Chapter 11 Dealing with Competition

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Contents.. 1. 2. 3. 4. 5. 6. 7. Competitive Forces Identifying Competitors Analyzing Competitors Competitive Strategies for Competitive Strategies for Competitive Strategies for Competitive Strategies for

Leaders Challenger Follower Nichers

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Threat of:

1. Competitive Forces
Figure : Five Forces Determining Segment Structural Attractiveness

intense segment rivalry (Intense

competition competition.FC high lead high exit barrier and resulting price war)

new entrants

(attractive if entry barrier is high but low exit barrier)

substitute products buyers buyers growing bargaining power (Wal (Walsuppliers suppliers growing bargaining power (OPEC and Shell)

Mart creates threats to other firms due to bargaining power)

1. Competitive Forces 1/1

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2. Identifying Competitors Industry Concept of Competition

Industry (A group of firms that offer a product or class of products that are close substitutes for one another) Number of Sellers & Degree of Differentiation Pure monopoly ( A certain pdt in a certain country/ area) area) Oligopoly
Pure oligopoly: Few companies producing same
commodit y (Oil)

Differentiated oligopoly: Partially differentiated

along line s of features or service s (mobile phone)

Monopolistic competition Pure competition

2. Identifying Competito rs 1/3

(to differentiate offers in whole or in part (restaurants or beaut y shop s) (Many competitors offers same product to many consumer s)
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2. Identifying Competitors
Entry, Mobility, Exit Barriers
Entry barriers
industry) industry) ( It is easy to open an restaurant but not aircraft (When it tries to enter into more attracti ve

Mobility barriers
segments)

Exit barriers

(Legal restriction to customers, creditor s and

emplo yees and other factors)

Cost Structure

(steel industry for high cost on raw materials whether toy on distribution and promotion)

Degree of Vertical Integration

Vertical integration (backward or forward integration)

Degree of Globalization
2. Identifying Competito rs 2/3

(local or global; camera)

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2. Identifying Competitors
Market Concept of Competition
(Direct/Indirect Competition Kodak)

2. Identifying Competito rs 3/3

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3. Analyzing Competitors
Strategies: A group of firms following the same strategy in a given target market is called strategic group
Fig: Strategic Group s in the Major Appliance Industr y

3. Analyzing Competitor s 1/6

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3. Analyzing Competitors
Objectives: What their competitors trying to seek in the

market place and what drives each competitors behavior?

Figure : A Competitors Expansion Plans

3. Analyzing Competitor s 2/6

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3. Analyzing Competitors

Strengths and Weaknesses

Dominant Strong Favorable Tenable (able to be occupied ) Weak Nonviable

3. Analyzing Competitor s 3/6

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3. Analyzing Competitors

Three Variables to Monitor When Analyzing Competitors:

Share of market (Competitor s share of the (Competitor
market)

Share of mind (First company comes to mind) Share of heart (Company prefer to buy)

3. Analyzing Competitor s 4/6

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Table : Customers Ratings of Competitors on Key Success Factors

Customer Product Product Awareness Quality Availability Competitor A Competitor B Competitor C E G F E G P P E G

Technical Assistance P G F

Selling Staff G E F

Note: E = excellent, G = good, F = fair, P = poor.

3. Analyzing Competitor s 5/6

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3. Analyzing Competitors
Selecting Competitors Strong versus Weak
(Most compan y aim to shot the weak competitors, thi s requires fewer re source per share point gained) (Compete with competitors who resemble them, Chevrolet competes with Ford rather Ferrari)

Close versus Distant

Good versus Bad (Attack bad competitors Good Bad

and support good competitors .due to follow indu stry competitors rule s, set rea sonable price compare to cost etc.)

3. Analyzing Competitor s 6/6

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Designing Competitive Strategies

Hypothetical Market Structure

Designing Competitive Strategies 1/1

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4. Competitive Strategies for Leader

Market-Leader Strategies Market Expanding the Total Market
New Users
not)

Market-penetration strateg y (Those who might use it but do Market New-market segment strateg y (Who never use it) New Geographical-expansion strategy (Those who live Geographical-

New Uses Mo re Usage

elsewhere)

(by quantity of consumption or frequency of consumption)

Defending Market Share

Premium Performance: CAT produces high quality of pdts Extensive dealership: Largest number of dealership Superior service: World wide parts and service system FullFull -line strategy: Full line of construction equipment Good financing: Offering good terms to their customer s
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4. Competitive Strategies for Leader 1/4

Caterpillar

4. Competitive Strategies for Leader 2/4

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Human Labor Excavator

4. Competitive Strategies for Leader 3/4
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4. Competitive Strategies for Leader

Defense Strategies
Position Defense (Most de sirable market space; Cre st for cavity) Flank Defense ( Protect the weak front or sides for counter attack) attack) Preemptive/done before others can act Defense (Attack before
enem y start it s offense)

Counteroffensive Defense ( When attacked the respond with counter

attack) attack)

Mobile Defense
Market broadening ( Oil Co. for coal, nuclear, hydroelectric etc.) (Oil Market diver sification (Shifting to unrelated industry)

Contraction Defense
Planned contraction (Strategic withdra wal)

4. Competitive Strategies for Leader 4/4

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5. Competitive Strategies for Challenger

Market-Challenger Strategies
Defining Strategic Objective & Opponent(s)
It can attack the market leader ( Canon grabbed Xerox
with desk copier)

It can attack firms of its own size that are not doing the job and are underfinanced ( firms charging excessive
price or not satisfying customers)

It can attack small local and regional firms

Choosing a General Attack Strategy

5. Competitive Strategies for Cha llenger 1/4

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By passing enemy attacking easier markets (PepsiCo bought Tropicana; orange juice) Geographi c or segmental Attackers matches opponents products, advertising, price and distribution

With superior resources and believes to break the will of opponent Selective price cut, Intense promotional blitzes /concentrated effort & occasional legal action
5. Competitive Strategies for Cha llenger 2/4
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Guerrilla/< Spanish, "raiding party, skirmish" <

guerra "war"

Gorilla/the largest ape

5. Competitive Strategies for Cha llenger 3/4
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5. Competitive Strategies for Challenger

Choosing a Specific Attack Strategy
Price-discount Price Lower price goods Prestige goods Product proliferation (larger product variety) Product innovation Improved services Distribution innovation (Avon door to door selling) Manufacturing cost reduction Intensive advertising promotion
5. Competitive Strategies for Cha llenger 4/4
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6. Competitive Strategies for Follower

Innovative imitation (Product imitation) Product innovation Four Broad Strategies:
Counterfeiter ( duplicates the leaders product & sell in black market) Cloner (Pdts, name and packaging with slight variation) Pdts, Imitator ( copies something from the leader but maintains differentiation) Adapter ( takes leaders products and adapts or improves them)

6. Competitive Strategies for Follo wer 1/1

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7. Competitive Strategies for Nicher

High margin (nicher) vs high volume (mass marketer) (nicher) Nicher Specialist Roles

End-user specialist (Value-added reseller) End(Value Vertical-le vel speciali st Vertical(Copper firm raw copper/ processed copper/copper items)

Cu stomer-size specialist (H/M/L) stomer Specific-customer speciali st (sale to one or few customer) Specific Geographic speciali st Product or product-line speciali st (Only sales Microwa ve oven) product Product-feature specialist Product Job- shop speciali st (customization) Job Quality-price specialist (high or low qualit y) Quality Service specialist (24 hr after sales service) Channel specialist (Ga soline to home deliver y/Gas Station )

7. Competitive Strategies for Nicher 1/1

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