monopolistic competition: Monopolistic competition: many firms offer differentiated product/ many firms offer differentiated product/
service. (e.g. Banking, Insurance, Mutual Fund Companies)service. (e.g. Banking, Insurance, Mutual Fund Companies)
• Pure competition: Pure competition: numerous firms offer the same product/ service. (e.g. numerous firms offer the same product/ service. (e.g. reaching a stage similar to reaching a stage similar to pani-puri wallaspani-puri wallas))
Number of Sellers Number of Sellers && Degree of Degree of DifferentiationDifferentiation
• Pure MonopolyPure Monopoly: local cable network• OligopolyOligopoly: Pure oligopolyPure oligopoly like Oil, steel –
lower prices can only sustain market pie for lower prices can only sustain market pie for long runlong run; Differentiated oligopolyDifferentiated oligopoly like autos, camera – partially differentiated in quality, partially differentiated in quality, features, style & servicesfeatures, style & services.
• MonopolisticMonopolistic: Many competitors differentiate clearly on offers, concentrate on specific market segments and charge customized prices like restaurants, ethical drug manufacturers etc.
• Pure competitionPure competition: Many competitors offers the same product/service to many customers like commodity markets.
Five Industry Five Industry Structure typesStructure types
1. Pure Monopoly1. Pure Monopoly2. 2. DifferentiatDifferentiateded
OligopolyOligopoly
3. Pure 3. Pure
OligopolyOligopoly
4. 4. MonopolistiMonopolistic c
CompetitionCompetition
5. Pure 5. Pure
CompetitioCompetitionn
ONEONE
FEWFEW
MANMANYY
Differentiated product Differentiated product Undifferentiated productUndifferentiated product
Nu
mb
er
of
Nu
mb
er
of
Sell
ers
Sell
ers
Nu
mb
er
of
Nu
mb
er
of
Sell
ers
Sell
ers
Entry, Mobility Entry, Mobility && Exit Exit barriersbarriers
• Entry BarriersEntry Barriers:– High capital requirements
– Economies-of-scale
– Patents & license requirements
– Scarce locations & raw materials
– Scarce distributors/ channels
– Reputation & ‘trust’ factor
• Mobility BarriersMobility Barriers: heavy investment industries (infrastructure) are location specific – mobility is difficult compare to other industries.
• Exit BarriersExit Barriers:– Legal obligations
– Capital blockage/ investment
– Government restrictions
– Lack of alternative opportunities
Low, stableLow, stablereturnsreturnsLowLow
High, stableHigh, stablereturnsreturnsHighHigh
LowLow
Low, riskyLow, riskyreturnsreturns
High, riskyHigh, riskyreturnsreturns
HighHigh
E
ntr
y B
arr
iers
En
try
Barr
iers
Exit barriersExit barriers
Barriers and ProfitabilityBarriers and Profitability
Cost StructureCost StructureCost StructureCost Structure
• Heavy manufacturing – high – high
raw material costs.raw material costs.
• Confectionery & FMCG – high – high
distribution & marketing costs.distribution & marketing costs.
• Heavy manufacturing – high – high
raw material costs.raw material costs.
• Confectionery & FMCG – high – high
distribution & marketing costs.distribution & marketing costs.
Degree of Vertical Degree of Vertical IntegrationIntegration
Degree of Vertical Degree of Vertical IntegrationIntegration
Backward – or – Forward
integration:
Oil companies (Reliance Industries Oil companies (Reliance Industries
Ltd, RIL) – Oil exploration, Oil Ltd, RIL) – Oil exploration, Oil
drilling, Oil refining, Chemical drilling, Oil refining, Chemical
manufacturer & service stations.manufacturer & service stations.
Backward – or – Forward
integration:
Oil companies (Reliance Industries Oil companies (Reliance Industries
Ltd, RIL) – Oil exploration, Oil Ltd, RIL) – Oil exploration, Oil
drilling, Oil refining, Chemical drilling, Oil refining, Chemical
manufacturer & service stations.manufacturer & service stations.
Degree of GlobalizationDegree of GlobalizationDegree of GlobalizationDegree of Globalization
Nature of business like Oil, Oil,
Aircrafts, Cameras, Steel Aircrafts, Cameras, Steel
companiescompanies etc – need to grow fast
across geographies – to share risk
and achieve economies-of-scale
across markets – maintain the
pace of technological
inducements.
Nature of business like Oil, Oil,
Aircrafts, Cameras, Steel Aircrafts, Cameras, Steel
companiescompanies etc – need to grow fast
across geographies – to share risk
and achieve economies-of-scale
across markets – maintain the
pace of technological
inducements.
