You are on page 1of 43



Response Mechanism

Poor firms ignore their competitors; average firms copy their competitors; winning firms lead their competitors.


Competition: “A market in which rival sellers are trying to gain extra business at one another's expense and thus are forced both to be as efficient as possible and to hold their prices down as much as possible.”


Competitors : “those firms or individuals who seek to satisfy the same customers or customer needs and offer similar products or services, close substitutes or brands to them”.

Identifying Competitors

Industry Concept of Competition
 Industry

 Number
 Pure
 

of Sellers and Degree of Differentiation
monopoly  Oligopoly
Pure oligopoly Differentiated oligopoly

 Monopolistic

competition  Pure competition

Analyzing Competitors

 Three

Variables to Monitor When Analyzing Competitors:
 Share

of market  Share of mind  Share of heart

What it is ?

Share of market : The competitor’s share of the target market Share of mind: The percentage of customers who name the competitor in responding to the statement, “Name the first company that comes to your mind in this industry.” Share of heart: The percentage of customers who named the competitor in responding to the statement, “Name the company from which you would prefer to buy the product.”

Competitive Forces
Michael Porter’s 5 forces theory

Threat of:
2. intense segment rivalry 3. new entrants 4. substitute products 5. buyers’ growing Figure 9-1: Five Forces Determining Segment Structural Attractiveness bargaining

Barriers and Profitability

Figure 9-2:

Effects of Competition

  3. 4. 5.  7. 8. 9.

Enlarging the product mix The mix is defined by : the industry and manufacturing environment and management strategies that position the company as a specialty, niche or broad-based supplier of goods and services

Levels of Competition

   

Brand Competition Industry Competition Form Competition Generic Competition

Brand Competition

Rival companies offering a similar product and services to the same customer at similar prices. Maruti800, Santro, Matiz

  

Industry Competition

A Competition within all companies making same product and class of products. Maruti800 could compete against all other automobile manufacturers

Form Competition

All companies manufacturing products that supply the same resultant to the consumer Maruti800 would see itself competing against not only automobiles manufacturers but also against manufacturers of trucks,LCVs and even with manufacturers of various motor cycles mfg companies.

Generic Competition

All companies that compete for the same consumer’s wallet and try to achieve maximum share of wallet. Maruti800 would see itself competing with companies that sell white goods.

Analysis of Competition

  

Two Approaches Industry analysis Key player analysis

Industry Analysis

5 Steps: Defining an industry : E.g. Cement
ndustry,automobiles industry Study of key aspects: Market Size,growth,structure,gov.policy etc. SWOT Predicting the changes in industry strategies Analysis of Results identification of strategic player

Creative Marketer

It discovers & produce solutions customers did not ask for but to which they enthusiastically respond. A market driving firm

Anticipative marketer

It looks ahead into what needs customers may have in the near future.

Responsive Marketer

It finds a stated need & fills it

Defending the Market Share

    

Continuous innovation Developing new products Distribution effectiveness Cost cutting 6 defense strategies

Designing Competitive Strategies


Defense Strategies

 Position

Defense  Flank Defense  Preemptive Defense  Counteroffensive Defense  Mobile Defense  Contraction Defense  Planned contraction (Strategic withdrawal)

Position defense

Building superior brand power and making the brand almost Impregnable (unassailable)

Flank defense

Erect outposts to protect a weak front or possibly serve as an Invasion base for counterattacking the possible challenge for the weak (low) product.

Preemptive defense

To attack before the enemy starts its offense. Keep your competitors off balanced: open many pockets of offense. Preannouncements Small firms may choose another direction to avoid head to head competition.

Counter offensive defense

 

Launching a pincer movement counter attacking attacker’s main territory: So that the aggressor will have to pull back some of its troops to defend its territory.

Mobile defense:

The Leader stretches its domain over new territories that can serve as future centers for defense & offense through market broadening and diversification.

Market broadening: Shifting focus from the current product to the underlying generic need. Company gets involved in the R & D across the whole range of technology associated with that need. Principle of the objective: The most important military principle is the Principle of the Objective. This principle requires that you decide in advance exactly what it is that you are trying to accomplish. What exactly is your objective? 80% of all problems in personal and corporate life come from a lack of clarity with regard to objectives and goals. Principle of mass: The principle of mass should be
understood in terms of its components: (1) effects not forces, (2) place and time, (3) joint integration, and (4) synchronization.

Market diversification : Shifting into the unrelated industries.


Designing Competitive Strategies

Market-Challenger Strategies
 Defining
 It

the Strategic Objective and Opponent(s)
can attack the market leader  It can attack firms of its own size that are not doing the job and are underfinanced  It can attack small local and regional firms

Choosing a General Attack Strategy


Designing Competitive Strategies
 Brand-extension

strategy  Multibrand strategy  Heavy advertising and media pioneer  Aggressive sales force  Effective sales promotion  Competitive toughness  Manufacturing efficiency and cost cutting  Brand-management system

Attack Strategies

Figure 910:

Designing Attack Strategies


Attack Strategies
Attack Attack Attack

 Frontal  Flank

 Encirclement  Bypass

Attack Warfare

 Guerrilla

Analyzing Competitors

Reaction Patterns 1. If competitors are nearly identical and make their living the same way, then their competitive equilibrium is unstable. 2. If a single major factor is the critical factor, then the competitive equilibrium is unstable. 3. If multiple factors may be critical factors, then it is possible for each competitor to have some advantage and be differentially attractive to some customers. The more factors that may provide an advantage, the more competitors who can coexist. Competitors all have their segment, defined by the preference for the factor trade-offs they offer. 4. The fewer the number of critical competitive variables, the fewer the number of competitors. 5. A ratio of 2 to 1 in market share between any two competitors seems to be the equilibrium point at which it is neither practical nor

Definition of Attack

Frontal Attack : The attacker matches its opponent’s product , advertising ,price and distribution. Flank Attack : An enemy’s weak spots are targeted. Encirclement Attack : It is attempt to capture a wide slice of the enemy’s territory through a blitz Bypass Attack : Bypassing the enemy and attacking easier markets to broaden resource base.

Designing Competitive Strategies

Figure 9-6: Hypothetical Market Structure


Designing Competitive Strategies

Market-Leader Strategies
 Expanding
 New
  

the Total Market


Market-penetration strategy New-market segment strategy Geographical-expansion strategy

 New

Uses  More Usage
 Defending

Market Share


Designing Competitive Strategies
a Specific Attack Strategy
 Price-discount  Lower


price goods  Prestige goods  Product proliferation  Product innovation  Improved services  Distribution innovation  Manufacturing cost reduction  Intensive advertising promotion


Designing Competitive Strategies Market-Follower Strategies
 Innovative

imitation (Product imitation)  Product innovation  Four Broad Strategies:
   

Counterfeiter Cloner Imitator Adapter


The counterfeiter duplicates the leader’s product and package and sell it on the black market or through disreputable dealers

   

The Cloner emulates the leader’s product, name and packaging, with slight variation.


   

The imitator copies some things but maintains differentiation in terms of Packaging Advertising Pricing Location


The adapter takes (legally) the leader’s product and improves them and sell it probably at a different country.


Designing Competitive Strategies

Market-Nicher Strategies
 High

margin versus
 Product-feature specialist  Job-shop specialist  Quality-price specialist  Service specialist  Channel specialist

high volume  Nicher Specialist Roles

End-user specialist

Value-added reseller

   

Vertical-level specialist Customer-size specialist Specific-customer specialist Geographic specialist


Balancing Customer and Competitor Orientations

company Customer-centered company