Dealing With Competition

Chapter 9 Dealing with the  Competition Group# 2

Abdul Latif Nagaria 2257 Anas Ahmed 2258 Owais Tahir Mohammad Azeem Shakir Hassan

Objectives • Understand how a company identifies its primary competitors and ascertains their strategies. • Review how companies design competitive intelligence systems.

Objectives • Learn how a company decides whether to position itself as a market leader, a challenger, a follower, or a nicher. • Identify how a company can balance a customer vs. competitor orientation.

Competitive Markets • Porter’s Five Forces that Determine Market Attractiveness: – Threat of intense segment rivalry – Threat of new entrants – Threat of substitute products – Threat of buyers’ growing bargaining power – Threat of suppliers’ growing bargaining power

Competitive Markets • Failing to identify competitors can lead to extinction • Internet businesses have led to disintermediation of middlemen • Competition can be identified using the industry or market approach

Competitive Markets Industries Can Be Classified By: • Number of sellers and degree of differentiation • Cost structure

• Entry, mobility and exit barriers • Degree of vertical integration

Degree of globalization

Competitive Markets Industry Structures • • • •

Pure Monopoly Pure Oligopoly Differentiated Oligopoly Monopolistic Competition • Pure Competition

• Only one firm offers an undifferentiated product or service in an area – Unregulated – Regulated

• Example: Most utility companies

Competitive Markets Industry Structures • • • •

Pure Monopoly Pure Oligopoly Differentiated Oligopoly Monopolistic Competition • Pure Competition

• A few firms produce essentially identical commodities and little differentiation exists • Lower costs are the key to higher profits • Example: oil

Competitive Markets Industry Structures • • • •

Pure Monopoly Pure Oligopoly Differentiated Oligopoly Monopolistic Competition • Pure Competition

• A few firms produce partially differentiated items • Differentiation is by key attributes • Premium price may be charged • Example: Luxury autos

Competitive Markets Industry Structures • • • •

Pure Monopoly Pure Oligopoly Differentiated Oligopoly Monopolistic Competition • Pure Competition

• Many firms differentiate items in whole or part • Appropriate market segmentation is key to success • Example: beer, restaurants

Competitive Markets Industry Structures • • • •

Pure Monopoly Pure Oligopoly Differentiated Oligopoly Monopolistic Competition • Pure Competition

• Many competitors offer the same product • Price is the same due to lack of differentiation • Example: farmers selling milk, crops

Competitive Markets • A broader group of competitors will be identified using the market approach • Competitor maps plot buying steps in purchasing and using the product, as well as direct and indirect competitors

Competitor Analysis • Key characteristics of the competition must be identified: – Strategies – Objectives – Strengths and Weaknesses • Effect a firm’s competitive position in the target market

– Reaction Patterns

Competitor Analysis Competitive Positions in the Target Market • Dominant • Strong • Favorable

• Tenable • Weak • Nonviable

Competitive Intelligence Systems • Designing the system involves: – Setting up the system – Collecting the data – Evaluating and analyzing the data – Disseminating information and responding to queries

Competitive Intelligence Systems • Value analysis helps firms to select competitors to attack and to avoid – Customers identify and rate attributes important in the purchase decision for the company and competition

• Attacking strong, close, and bad competitors will be most beneficial

Designing Competitive Strategies Major Strategies • • • •

Market-Leader Market-Challenger Market-Follower Market-Nicher

• Expanding the total market • Defending market share • Expanding market share

Designing Competitive Strategies • Expanding the Total Market: – Targeting Product to New Users • Market-penetration strategy • New-market strategy • Geographical-expansion strategy

– Promoting New Uses of Product – Encouraging Greater Product Use

Designing Competitive Strategies Defending Market Share • Position defense • Flank defense • Preemptive defense

• Counteroffensive defense • Mobile defense • Contraction defense

Designing Competitive Strategies • Before Attempting to Expand Market Share, Consider: – Probability of invoking antitrust action – Economic costs involved – Likelihood that marketing mix decisions will increase profits

Designing Competitive Strategies Major Strategies • • • •

Market-Leader Market-Challenger Market-Follower Market-Nicher

• First define the strategic goals and opponent(s) • Choose general attack strategy • Choose specific attack strategy

Designing Competitive Strategies • General Attack Strategies: – Frontal attacks match competition – Flank attacks serve unmet market needs or underserved areas – Encirclement “blitzes” opponent – Bypassing opponent and attacking easier markets is also an option

Competitive Markets

• • • • •

Specific Attack Strategies Include: • Product Price-discount innovation Lower-price goods • Distribution Prestige goods innovation Improved services • Manufacturing Product proliferation cost reduction

Designing Competitive Strategies Major Strategies • • • •

Market-Leader Market-Challenger Market-Follower Market-Nicher

• Imitation may be more profitable than innovation • Four broad strategies: – – – –

Counterfeiter Cloner Imitator Adapter

Designing Competitive Strategies Major Strategies • • • •

Market-Leader Market-Challenger Market-Follower Market-Nicher

• Niche specialties: – – – – – – – – – – –

End-user Vertical-level Customer-size Specific customer Geographic Product/product line Product feature Job-shop Quality-price Service Channel

Balancing Customer and Competitor Orientations • Competitor-centered companies evaluate what competitors are doing, then formulate competitive reactions • Customer-centered companies focus on customer developments when formulating strategy