HighHigh
LowLowHighHigh
LowLow
Qu
ali
tyQ
uali
ty
Vertical IntegrationVertical Integration
Analyzing competitors: Strategic Analyzing competitors: Strategic GroupsGroups
Analyzing competitors: Strategic Analyzing competitors: Strategic GroupsGroups
Group AGroup A•Narrow lineNarrow line•Lower mfg. costLower mfg. cost•Very high serviceVery high service•High priceHigh price
Group DGroup D•Broad lineBroad line•Medium mfg. costMedium mfg. cost•Low serviceLow service•Low priceLow price
Group CGroup C•Moderate lineModerate line•Medium mfg. costMedium mfg. cost•Medium serviceMedium service•Medium priceMedium priceGroup BGroup B
•Full lineFull line•Low mfg. costLow mfg. cost•Good serviceGood service•Medium priceMedium price
Planet Health, Dialforhealth (Zydus), Planet Health, Dialforhealth (Zydus), Apollo chains/ GM & Ford Apollo chains/ GM & Ford (Automobiles)/ Haldiram (Mixtures)(Automobiles)/ Haldiram (Mixtures)
Planet Health, Dialforhealth (Zydus), Planet Health, Dialforhealth (Zydus), Apollo chains/ GM & Ford Apollo chains/ GM & Ford (Automobiles)/ Haldiram (Mixtures)(Automobiles)/ Haldiram (Mixtures)
GE, Whirlpool & GE, Whirlpool & SearsSears
GE, Whirlpool & GE, Whirlpool & SearsSears
ConfectionConfectionery shops ery shops (local), (local), Mother Mother Dairy (Milk Dairy (Milk variants)variants)
ConfectionConfectionery shops ery shops (local), (local), Mother Mother Dairy (Milk Dairy (Milk variants)variants)
V-mart, V-mart, Big Big BazarBazar
V-mart, V-mart, Big Big BazarBazar
Blue Line StrategyBlue Line Strategy****Prof. Chan Kim & Prof. Renee MouborgneProf. Chan Kim & Prof. Renee Mouborgne
Example: A highly competitive Example: A highly competitive
IndustryIndustry
The American The American Wine Industry Wine Industry
What the industry offers?What the industry offers?
Premium WinesPremium WinesPremium WinesPremium Wines Budget WinesBudget WinesBudget WinesBudget Wines
Massive ChoiceMassive ChoiceMassive ChoiceMassive Choice
Strategic GroupsStrategic Groups
American Wine American Wine IndustryIndustry
• 33rdrd largest in world: worth $20 billion largest in world: worth $20 billion
• Californian makes 66% - the rest is from Italy, Californian makes 66% - the rest is from Italy,
France, Spain, Chile, Argentina, AustraliaFrance, Spain, Chile, Argentina, Australia
• Exploding number of new wines – new Exploding number of new wines – new
vineyards in Oregon, Washington, New Yorkvineyards in Oregon, Washington, New York
• Customer base stagnantCustomer base stagnant
• 31st in the world in per capita consumption!31st in the world in per capita consumption!
American Wine American Wine IndustryIndustry
• Top 8 producers had 75% of the Top 8 producers had 75% of the market; 1600 had the remaining 25%market; 1600 had the remaining 25%
• $ millions spent in marketing – intense $ millions spent in marketing – intense competitioncompetition
• Sever price pressureSever price pressure
• The dominant growth strategy was The dominant growth strategy was towards premium wines – more towards premium wines – more complexity, better image, more complexity, better image, more prestigious vineyards, number of prestigious vineyards, number of medals won at wine festivals.medals won at wine festivals.
Very high
Off
eri
ng
Leve
l vs
. W
ine
Off
eri
ng
Leve
l vs
. W
ine
Dri
nkers
’ E
xp
ecta
tion
sD
rin
kers
’ E
xp
ecta
tion
s
High
Normal
Low
Very low
Non-existent
Abo
ve-t
he-li
ne-
mar
ketin
gA
ging
qua
lity
Vin
eyar
d pr
estig
e
and
lega
cyW
ine
com
plex
ity
Use
of c
ompl
ex
term
inol
ogy
and
dist
inct
ions
in w
ine
com
mun
icat
ion
Win
e ra
nge
Premium and Budget Premium and Budget WinesWines
Pri
ce
What people said …What people said …• “It is too confusing and complexIt is too confusing and complex”
– Wine descriptions and terminology
– The shopping experience (lack of ‘fun’)
– The lack of clear guidance on what to buy and drink
• Thus, non-influential for ‘non non-influential for ‘non customers’customers’ (the large majority of the US population who were not wine drinkers)
Yellow Tail created a Blue Yellow Tail created a Blue OceanOcean
PremiumPremium BudgetBudgetCreatingCreating
a Blue Oceana Blue Ocean
Yellow Tail StrategyYellow Tail Strategy• EliminatedEliminated:: Complex terminology and
distinctions, Above the line marketing
• ReducedReduced:: Wine complexity and Wine range
• RaisedRaised:: Price versus Budget Wines, Simplicity of retail store environment, Enthusiasm of Sales People
• CreatedCreated:: Easy drinking, Ease of selection, Sense of fun and adventure
Fun
and
adve
ntur
ous
Very high
High
Normal
Low
Very low
Non-existent
Abo
ve-t
he-li
ne-
mar
ketin
gA
ging
qua
lity
Eas
e of
sel
ectio
n
Eas
y dr
inki
ng
Vin
eyar
d pr
estig
e
and
lega
cyW
ine
com
plex
ity
Use
of c
ompl
ex
term
inol
ogy
and
dist
inct
ions
in w
ine
com
mun
icat
ion
Win
e ra
nge
Yellow Tail Value Yellow Tail Value CurveCurve
Pri
ce
Casella WinesCasella Wines: How they applied Blue Ocean How they applied Blue Ocean
Strategy?Strategy?• Casella Wines, an Australian wineryCasella Wines, an Australian winery, looked at the demand from drinkers of beer, spirits and ready-to-drink cocktails (3 times the US consumers of Wine)
• Redefined the wine industry with fun and adventure, nontraditional wine that is easy to drink.
