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2003 Prentice Hall, Inc. To accompanyA Framework for Marketing Management, 2nd Edition Slide 0 in Chapter 8

Chapter 8

Dealing with theCompetition

PowerPoint by Karen E. James

Louisiana State University - Shreveport

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2003 Prentice Hall, Inc. To accompanyA Framework for Marketing Management, 2nd Edition Slide 1 in Chapter 8

Objectives

Understand how a company

identifies its primary competitors

and ascertains their strategies.

Review how companies design

competitive intelligence systems.

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2003 Prentice Hall, Inc. To accompanyA Framework for Marketing Management, 2nd Edition Slide 2 in Chapter 8

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 canbalance a customer vs. competitor

orientation.

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2003 Prentice Hall, Inc. To accompanyA Framework for Marketing Management, 2nd Edition Slide 3 in Chapter 8

Competitive Markets

Porters Five Forces that Determine

Market Attractiveness:

Threat of intense segment rivalry

Threat of new entrants

Threat of substitute products

Threat of buyers growing bargainingpower

Threat of suppliers growing bargainingpower

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2003 Prentice Hall, Inc. To accompanyA Framework for Marketing Management, 2nd Edition Slide 4 in Chapter 8

Competitive Markets

Failing to identify competitorscan lead to extinction

Internet businesses have led todisintermediation of middlemen

Competition can be identifiedusing the industry ormarketapproach

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2003 Prentice Hall, Inc. To accompanyA Framework for Marketing Management, 2nd Edition Slide 5 in Chapter 8

Competitive Markets

Number of sellersand degree of

differentiation

Cost structure

Entry, mobility andexit barriers

Degree of vertical

integration

Degree of globalization

Industries Can Be Classified By:

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2003 Prentice Hall, Inc. To accompanyA Framework for Marketing Management, 2nd Edition Slide 6 in Chapter 8

Competitive Markets

Industry Structures

Pure Monopoly

Pure Oligopoly

DifferentiatedOligopoly

MonopolisticCompetition

Pure Competition

Only one firm offers

an undifferentiated

product or servicein an area

Unregulated

Regulated

Example: Mostutility companies

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2003 Prentice Hall, Inc. To accompanyA Framework for Marketing Management, 2nd Edition Slide 7 in Chapter 8

Competitive Markets

Industry Structures

Pure Monopoly

Pure Oligopoly

DifferentiatedOligopoly

MonopolisticCompetition

Pure Competition

A few firms produce

essentially identical

commodities andlittle differentiation

exists

Lower costs are the

key to higher profits

Example: oil

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2003 Prentice Hall, Inc. To accompanyA Framework for Marketing Management, 2nd Edition Slide 8 in Chapter 8

Competitive Markets

Industry Structures

Pure Monopoly

Pure Oligopoly

DifferentiatedOligopoly

MonopolisticCompetition

Pure Competition

A few firms producepartiallydifferentiated items

Differentiation is bykey attributes

Premium price may

be charged

Example: Luxuryautos

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2003 Prentice Hall, Inc. To accompanyA Framework for Marketing Management, 2nd Edition Slide 9 in Chapter 8

Competitive Markets

Industry Structures

Pure Monopoly

Pure Oligopoly

DifferentiatedOligopoly

MonopolisticCompetition

Pure Competition

Many firms

differentiate items

in whole or part Appropriate market

segmentation is key

to success

Example: beer,restaurants

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2003 Prentice Hall, Inc. To accompanyA Framework for Marketing Management, 2nd Edition Slide 10 in Chapter 8

Competitive Markets

Industry Structures

Pure Monopoly

Pure Oligopoly

DifferentiatedOligopoly

MonopolisticCompetition

Pure Competition

Many competitors

offer the same

product Price is the same

due to lack of

differentiation

Example: farmersselling milk, crops

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2003 Prentice Hall, Inc. To accompanyA Framework for Marketing Management, 2nd Edition Slide 11 in Chapter 8

Competitive Markets

A broader group of competitors

will be identified using the

market approach

Competitor maps plot buying

steps in purchasing and usingthe product, as well as direct and

indirect competitors

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2003 Prentice Hall, Inc. To accompanyA Framework for Marketing Management, 2nd Edition Slide 12 in Chapter 8

