Professional Documents
Culture Documents
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Primary Activities
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Definition
Competitive Advantage
An advantage over competitors gained by offering consumers greater value than competitors offer.
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Competitor Analysis
Identifying Competitors Assessing Competitors
Determining Objectives Identifying Strategies Assessing Strengths and Weaknesses Estimating Reaction Patterns
Competitor Analysis
Steps in the Process:
Identifying Competitors Assessing Competitors Selecting Competitors to Attack or Avoid Firms face a wide range of competition Be careful to avoid competitor myopia Methods of identifying competitors:
Industry point-of-view Market point-of-view
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Levels of Competition
Beer Ice cream
Tea
Regular colas
Wine
Fast food
Fruit flavore d colas
Diet Coke
Bottled water
Lemon limes
Video rentals
Baseball cards
Coffee
230-year-old Encyclopedia Britannica viewed itself as competing with other publishers of printed encyclopedias. Big mistake! Its real competitors were software encyclopedias and the Internet.
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Competitor Analysis
Potential Competitors
Market expansion
Product expansion
Backward integration competitive customers Forward integration competitive suppliers Export assets or competencies mergers/acquisitions Retaliatory or defensive strategies
Competitor Analysis
Steps in the Process:
Identifying Competitors Assessing Competitors Selecting Competitors to Attack or Avoid
Determining competitors objectives Identifying competitors strategies
Strategic groups
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Analyzing Competitors
Objectives
Strategies
Competitor Actions
Reaction Patterns
Competitor Analysis
Successful strategists take great pains in scouting competitors Understanding their strategies Watching their actions Evaluating their vulnerability to driving forces and competitive pressures Sizing up their resource strengths and weaknesses and their capabilities Trying to anticipate rivals next moves
ANALYZING COMPETITORS
Once a company identifies its primary competitors, it must ascertain their objectives, strategies, strengths, and weaknesses. Competitors strive to maximize profits. Monitor three variables when analyzing competitors: Share of market. Share of mind. Share of heart. Companies that make steady gains in mind share and heart share will inevitably make gains in market share and profitability.
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Dominant- Controls the behavior of other competitors Strong- The firm can take independent action without
endangering its long-term position
Favorable-
has exploitable strength and more than average opportunity to improve its position
Tenable- performing at a satisfactory level Weak- unsatisfactory performance but opportunity exists for
improvement
Nonviablefor improvement
Reaction Patterns
1. 2.
3.
4.
Competitor Analysis
Steps in the Process:
Identifying Competitors Assessing Competitors Selecting Competitors to Attack or Avoid
Strong or weak competitors
Customer value analysis
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Competitive Strategies*
Basic Winning Competitive Strategies: Michael Porter
Overall cost leadership Lowest production and distribution costs Differentiation Creating a highly differentiated product line and marketing program Focus Effort is focused on serving a few market segments
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Barriers to Entry
Exit Barriers
Legal or moral obligations. Government restrictions. Low asset salvage value. Lack of alternative opportunities. High vertical integration. Emotional barriers.
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Entry Barriers
Low
High
Supplier industry is dominated by a few firms Suppliers products have few substitutes Buyer is not an important customer to supplier Suppliers product is an important input to buyers product
Price competition often leaves the entire industry worse off Advertising battles may increase total industry demand, but may be costly to smaller competitors
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Competitive Strategy
Competitive Positions Market Leader Market Challenger Market Follower Market Nicher
Expanding the total demand
Finding new users Discovering and promoting new product uses Encouraging greater product usage
New Users
Converting potential customers New-market segment strategy (e.g. Rural segments by banks) Geographical-expansion strategy (E.g., Northeastern markets, B-class towns by Mercedes Benz)
New Uses (e.g., Vaseline petroleum jelly) More Usage (More Cricket, More Pepsi, Sunday
ke Sunday, Medikar)
More Usage
Usage can be increased by increasing the level of quantity of consumption or increasing the frequency of consumption. Increasing the amount of consumption can sometimes be done through packaging or product design. Increasing frequency of use involves identifying additional opportunities to use the brand in the same basic way or identifying completely new and different ways to use the brand.
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Communicate the appropriateness and advantages of using the brand more frequently in new or existing situations. Identify completely new and different applications. Product development can spur new uses.