• Offered and positioned as ‘Social drinkSocial drink’ accessible to everyone i.e. beer, cocktail and other drinkers of non-wine beverages.
• In 2 years, the fun and social drink (Yellow tail) emerged as the In 2 years, the fun and social drink (Yellow tail) emerged as the fastest growing brand in the history of Australian and US Wine fastest growing brand in the history of Australian and US Wine industries.industries.
• By Aug 2003, it was number 1 Red Wine in 730 ml bottle sold in US By Aug 2003, it was number 1 Red Wine in 730 ml bottle sold in US ahead of all the California labels with average annual sales of 4.5 ahead of all the California labels with average annual sales of 4.5 million cases.million cases.
• Company found that, US drinkers reject wine because of complicated US drinkers reject wine because of complicated taste and is difficult to appreciate. Beer and ready-to-drink cocktails taste and is difficult to appreciate. Beer and ready-to-drink cocktails were much sweeterwere much sweeter.
• They offered wine which was soft in taste and easily available like beer wine which was soft in taste and easily available like beer
and ready-to-drink cocktailsand ready-to-drink cocktails. They introduced primary flavors and primary flavors and
fruits flavors which provide sweet taste and customer feel fresher and fruits flavors which provide sweet taste and customer feel fresher and
would like to enjoy another glass of wine without thinkingwould like to enjoy another glass of wine without thinking.
ResultsResults• No 1 imported wine (outsells France
and Italy)
• Fastest growing wine in the history of the USA industry:
– New consumers of wine
– Jug drinkers trade up
– Premium wine drinkers trade down
• Industry criticizes them at first
• New wine gives it a “best buy” for value; New wine gives it a “best buy” for value; winning wine awards.winning wine awards.
Conventional LogicConventional Logic Blue Ocean LogicBlue Ocean Logic
IndustryIndustryAssumptionAssumption
Industry conditions are Industry conditions are givengiven
Industry condition can be Industry condition can be shaped.shaped.
SummarySummary
Strategic Strategic FocusFocus
Build competitive Build competitive advantages to beat the advantages to beat the competition.competition.
Create an Create an equity and
buyer value to dominate to dominate
and sustain the market.and sustain the market.CustomersCustomers
• Retain and expand the Retain and expand the
customer base through customer base through
further segmentation and further segmentation and
customization.customization.
• Focus on existing Focus on existing
customer differences.customer differences.
• Go for the mass of Go for the mass of
buyers buyers
• Focus onFocus on key customer key customer
valuevalue
Conventional LogicConventional Logic Blue Ocean LogicBlue Ocean Logic
SummarySummary
Assets &Assets &CapabilitiesCapabilities
Think in terms of a Think in terms of a
company’s existing company’s existing
assets and capabilities.assets and capabilities.
Build on what it has.Build on what it has.
Think free from a Think free from a
company’s existing assets company’s existing assets
and capabilities.and capabilities.
Ask, what if we start Ask, what if we start
anew?anew?Product/Product/ServiceServiceofferingsofferings
Think in terms of Think in terms of
products/services offered products/services offered
by the industry. Seek to by the industry. Seek to
maximize the value out maximize the value out
of these offerings.of these offerings.
Think in terms of buyers’ Think in terms of buyers’
solution even if that solution even if that
overrule the industry.overrule the industry. Seek Seek
to solve buyers’ major to solve buyers’ major
problems/compromises in problems/compromises in
using the products/services using the products/services
of the industry.of the industry.
What factors should What factors should be eliminated that be eliminated that
the industry has the industry has taken for granted?taken for granted?
EliminateEliminate
What factors should What factors should be reduced well be reduced well
below the industry below the industry standard?standard?
ReduceReduce
What factors should What factors should be created that the be created that the industry has never industry has never
offered?offered?
CreateCreate
What factors should What factors should be raised well beyond be raised well beyond
the industry the industry standard?standard?