Competitor Analysis

Key characteristics of thecompetition must be identified:

Strategies

Objectives

Strengths and WeaknessesEffect a firms competitive position in

the target market

Reaction Patterns

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2003 Prentice Hall, Inc. To accompanyA Framework for Marketing Management, 2nd Edition Slide 13 in Chapter 8

Competitor Analysis

Dominant

Strong

Favorable

Tenable

Weak

Nonviable

Competitive Positions in

the Target Market

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2003 Prentice Hall, Inc. To accompanyA Framework for Marketing Management, 2nd Edition Slide 14 in Chapter 8

Competitive Intelligence Systems

Designing the system involves:

Setting up the systemCollecting the data

Evaluating and analyzing the data

Disseminating information andresponding to queries

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2003 Prentice Hall, Inc. To accompanyA Framework for Marketing Management, 2nd Edition Slide 15 in Chapter 8

Competitive Intelligence Systems

Value analysis helps firms to selectcompetitors to attack and to avoid

Customers identify and rate attributesimportant in the purchase decision forthe company and competition

Attacking strong, close, and badcompetitors will be most beneficial

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2003 Prentice Hall, Inc. To accompanyA Framework for Marketing Management, 2nd Edition Slide 16 in Chapter 8

Designing Competitive Strategies

Major Strategies

Market-Leader

Market-Challenger

Market-Follower

Market-Nicher

Expanding the

total market

Defending

market share

Expandingmarket share

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2003 Prentice Hall, Inc. To accompanyA Framework for Marketing Management, 2nd Edition Slide 17 in Chapter 8

Designing Competitive Strategies

Expanding the Total Market:

Targeting Product to New UsersMarket-penetration strategy

New-market strategy

Geographical-expansion strategyPromoting New Uses of Product

Encouraging Greater Product Use

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2003 Prentice Hall, Inc. To accompanyA Framework for Marketing Management, 2nd Edition Slide 18 in Chapter 8

Designing Competitive Strategies

Positiondefense

Flank defense

Preemptivedefense

Counteroffensive

defense

Mobile defense

Contraction

defense

Defending Market Share

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2003 Prentice Hall, Inc. To accompanyA Framework for Marketing Management, 2nd Edition Slide 19 in Chapter 8

Designing Competitive Strategies

Before Attempting to Expand

Market Share, Consider:

Probability of invoking antitrustaction

Economic costs involvedLikelihood that marketing mix

decisions will increase profits

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2003 Prentice Hall, Inc. To accompanyA Framework for Marketing Management, 2nd Edition Slide 20 in Chapter 8

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

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2003 Prentice Hall, Inc. To accompanyA Framework for Marketing Management, 2nd Edition Slide 21 in Chapter 8

Designing Competitive Strategies

General Attack Strategies:

Frontal attacks match competitionFlank attacks serve unmet market

needs or underserved areas

Encirclement blitzes opponentBypassing opponent and attacking

easier markets is also an option

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2003 Prentice Hall, Inc. To accompanyA Framework for Marketing Management, 2nd Edition Slide 22 in Chapter 8

Competitive Markets

Price-discount

Lower-price goods

Prestige goods

Improved services

Product proliferation

Product

innovation

Distribution

innovation

Manufacturingcost reduction

Intensive advertising promotion

Specific Attack Strategies Include:

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2003 Prentice Hall, Inc. To accompanyA Framework for Marketing Management, 2nd Edition Slide 23 in Chapter 8

Designing Competitive Strategies

Major Strategies

Market-Leader

Market-Challenger

Market-Follower

Market-Nicher

Imitation may bemore profitablethan innovation

Four broadstrategies:

Counterfeiter

Cloner

Imitator

Adapter

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2003 Prentice Hall, Inc. To accompanyA Framework for Marketing Management, 2nd Edition Slide 24 in Chapter 8

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

J ob-shop

Quality-price

Service

Channel

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2003 Prentice Hall, Inc. To accompanyA Framework for Marketing Management, 2nd Edition Slide 25 in Chapter 8

Balancing Customer andCompetitor Orientations

Competitor-centered companiesevaluate what competitors are

doing, then formulate competitivereactions

Customer-centered companiesfocus on customer developments

when formulating strategy