Chapter 8 Dealing with the Competition Marketing Managment Tenth Edition Philip Kotler

Objectives Identifying Competitors Evaluating Competitors Competitive Intelligence Systems Competitive Strategies Customer vs. Competitor Orientation

Induce your competitors not to invest in those products, markets and services where you expect to invest the most … that is the fundamental rule of strategy. Bruce Henderson, Founder of BCG There is nothing more exhilarating than to be shot at without result. Winston Churchill

Five Forces Determining Segment Structural Attractiveness Potential Entrants (Threat of Mobility) Suppliers (Supplier power) Industry Competitors (Segment rivalry) Buyers (Buyer power) Substitutes (Threats of substitutes)

Barriers and Profitability Entry Barriers Exit barriers High, stable returns High Low High, risky returns High Low, stable returns Low Low, risky returns

Industry Competition Number of Sellers - Degree of Differentiation Entry, Mobility, Exit barriers Cost Structure Degree of Vertical Integration Degree of Globalization

Strategic Groups in the Major Appliance Industry High Low Quality Vertical Integration 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

Analyzing Competitors Objectives Competitor Actions Strategies Strengths & Weaknesses Reaction Patterns

Competitor’s Expansion Plans Markets Products Individual Users Commercial & Industrial Educational Personal Computers Hardware Accessories Software Dell

Hypothetical Market Structure & Strategies 10% Market nicher 40% Market leader 30% Market challenger 20% Market follower Expand Market Attack leader Special- ize Imitate Defend Market Share Status quo Expand Market Share

Defense Strategies (2) Flank defense Attacker Defender (3) Preemptive (4) Counter- offensive (1) Position defense (6) Contraction defense (5) Mobile defense

Optimal Market Share Profitability Market share Optimal market share 0% 25% 50% 75% 100%

Attack Strategies (4) Bypass attack (2) Flank attack Attacker Defender (1) Frontal attack (5) Guerilla attack (3) Encirclement attack

Specific Attack Strategies Price-discount Cheaper goods Prestige goods Product proliferation Product innovation Improved services Distribution innovation Manufacturing cost reduction Intensive advertising promotion

“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

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

Review Identifying Competitors Evaluating Competitors Competitive Intelligence Systems Competitive Strategies Customer vs. Competitor Orientation