RaiseRaise
Four Actions to create a Blue Four Actions to create a Blue OceanOcean
Market Structure & Market Structure &
StrategiesStrategies
MarketMarketLeaderLeader
MarketMarketChallengerChallenger
MarketMarketFollowerFollower
• Expand MarketExpand Market• Expand MarketExpand Market
• Defend Market Defend Market ShareShare
• Defend Market Defend Market ShareShare• Expand Market Expand Market ShareShare
• Expand Market Expand Market ShareShare
Attack Attack leaderleaderAttack Attack leaderleader
ImitatImitateeImitatImitatee
MarketMarketnichernicher
SpecialSpecial
izeize
SpecialSpecial
izeize
Microsoft Microsoft (softwares), Gillette (softwares), Gillette (razor blades), (razor blades), LG (consumer LG (consumer electronics)electronics)
Microsoft Microsoft (softwares), Gillette (softwares), Gillette (razor blades), (razor blades), LG (consumer LG (consumer electronics)electronics)
Kmart – Wal-Kmart – Wal-Mart, Nokia – Mart, Nokia – Motorola, Pepsi - Motorola, Pepsi - Coca-ColaCoca-Cola
Kmart – Wal-Kmart – Wal-Mart, Nokia – Mart, Nokia – Motorola, Pepsi - Motorola, Pepsi - Coca-ColaCoca-Cola
BMW, BMW, Tanisq, Tanisq, Kingfisher Kingfisher AirlinesAirlines
BMW, BMW, Tanisq, Tanisq, Kingfisher Kingfisher AirlinesAirlines
Bigbazar – Bigbazar – Superbazar Superbazar (Retail), (Retail), Godrej-Godrej-Whirlpool Whirlpool (refrigerator), (refrigerator), HMT-Titan HMT-Titan
Bigbazar – Bigbazar – Superbazar Superbazar (Retail), (Retail), Godrej-Godrej-Whirlpool Whirlpool (refrigerator), (refrigerator), HMT-Titan HMT-Titan
Market LeaderFirm with the Largest Firm with the Largest
Market ShareMarket Share
Market LeaderFirm with the Largest Firm with the Largest
Market ShareMarket Share
• Expand Total MarketExpand Total Market• Protect Market ShareProtect Market Share• Expand Market ShareExpand Market Share
• Expand Total MarketExpand Total Market• Protect Market ShareProtect Market Share• Expand Market ShareExpand Market Share
Competitive PositionsCompetitive PositionsCompetitive PositionsCompetitive Positions
Market ChallengerRunner-Up Firms thatRunner-Up Firms that
Fight Hard to Increase Fight Hard to Increase Market ShareMarket Share
Market ChallengerRunner-Up Firms thatRunner-Up Firms that
Fight Hard to Increase Fight Hard to Increase Market ShareMarket Share
Market FollowersRunner-Up Firms that WantRunner-Up Firms that Wantto Hold Their Share Withoutto Hold Their Share Without
Rocking the BoatRocking the Boat
Market FollowersRunner-Up Firms that WantRunner-Up Firms that Wantto Hold Their Share Withoutto Hold Their Share Without
Rocking the BoatRocking the Boat
Market NichersFirms that Serve SmallFirms that Serve SmallSegments Not BeingSegments Not Being
Pursued by Other FirmsPursued by Other Firms
Market NichersFirms that Serve SmallFirms that Serve SmallSegments Not BeingSegments Not Being
Pursued by Other FirmsPursued by Other Firms
Follow CloselyFollow CloselyFollow at a DistanceFollow at a Distance
Follow CloselyFollow CloselyFollow at a DistanceFollow at a Distance
By Customer, Market,By Customer, Market,Quality-Price, ServiceQuality-Price, Service
Multiple NichingMultiple Niching
By Customer, Market,By Customer, Market,Quality-Price, ServiceQuality-Price, Service
Multiple NichingMultiple Niching
Full Frontal AttackFull Frontal AttackIndirect AttackIndirect Attack
Competitive Competitive PositionsPositions
Competitive Competitive StrategiesStrategies
Strategies for Market LeadersStrategies for Market Leaders
Market Market LeadershipLeadershipMarket Market
LeadershipLeadership
Expansion of theExpansion of the Overall marketOverall market
Expansion of theExpansion of the Overall marketOverall market
Defending theDefending theExisting Existing
market sharemarket share
Defending theDefending theExisting Existing
market sharemarket share
Expansion of theExpansion of theCurrent Current
market sharemarket share
Expansion of theExpansion of theCurrent Current
market sharemarket share
• Targeting customer groups
that currently are non-users
• Identifying new uses for
product/service
• Increasing usage rates
• Targeting customer groups
that currently are non-users
• Identifying new uses for
product/service
• Increasing usage rates
• Strong market positioning• Development & refinement of competitive advantages• Continuous product & process innovation• proactive• Heavy promotions• Strong customer relations• Strong channel relations
• Strong market positioning• Development & refinement of competitive advantages• Continuous product & process innovation• proactive• Heavy promotions• Strong customer relations• Strong channel relations
• Heavy promotions• Improved distribution• Price incentives• product portfolio expansion• Mergers & Takeovers• Geographic expansion• Distribution expansion
• Heavy promotions• Improved distribution• Price incentives• product portfolio expansion• Mergers & Takeovers• Geographic expansion• Distribution expansion
Stage 1: Expansion of Overall Stage 1: Expansion of Overall MarketMarket• Strategy: Search for new usersSearch for new users
HONDA’s Strategies for Indian MarketsHONDA’s Strategies for Indian MarketsYear Year & & StrategyStrategy
Target Target CustomersCustomers
Offer Offer && promotional promotional
emphasisemphasis
1960s-1970s:1960s-1970s:Developed range of Developed range of small-economic-small-economic-light weight light weight motorcyclesmotorcycles
Honda increased its Honda increased its sales by targeting sales by targeting groups that groups that traditionally had traditionally had never bought never bought motorcyclesmotorcycles..
heavy advertising heavy advertising giving emphasis to giving emphasis to – – ‘convenience’ ‘convenience’ andand ‘style’‘style’
1980s:1980s:
identified potential identified potential
for selling for selling
motorcycles – motorcycles –
delivering a fashion delivering a fashion
symbol – ‘styling’ symbol – ‘styling’
become relevant – become relevant –
repositioning.repositioning.
middle-aged middle-aged
executive marketexecutive market
• Offer: Series of Offer: Series of
larger motorcycle. larger motorcycle.
• Supported by Supported by
heavy advertising – heavy advertising –
emphasis on emphasis on
youthful valuesyouthful values..
