Understanding Competition
Sources of Competition ä Sources of Competition ä Industry competition ä existing ä New ä Product line competition ä me-too ä improved ä breakthrough
Types of Competition ä Types of Competition (next slide) ä Brand competition ä Product competition ä Generic competition ä Total budget competition
Exhibit 2.1
Customers Frontline Employees Middle Managers CEO Frontline Employees Middle Managers CEO Competition Traditional Organizations Exhibit 2.5 – Part One
Market-Oriented Organizations Exhibit 2.5 – Part Two Customers Frontline Employees Middle Managers CEO Frontline Employees Middle Managers CEO Cooperation
Major Types of Competition
Competitive Intelligence ä Involves observation, tracking and analysis of the total range of competitive activity to learn what competitors do best and why and where they are weak. ä Generally involves publicly available information on competitors. ä Can fulfill three major objectives: ä allows a company to understand it and its competitors’ positions of comparative advantage ä allows a company to understand its competitors’ strategies ä provides a key criterion for strategy selection
Gathering Competitive Intelligence 1. Identify all current and potential brand, product, generic, and total budget competitors. 2. Assess each key competitor by ascertaining its size, growth, profitability, objectives, strategies, and target markets. 3.Assess each key competitor’s strengths and weaknesses, including the major competencies that each possesses within its functional areas (marketing, R&D, production, HR, etc.) 4.Focus the analysis on each key competitor’s marketing capabilities in terms of its products, distribution, promotion, and pricing. 5.Estimate each competitor’s most likely strategies and responses under different environmental situations, as well as its reactions to the firm’s own marketing efforts. 6.Assess the impact of competitive strategy on the company’s product/market.
Sources of Competitive Intelligence ä Exhibit 3.4 ä Salespeople can gather information from customers, distributors, dealers and former salespeople. ä A tear-down program (like Ford’s) may be undertaken. ä Use senior marketing people and others in the company to gather or report on information. ä Pay attention to “help wanted” ads.
Seeking Competitive Advantage ä A company has a competitive advantage when it possesses capabilities that allow it to serve customers’ needs better than the competition. ä A competitive advantage may be real or perceived. ä Advantages come from several sources (relational, legal, organizational, human resource, product, pricing, promotion, distribution - see exhibit 4.8). ä To be fully realized, customers must view the competitive advantage as valuable. ä Determine your company’s strengths and weaknesses relative to competitors. Determine unmet and/or poorly served needs.
Seeking Competitive Advantage (continued) ä Three basic strategies used to develop competitive advantage (show exhibit 4.9): ä 1. Operational Excellence – focus on efficiency of operations and processes. ä 2. Product Leadership – excel at technology and product development. ä 3. Customer Intimacy – get to know their customers and understand their needs better than the competition.