CREATING COMPETITIVE ADVANTAGE

OBJECTIVES OF THE SESSION

Before delving into the specifics, let's outline the core objectives this report aims to accomplish.
 Discuss the need to understand competitors as well as customers through competitor
analysis.
 Explain the fundamentals of competitive marketing strategies based on creating value to
customers.
 The need for balancing various orientations in becoming a truly market-centered
organization.

DEFINITIONS
1. COMPETITIVE ADVANTAGE = an advantage over competitors gained by offering
consumers greater value, either through lower prices or by providing more benefits that
justify higher prices.
2. COMPETITOR ANALYSIS = the process of identifying key competitors; assessing their
objectives, strategies, strengths and weaknesses, and reaction patterns; and selecting
which competitors to attack or avoid.
3. COMPETITIVE MARKETING STRATEGIES = strategies that strongly position the
company against competitors and that give the company the strongest possible strategic
advantage.

STEPS IN ANALYZING COMPETITORS

1. Identifying the company’s competitors
2. Assessing competitors’ objectives, strategies, strengths and weaknesses, and reaction
patterns
3. Selecting which competitors to attack or avoid

IDENTIFYING COMPETITORS
Industry concept of competition: group of firms that offer a product or class of products
that are close substitutes for one another.
Market concept of competition: companies that satisfy the same customer need.

ANALYZING COMPETITORS
 DETERMINING COMPETITORS’ OBJECTIVES
- Each competitor has a mix of objectives
- Knowing a competitor’s mix of objectives reveals whether the competitor is satisfied
with its current situation and how it might react to different competitive actions.
- A company also must monitor its competitors’ objectives for various segments.
 IDENTIFYING COMPETITORS’ STRATEGIES
- Strategic group = group of firms in an industry following the same or a similar strategy
in a given target market.
- Although competition is most intense within a strategic group, there is also rivalry
among groups due to:
 Some of the strategic groups may appeal to overlapping customer segments.
 The customers may not see much difference in the offers of different groups.
 Members of one strategic group might expand into new strategy segments.
  ASSESSING COMPETITORS’ STRENGTHS & WEAKNESSES
- Company normally learn about their competitors’ strengths and weaknesses through
secondary data; conduct marketing research with customers, suppliers, and dealers;
personal experience, and word of mouth.
- Conduct benchmarking = the process of comparing the company’s products and
processes to those of competitors or leading firms in other industries to find ways to
improve quality and performance.

 ESTIMATING COMPETITORS’ REACTIONS

- Marketing managers need a deep understanding of a given competitor’s mentality if
they want to anticipate how the competitor will act or react.
- Each competitor reacts differently:
 THE TIGER COMPETITOR
 THE LAID BACK COMPETITOR
 THE SELECTIVE COMPETITOR
 THE STOCHASTIC COMPETITOR

SELECTING COMPETITORS TO ATTACK and AVOID

 STRONG or WEAK COMPETITORS
 CLOSE or DISTANT COMPETITORS
 “GOOD” or “BAD” COMPATITORS

COMPETITIVE POSITIONS
 Market leader = the firm in an industry with the largest market share.
 Market challenger = a runner-up firm that is fighting hard to increase its market share in
an industry.
 Market follower = a runner-up firm that wants to hold its share in an industry without
rocking the boat.
 Market nicher = a firm that serves small segments that the other firms in an industry
overlook or ignore.

BASIC COMPETITIVE STRATEGIES

1. Overall cost leadership. The company works hard to achieve the lowest production and
distribution costs.
2. Differentiation. The company concentrates on creating a highly differentiated product
line and marketing program so that it comes across as the class leader in the industry.
3. Focus. The company focuses its efforts on serving a few market segments well rather
than going after the whole market.

COMPETITIVE MARKETING STRATEGIES

Strategies –called value discipline– for delivering superior customer value :
1. Operational excellence. The company provides superior value by leading its industry in
price and convenience. E.g. Wal-Mart
 2. Customer intimacy. The company provides superior value by precisely segmenting its
markets and tailoring its products or services to match exactly the needs of targeted
customers. E.g. British Airways
3. Product leadership. The company provides superior value by offering a continuous
stream of leading-edge products or services. E.g. Microsoft

MARKET LEADER STRATEGIES

 EXPANDING the total DEMAND
1. MORE USAGE
2. NEW USERS
3. NEW USES
 EXPANDING MARKET SHARE
 PROTECTING MARKET SHARE
1. PREVENT OR FIX WEAKNESSES
2. CONTINUOUS INNOVATION

MARKET LEADER STRATEGIES

 DEFENSE STRATEGIES
1. POSITION DEFENSE. Occupying the most desirable market space in the mind
of the consumers, making the brand almost impregnable.
2. FLANK DEFENSE. Erect outposts to protect a weak front or possibly serve as an
invasion base for counterattack.
3. PREEMPTIVE DEFENSE. Attack before the competitor starts its offence.
4. COUNTEROFFENSE DEFENSE. The leader meets the attacker frontally.
5. MOBILE DEFENSE. The leader stretches its domain over new territories that can
serve as future centers for defense & offense through market broadening &
market diversification.
6. CONTRACTION DEFENSE. Giving up weaker territories & reassigning
resources to stronger territories.
 DEFINING THE STRATEGIC OBJECTIVE AND OPPONENT(S)
 CHOOSING A GENERAL ATTACK STRATEGY
1. FRONTAL ATTACK
2. FLANK ATTACK
3. ENCIRCLEMENT ATTACK
4. BYPASS ATTACK
5. GUERRILLA WARFARE

 COUNTERFEITER: DUPLICATES THE LEADER’S PRODUCT & PACKAGE AND

SELLS IT ON THE BLACK MARKET
 CLONER: EMULATES THE LEADER’S PRODUCT, NAME, PACKAGING WITH SLIGHT
VARIATIONS
 IMITATOR: COPIES SOMETHINGS FROM THE LEADER BUT MAINTAINS
DIFFERENTIATION
 ADAPTER: TAKE THE LEADER’S PRODUCTS AND ADAPTS OR IMPROVES THEM
 MULTIPLE NICHING IS PREFERABLE TO SINGLE NICHING
 THREE TASKS
1. CREATING
2. EXPANDING
 3. PROTECTING NICHES

BALANCING COMPANY ORIENTATIONS

1. COMPETITOR-CENTERED COMPANY – a company whose moves are mainly based
competitors’ actions and reactions.
2. CUSTOMER-CENTERED COMPANY – a company that focuses on customer
developments in designing its marketing strategies and on delivering superior value to its
target customers.
3. MARKET-CENTERED COMPANY – a company that pays balanced attention to both
customers and competitors in designing its marketing strategies.

REFERENCE:
Kotler, P. & Armstrong, G., 2006, Principles of Marketing, New Jersey: Pearson Education, Inc.,
Ch.17