Stage 2: Expansion of Overall Stage 2: Expansion of Overall MarketMarket
• Strategy: Strategy: New UsesNew Uses
Company Initial uses Reformulated/ redefined uses
Du Pont’s-
Nylon
used as synthetic used as synthetic
fibre for fibre for
parachutesparachutes
used for shirts, used for shirts,
tyres, carpets, tyres, carpets,
various industrial various industrial
and engineering and engineering
usesuses
Teflon –
lubricants
and Oils
used as high used as high
performance performance
lubricant for lubricant for
American space American space
programmeprogramme
•for applications for applications
in cooking and in cooking and
motor oils; motor oils;
•protection for protection for
fabrics, cloths and fabrics, cloths and
carpets.carpets.
Stage 3: Expansion of Overall Stage 3: Expansion of Overall MarketMarket
• Strategies: Greater usage levelsGreater usage levels
(existing users – increasing usage rates)(existing users – increasing usage rates)* Procter & Gamble (P&G) – * Procter & Gamble (P&G) –
Head & ShouldersHead & Shoulders Shampoo Shampoo
• Basis of promotion: Basis of promotion: two applicationstwo applications
were more effective than were more effective than oneone..
• Preity Zinta – Brand AmbassadorPreity Zinta – Brand Ambassador
• 9 billion – shampoo market9 billion – shampoo market
Procter & Gamble (P&G) – Procter & Gamble (P&G) – Head & Shoulders Head & Shoulders ShampooShampoo
1. The ad opens with a 1. The ad opens with a product shot of a Head product shot of a Head & Shoulders shampoo & Shoulders shampoo bottle.bottle.
1. The ad opens with a 1. The ad opens with a product shot of a Head product shot of a Head & Shoulders shampoo & Shoulders shampoo bottle.bottle.
2. In the next scene, Preity Zinta 2. In the next scene, Preity Zinta is shown washing her hair with is shown washing her hair with the shampoo.the shampoo.
2. In the next scene, Preity Zinta 2. In the next scene, Preity Zinta is shown washing her hair with is shown washing her hair with the shampoo.the shampoo.
3. Feeling 3. Feeling her freshly her freshly washed hair washed hair Preity Preity comments, comments, ""ItneItne soft soft baalbaal, , kya aap kya aap nahin chahte nahin chahte yeh ehsas yeh ehsas din bhar din bhar raherahe?"?"
3. Feeling 3. Feeling her freshly her freshly washed hair washed hair Preity Preity comments, comments, ""ItneItne soft soft baalbaal, , kya aap kya aap nahin chahte nahin chahte yeh ehsas yeh ehsas din bhar din bhar raherahe?"?"
4. Walking before the 4. Walking before the photographers, the actress photographers, the actress showing off her hair. showing off her hair. ""PaaiyePaaiye dandruff free soft dandruff free soft baalbaal, , dono ek saathdono ek saath......
4. Walking before the 4. Walking before the photographers, the actress photographers, the actress showing off her hair. showing off her hair. ""PaaiyePaaiye dandruff free soft dandruff free soft baalbaal, , dono ek saathdono ek saath......
5. ...Head & 5. ...Head & Shoulders Shoulders smooth and smooth and silky silky sese. . YehYeh dandruff dandruff hundred hundred percent percent hataye hataye auraur moisturise moisturise bhi karenbhi karen, , baal rahebaal rahe soft soft subah se raat subah se raat taktak."."
5. ...Head & 5. ...Head & Shoulders Shoulders smooth and smooth and silky silky sese. . YehYeh dandruff dandruff hundred hundred percent percent hataye hataye auraur moisturise moisturise bhi karenbhi karen, , baal rahebaal rahe soft soft subah se raat subah se raat taktak."." 6. It is work 6. It is work
time and the time and the
star's co-actor star's co-actor
too busy too busy
admiring the admiring the
former's hair, former's hair,
fails to hear fails to hear
the director the director
saying, "Cut."saying, "Cut."
6. It is work 6. It is work
time and the time and the
star's co-actor star's co-actor
too busy too busy
admiring the admiring the
former's hair, former's hair,
fails to hear fails to hear
the director the director
saying, "Cut."saying, "Cut."
7. Seeing the two actors 7. Seeing the two actors carrying carrying on with the scene, the on with the scene, the director director has to once again has to once again scream, "Cut" and give scream, "Cut" and give them a jolt.them a jolt.
7. Seeing the two actors 7. Seeing the two actors carrying carrying on with the scene, the on with the scene, the director director has to once again has to once again scream, "Cut" and give scream, "Cut" and give them a jolt.them a jolt.
8. At this the 8. At this the two suddenly two suddenly wake up and wake up and smile smile sheepishly - sheepishly - "Head & "Head & Shoulders Shoulders smooth and smooth and silky, dandruff silky, dandruff free soft free soft baalbaal, , subah se raat subah se raat taktak."."
8. At this the 8. At this the two suddenly two suddenly wake up and wake up and smile smile sheepishly - sheepishly - "Head & "Head & Shoulders Shoulders smooth and smooth and silky, dandruff silky, dandruff free soft free soft baalbaal, , subah se raat subah se raat taktak."."
Strategies of Market Leader: 1. Expanding the total market1. Expanding the total market
• New customers: New customers: those who might have use those who might have use
it but occassionally (it but occassionally (market-penetration market-penetration
strategy – chocolatesstrategy – chocolates); those who had never ); those who had never
used it (used it (new market segment strategy – new market segment strategy –
filtered vs. instant coffee ‘Nescafe’filtered vs. instant coffee ‘Nescafe’); or ); or
new geographical locations (new geographical locations (geographical-geographical-
expansion strategy- McDonald’sexpansion strategy- McDonald’s).).
