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Dealing with the Competition

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Chapter 7 Dealing with the Competition PowerPoint by Yu Hongyan Business School of Jilin University Objectives Understand how a company identifies its primary ... – PowerPoint PPT presentation

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Title: Dealing with the Competition


1
Chapter 7 Dealing with the Competition
PowerPoint by Yu Hongyan Business School of Jilin
University
2
Objectives
  • Understand how a company identifies its primary
    competitors and ascertains their strategies.
  • Review how companies design competitive
    intelligence systems.

3
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.

4
Five Forces Determining Segment Structural
Attractiveness
5
Competitive Markets
Figure 8-1 Five Forces that Determine Market
Attractiveness
6
Barriers and Profitability
Low, risky returns
7
Competitive Markets
Figure 8-2 Barriers and Profitability
8
Discussion Scenario
  • Assume that Texas passes legislation which
    legalizes casino riverboat gambling (riverboats
    must be located on rivers, lakes, or oceans). A
    limited number of gaming licenses are strictly
    controlled by the state gaming commission.
  • Assume you work for Harrahs. Using Porters
    Five Forces, analyze the market attractiveness of
    Texas.

9
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

10
Competitive Markets
Industries Can Be Classified By
Number of sellers and degree of
differentiation
Entry barriers, mobility and exit barriers
Industry Characteristics
Degree of vertical integration
Degree of globalization
Cost structure
11
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

12
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

13
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

14
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

15
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

16
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

17
Competitive Markets
Figure 8-3 Competitor Map of Eastman Kodak
18
Competitor Analysis
Key Competitive Characteristics to be Identified
Strategies
Objectives
Reactive Patterns
Strengths and Weaknesses Effect a firms
competitive position
19
Strategic Groups in the Major Appliance Industry
  • Group A
  • Narrow line
  • Lower mfg. cost
  • Very high service
  • High price
  • Group C
  • Moderate line
  • Medium mfg. cost
  • Medium service
  • Medium price
  • Group B
  • Full line
  • Low mfg. cost
  • Good service
  • Medium price
  • Group D
  • Broad line
  • Medium mfg. cost
  • Low service
  • Low price

20
Competitor Analysis
Figure 8-4 Strategic Groups in the Major
Appliance Industry
21
Analyzing Competitors
22
Competitor Analysis
Competitive Positions in the Target Market
Dominant
Strong
Favorable
Tenable
Weak
Nonviable
23
Discussion Scenario
  • Choose one of these three product classes
    personal computers, soft drinks, or mass
    merchandise retailers.
  • Identify key competitors within your chosen
    product class, as well as the competitive
    position held by each. Be prepared to defend
    your classifications.

24
Competitive Intelligence Systems
Designing the System Involves
Designing the system
Collecting the data
Evaluating and analyzing the data
Disseminating information and responding to
queries
25
Competitive Intelligence Systems
The CI Resource Index is a search engine devoted
to competitive intelligence resources
26
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

27
Designing Competitive Strategies
  • Expanding the total market
  • Defending market share
  • Expanding market share
  • Major Strategies
  • Market-Leader
  • Market-Challenger
  • Market-Follower
  • Market-Nicher

28
Competitors Expansion Plans
29
Hypothetical Market Structure Strategies
Expand Market
Attack leader
Special- ize
Imitate
Defend Market Share
Status quo
Expand Market Share
30
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

31
Designing Competitive Strategies
Figure 8-5 Defense Strategies
32
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

33
Designing Competitive Strategies
  • First define the strategic goals and opponent(s)
  • Choose general attack strategy
  • Choose specific attack strategy
  • Major Strategies
  • Market-Leader
  • Market-Challenger
  • Market-Follower
  • Market-Nicher

34
Designing Competitive Strategies
Figure 8-6 Attack Strategies
35
Designing Competitive Strategies
Productproliferation
Manufacturing cost reduction
Specific Attack Strategies
Prestige goods
Price-discount
Improved services
Product innovation
Distribution innovation
Lower-price goods
Intensive advertising promotion
36
Discussion Scenario
  • As brand manager for the IBM personal
    computing division, you have been given the
    formidable task of increasing market share.
  • Identify and justify the general and specific
    attack strategies that you would use to
    accomplish this goal.

37
Designing Competitive Strategies
  • Imitation may be more profitable than innovation
  • Four broad strategies
  • Counterfeiter
  • Cloner
  • Imitator
  • Adapter
  • Major Strategies
  • Market-Leader
  • Market-Challenger
  • Market-Follower
  • Market-Nicher

38
Designing Competitive Strategies
  • Niche specialties
  • End-user
  • Vertical-level
  • Customer-size
  • Specific customer
  • Geographic
  • Product/product line
  • Product feature
  • Job-shop
  • Quality-price
  • Service
  • Channel
  • Major Strategies
  • Market-Leader
  • Market-Challenger
  • Market-Follower
  • Market-Nicher

39
Discussion Scenario
  • Companies or brands may successfully fill
    market niches.
  • Can you think of some companies or brands that
    follow a market niche strategy? If so, which
    ones?

40
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

41
Competitors Expansion Plans
42
Hypothetical Market Structure Strategies
Expand Market
Attack leader
Special- ize
Imitate
Defend Market Share
Status quo
Expand Market Share
43
Defense Strategies
Attacker
Defender
(1) Position defense
(6) Contraction defense
44
Optimal Market Share
45
Attack Strategies
46
Specific Attack Strategies
  • Price-discount
  • Cheaper goods
  • Prestige goods
  • Product proliferation
  • Product innovation
  • Improved services
  • Distribution innovation
  • Manufacturing cost reduction
  • Intensive advertising promotion

47
Nichemanship
  • End-user specialist
  • Vertical-level specialist
  • Customer-size specialist
  • Specific-customer specialist
  • Geographic specialist
  • Product or product-line specialist
  • Product-feature specialist
  • Job-shop specialist
  • Quality-price specialist
  • Service specialist
  • Channel specialist

48
Balance
Customer
Competition
ID opportunities
Fighter orientation
Long-run profit
Alert
Emerging needs groups
Exploit weaknesses
- Reactive
49
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