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Market leaders can improve their profitability by increasing market share. Gaining increased share in the served market does not automatically produce higher profits. A company should consider four factors before pursuing increased market share: The possibility of provoking antitrust action. Economic cost. Pursuing the wrong marketing-mix strategy. The effect of increased market share on actual and perceived quality.
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Responsive marketer > find a stated need and fill it; Anticipative marketer latent needs ; > discover
Defense Strategies
Position Defense > occupy the most desirable market
This involves setting up fortifications such as barriers to market entry around a product, brand, product line, market, or market segment. This could include increasing brand equity, customer satisfaction, customer loyalty, or repeat purchase rate. It could also include exclusive distribution contracts, patent protection, market monopoly, or government protected monopoly status.
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Defense Strategies
Flank Defense > Guard the weak fronts by erecting outposts and use them for invasion also.
Wheel, Coke
Preemptive Defense > attack before enemys offence, preannounce and introduce new products, expand distribution rapidly and widely
Jet airways -Times of India
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Defense Strategies
Counteroffensive Defense counterattack when attacked,
Attack the front or the flank Jet Vs King fisher on routes Pincer attack from two sides
Invade competitors main territory and force him to be defensive Subsidized product under attack by profits from other products Preannounce product upgrades to make customers wait than switch over Lobby with legislatures
Defense Strategies
Mobile Defense
market broadening shifts focus from current product to underlying generic need market diversification
This involves constantly shifting resources and developing new strategies and tactics. A mobile defense is intended to create a moving target that is hard to successfully attack, while simultaneously, equipping the defender with a flexible response mechanism should an attack occur. This would entail introducing new products, introducing replacement products, modifying existing products, changing market segments, changing target markets, repositioning products, or changing promotional focus. This defense requires a very flexible organization with strong marketing, entrepreneurial, product development, and marketing research skills.
Defense Strategies
Contraction Defense Strategic withdrawal
TOMCO, LAKME
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Firms that occupy second, third, and lower ranks in an industry are often called runner-up, or trailing firms. These firms can adopt one of two postures. Each can attack the leader and others in an aggressive bid for further market share (market challengers), or they can play ball and not rock the boat (market followers).
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Competitive Strategy
Competitive Positions Market Leader Market Challenger Market Follower Market Nicher
Option 1: challenge the market leader
High-risk but high-gain Sustainable competitive advantage over the leader is key to success
Option 2: challenge firms of the same size, smaller size or challenge regional or local firms Full frontal vs. indirect attacks
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Market-Challenger Strategies
Many market challengers have gained ground or even overtaken the leader. A market challenger must first define its strategic objective. The challenger must decide whom to attack:
It 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.
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Price discount. Lower price goods. Prestige goods. Product proliferation. Product innovation. Improved services. Distribution innovation. Manufacturing-cost reduction. Intensive advertising promotion.
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Pepsi is an example of market challenger that has chosen to use a full frontal attack
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Competitive Strategy
Competitive Positions Market Leader Market Challenger Market Follower Market Nicher
Follow the market leader
Focus is on improving profit instead of market share Many advantages:
Learn
from the market leaders experience Copy or improve on the leaders offerings Strong profitability
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Cloner
emulates leader
Imitator
copies some features
Adapter
improves on leader
Market-Follower Strategies
A market follower must know how to hold current customers and win a fair share of new customers. Each follower tries to bring distinctive advantages to its target marketlocation, services, and/or financing.
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Competitive Strategy
Competitive Positions Market Leader Market Challenger Market Follower Market Nicher
Serving market niches means targeting subsegments Good strategy for small firms with limited resources Offers high margins Specialization is key
By market, customer, product, or marketing mix lines
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Market-Nicher Strategies
Firms with low shares of the total market can be highly profitable through smart niching. Such companies tend to offer high value, charge a premium price, achieve lower manufacturing costs, and shape a strong corporate culture and vision. The market nicher ends up knowing the target customers so well that it meets their needs better than other firms selling to this niche. The nicher achieves high margin, whereas, the mass marketer achieves higher volume.
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Competitor-Centered Companies
A competitor-centered company sets its course based on reactions to its competitors. This kind of planning has some pluses and minuses. On the positive side, the company develops a fighter orientation. On the negative side, the company is too reactive. Rather than formulating and executing a consistent, customer-orientated strategy, it determines its moves based on competitors moves.
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Customer-Centered Companies
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Monopolist
Cooperative Approach
Co-opetition
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No
Customer Orientation
Yes
Market Orientation