• More or additional usage: More or additional usage: soft drinks and soft drinks and
snacks markets – snacks markets – identify opportunities/ identify opportunities/
‘gaps’‘gaps’ in HHs schedule. in HHs schedule.
Strategies of Market Leader: 2. Defending the Market Share2. Defending the Market Share Caterpillar Caterpillar become leader in the construction-equipment become leader in the construction-equipment
market by wider service, consistent performance and market by wider service, consistent performance and premium pricing being challenged by players like Komatsu, premium pricing being challenged by players like Komatsu, Hitachi and many others. Co. adopted following strategiesHitachi and many others. Co. adopted following strategies::
• Consistent performanceConsistent performance: high quality outputs every time, : high quality outputs every time, reliability & durability, identifying buyer considerations/ reliability & durability, identifying buyer considerations/ preferences etc.preferences etc.
• Extensive Extensive && efficient dealership network efficient dealership network: larger : larger penetration to serve buyer at all possible market points.penetration to serve buyer at all possible market points.
• Superior serviceSuperior service: enhancing the concept of product/service : enhancing the concept of product/service over time both by capturing the market expectations and over time both by capturing the market expectations and analyzing the market trends.analyzing the market trends.
• Full-line strategyFull-line strategy: provide wide range of products/ services : provide wide range of products/ services to provide a one-stop shopping.to provide a one-stop shopping.
• FeedbacksFeedbacks: prompt responses at regular intervals to gauge : prompt responses at regular intervals to gauge the direction of performance.the direction of performance.
Strategies of Market Leader: 2. Defending the Market Share2. Defending the Market Share
cont… cont…
Strategies of Market Leader: 2. Defending the Market Share2. Defending the Market Share
cont… cont…
Satisfying Satisfying
customer customer needsneeds
Satisfying Satisfying
customer customer needsneeds
Defending market shareDefending market shareDefending market shareDefending market share
RESPONSIVRESPONSIV
E E
MARKETINMARKETIN
GG
Concentrate Concentrate on on Stated/expliciStated/explicit needs and t needs and serve serve accordinglyaccordingly
RESPONSIVRESPONSIV
E E
MARKETINMARKETIN
GG
Concentrate Concentrate on on Stated/expliciStated/explicit needs and t needs and serve serve accordinglyaccordingly
ANTICIPATED ANTICIPATED MARKETINGMARKETING
Predicting the Predicting the future probable future probable needs of the needs of the customerscustomers
ANTICIPATED ANTICIPATED MARKETINGMARKETING
Predicting the Predicting the future probable future probable needs of the needs of the customerscustomers
CREATIVECREATIVEMARKETINGMARKETING
Discovers Discovers && produces pdt./ produces pdt./ service service solutions, to solutions, to which which customer customer likely to likely to response response positivelypositively
CREATIVECREATIVEMARKETINGMARKETING
Discovers Discovers && produces pdt./ produces pdt./ service service solutions, to solutions, to which which customer customer likely to likely to response response positivelypositively
e.g. Sony e.g. Sony introduced introduced many pdts. likemany pdts. like Walkmans, VCRs, Videocameras, and CDs.
e.g. Sony e.g. Sony introduced introduced many pdts. likemany pdts. like Walkmans, VCRs, Videocameras, and CDs.
e.g. HLLs toothpastes based on e.g. HLLs toothpastes based on research on research on herbal, salts and other natural ingredients, & , & Nokia Nokia mobile phones etc.
e.g. HLLs toothpastes based on e.g. HLLs toothpastes based on research on research on herbal, salts and other natural ingredients, & , & Nokia Nokia mobile phones etc.
e.g. pdt. e.g. pdt. categories like categories like milk, commodities like commodities like sugar, salt etc.
e.g. pdt. e.g. pdt. categories like categories like milk, commodities like commodities like sugar, salt etc.
Defense StrategiesDefense Strategies Market leader uses the strategies to:
• reduce the probability of present or reduce the probability of present or
future attack.future attack.
• divert attacks to less threatening divert attacks to less threatening
areas.areas.
• lessen the intensity of competition.lessen the intensity of competition.
Defense Strategies
AttackerAttacker
(3)(3) PreemptivePreemptivedefensedefense
(4)(4) Counter-Counter-offensiveoffensivedefensedefense Defender
(1)Positiondefense
(5)Mobiledefense
(2) Flank defense
(6) Contraction(6) Contractiondefensedefense
Six Defensive StrategiesSix Defensive Strategies• Position Defense: building superior brand power and building superior brand power and
making the name unique in the market. making the name unique in the market. e.g. Nescafé.• Flank Defense: to protect a weak front or use as to protect a weak front or use as
counterattack. counterattack. e.g. HLL’s Surf Excel powder – price hike
from Rs. 19 to Rs. 20 to consolidate the position in detergent market specially against small players in the Indian market- protect and leverage brand identity.
• Preemptive Defense: Attack before the competitor Attack before the competitor starts its offense. starts its offense. e.g. ICICI Bank’s ATM networks and core banking across branches keep their local and regional banks competition on check, and , and Microsoft’s ‘preannouncementpreannouncement’ approach on new software launch in future – force smaller firms to concentrate on other segments.
Six Defensive StrategiesSix Defensive Strategies cont…cont…
• Counter-offensive Defense: Attack the competitor from Attack the competitor from front or protect the weak front (Flank attack). front or protect the weak front (Flank attack). e.g. US Automobile companies often launch a counteroffensive attack against Japanese counterparts in their markets for the disturbances that had been created by them in US market.
• Mobile Defense: Market leader stretches/ leverage its Market leader stretches/ leverage its strengths into new sales territories – can serve for future strengths into new sales territories – can serve for future centers for defense & offense – centers for defense & offense – market broadeningmarket broadening like Reliance from Petroleum into Energy (using R&D for Oil, coal, hydroelectric and chemicals), and and market market diversificationdiversification like ITC from Cigarettes into e-choupals, garments etc.
• Contraction Defense: When it is difficult to defend the old When it is difficult to defend the old territories, leader go for ‘territories, leader go for ‘planned contractionplanned contraction’ (’ (strategic withdrawal) – ) – giving up weaker/ unprofitable territories and giving up weaker/ unprofitable territories and reassigning resources to stronger territoriesreassigning resources to stronger territories - like US companies relocating their operations from Europe to emerging economies like India & China.
Major Strategic Objectives- Major Strategic Objectives- Market Challenger Market Challenger
•Firms attack the leader to grab Firms attack the leader to grab further market sharefurther market share - South Korean companies like LGLG (TV and (TV and AC markets), AC markets), HyundaiHyundai, , SamsungSamsung etc.etc.
•Out-innovate the leader across Out-innovate the leader across the segmentsthe segments - XeroxXerox took copier took copier market from market from 3M3M by providing better by providing better copier solutions, later copier solutions, later CanonCanon grab grab share of Xerox by introducing desk share of Xerox by introducing desk copiers.copiers.
Attack StrategiesAttack Strategies
AttackerAttackerDefenderDefender
(3) Encirclement Encirclement attackattack
(4) Bypass attackBypass attack
(2) Flank Flank attackattack
(5) Guerilla Guerilla attackattack
(1) Frontal Frontal attackattack
Attacking StrategiesAttacking Strategies• Frontal Attack: attacker concentrate on attacker concentrate on
leader’s product ranges, advertising, price & leader’s product ranges, advertising, price &
distribution like distribution like Pepsi-Coca Cola, HLL-P&G..
• Flank Attack: Hit competitor’s weak front Hit competitor’s weak front
at two strategic dimensions – at two strategic dimensions – geographic
and and segmental. Geographical like like IBM’s rival Honeywell set-up sales branches in smaller cities, that were not targeted by IBM. Segmental like like Japanese automobile co.s did against US auto makers by developing fuel-efficient cars.
Attacking StrategiesAttacking Strategies cont… cont…• Bypass Attack: Indirect assault strategy – Indirect assault strategy – bypass bypass
the rival and attack the easier markets to the rival and attack the easier markets to broaden the resource base and share the riskbroaden the resource base and share the risk. . Can be done through:Can be done through:– Diversifying into unrelated product categories– Diversifying into new geographical areas– Launch new technologies to enhance existing products
e.g. e.g. Pepsi used bypass strategy against Coke by:by:– Purchasing the Purchasing the Orange juice giant ‘ ‘TropicanaTropicana’ for ’ for
$3.3 billion in 1998$3.3 billion in 1998 which is double the market which is double the market share of share of Coca Cola’s ‘ ‘Minute MaidMinute Maid’.’.
– Acquired Acquired The Quaker Oats Co. for for $14 billion in $14 billion in 20002000 – ‘ – ‘GatoradeGatorade’ thirst quenchers (health drink) ’ thirst quenchers (health drink) captured huge share from captured huge share from Coca Cola’s ‘ ‘PoweradePowerade’.’.
Attacking Strategies Attacking Strategies cont…cont…
• Encirclement Attack: Capture large proportion Capture large proportion
of leader’s share by launching massive of leader’s share by launching massive
offensive attack on several frontsoffensive attack on several fronts. Use when . Use when
challenger commands superior resources/ coverage. challenger commands superior resources/ coverage. Mohan’s against Kelloggs Cornflakes in India based on price points and distribution coverage – from groceries to organised chains.
• Guerrilla Attack: Launching small and irregular Launching small and irregular attacks to make competitor tired – to secure attacks to make competitor tired – to secure permanent foothold in the marketpermanent foothold in the market – by both – by both conventional & unconventional means like price conventional & unconventional means like price cuts, intensive promotions etc. cuts, intensive promotions etc. e.g. small Generic players against the Ethical drug manufacturers.
Specific Attack StrategiesSpecific Attack Strategies• Price-discount Price-discount – – Super Bazar vs. Big Bazar daily Super Bazar vs. Big Bazar daily
price offers across categories.price offers across categories.• Cheaper goods/ services Cheaper goods/ services (low quality) – Nirma, (low quality) – Nirma,
SpiceJet & IndiGo. SpiceJet & IndiGo. • Value priced goods/services Value priced goods/services – Nirma’s Nima – Nirma’s Nima
soap, Subhiksha, Air Deccan.soap, Subhiksha, Air Deccan.• Prestige goodsPrestige goods – (high quality-premium price) – – (high quality-premium price) –
Samsung India launch Plasma TVs to attack the Samsung India launch Plasma TVs to attack the Sony’s markets.Sony’s markets.
• Product proliferation Product proliferation (large pdt. variety – more (large pdt. variety – more choice) - Asian Paints against ICI paints.choice) - Asian Paints against ICI paints.
• Product innovation Product innovation – 3M entered new markets – 3M entered new markets through breakthrough technologies into their through breakthrough technologies into their product ranges.product ranges.
Specific Attack StrategiesSpecific Attack Strategies cont…cont…
• Improved servicesImproved services – ICICI Bank offers better – ICICI Bank offers better
ATM and core Banking coverage against HSBC ATM and core Banking coverage against HSBC
in India.in India.
• Distribution innovationDistribution innovation – Dell vs. other – Dell vs. other
traditional rivals like Compaq, HP, and IBM.traditional rivals like Compaq, HP, and IBM.
• Reduced Manufacturing costReduced Manufacturing cost – US – US
automobile co.s operations in India to sustain automobile co.s operations in India to sustain
their share in developed markets like US, their share in developed markets like US,
Europe.Europe.
• Intensive advertising promotionIntensive advertising promotion – Pepsi & – Pepsi &
Coca Cola wars.Coca Cola wars.
Market Follower StrategiesMarket Follower StrategiesFour broad strategies adopted are:
• Counterfeiter:Counterfeiter: Duplicated leader’s products and sell in the ‘parallel’ or grey market like general like general generic drugs, China’s toy manufacturersgeneric drugs, China’s toy manufacturers.
• Cloner:Cloner: Use the leader’s products, name, packaging with slight variations like electric fittings, pipe like electric fittings, pipe fittings at local markets.fittings at local markets.
• Imitator:Imitator: copy few things but also maintains differentiation in packaging, promotions, & pricing like Domino Pizza vs. Pizza Hut.like Domino Pizza vs. Pizza Hut.
• Adapter:Adapter: Adapt with better offer or improved version of leader’s products – launch in the same or different markets – Kissan vs. Maggi’s Tomato Kissan vs. Maggi’s Tomato KetchupKetchup.
““Nichemanship”Nichemanship”• End-userEnd-user specialist specialist (price premiums (price premiums
earned by retailers like Pantaloons and earned by retailers like Pantaloons and similar others)similar others)
• Vertical-level Vertical-level specialist specialist (chemical or (chemical or drug companies)drug companies)
• Customer-sizeCustomer-size specialist specialist (M80 mopeds (M80 mopeds in rural India being neglected by big in rural India being neglected by big players)players)
• Specific-customerSpecific-customer specialist specialist (BHEL, (BHEL, Crompton Ltd)Crompton Ltd)
• GeographicGeographic specialist specialist (Wagh Wakri tea (Wagh Wakri tea in Gujarat)in Gujarat)
“ “Nichemanship”Nichemanship”
cont… cont…• Product or product-lineProduct or product-line specialist specialist (Levi’s, Peter (Levi’s, Peter
England, Parker)England, Parker)
• Product-feature Product-feature specialistspecialist (few Insurance Co. only (few Insurance Co. only
cover Marine insurance)cover Marine insurance)
• Job-shopJob-shop specialist (customised) specialist (customised) (Dell, 7-Eleven’s)(Dell, 7-Eleven’s)
• Quality-price Quality-price specialistspecialist (HP, Apple – high quality & (HP, Apple – high quality &
high price computer systems & peripherals)high price computer systems & peripherals)
• ServiceService specialist specialist (Banks having -evening branches)(Banks having -evening branches)
• ChannelChannel specialist specialist (Nike’s & Addidas exclusive (Nike’s & Addidas exclusive
outlets)outlets)
Balance b/w Balance b/w Customers Customers && CompetitorsCompetitors
CompetitionCompetitionCustomerCustomer
+ Fighter + Fighter orientationorientation+ Alert against + Alert against future movesfuture moves+ Exploit + Exploit weaknessesweaknesses - - ReactivReactivee
+ Identify opportunities+ Identify opportunities+ Long-run profit+ Long-run profit
+ Emerging needs & groups+ Emerging needs & groups
Developing Competitive Marketing Strategies
Overall CostOverall CostLeadershipLeadership
Overall CostOverall CostLeadershipLeadership
DifferentiationDifferentiationDifferentiationDifferentiation
FocusFocusFocusFocus
Middle ofMiddle ofthe Roadthe RoadMiddle ofMiddle ofthe Roadthe Road
Basic Competitive StrategiesBasic Competitive StrategiesBasic Competitive StrategiesBasic Competitive Strategies
Developing Competitive Marketing Developing Competitive Marketing StrategiesStrategies
Balancing Customer and Balancing Customer and Competitor OrientationsCompetitor Orientations
Balancing Customer and Balancing Customer and Competitor OrientationsCompetitor Orientations
ProductProductOrientationOrientation
ProductProductOrientationOrientation
CompetitorCompetitorOrientationOrientationCompetitorCompetitorOrientationOrientation
CustomerCustomerOrientationOrientationCustomerCustomer
OrientationOrientation
MarketMarketOrientationOrientation
MarketMarketOrientationOrientation
Com
peti
tion
-Cen
tere
dC
om
peti
tion
-Cen
tere
dC
om
peti
tion
-Cen
tere
dC
om
peti
tion
-Cen
tere
d NoNoNoNo YesYesYesYes
Customer-CenteredCustomer-CenteredCustomer-CenteredCustomer-Centered
NoNoNoNo
YesYesYesYes
SWOT ANALYSISSWOT ANALYSIS