©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 0 in Chapter 8 Chapter 8 Dealing with the Competition PowerPoint by Karen E. James Louisiana State University - Shreveport

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd 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.

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd 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 can balance a customer vs. competitor orientation.

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 3 in Chapter 8 Competitive Markets  Porter’s Five Forces that Determine Market Attractiveness: –Threat of intense segment rivalry –Threat of new entrants –Threat of substitute products –Threat of buyers’ growing bargaining power –Threat of suppliers’ growing bargaining power

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

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 5 in Chapter 8 Competitive Markets  Number of sellers and degree of differentiation  Cost structure  Entry, mobility and exit barriers  Degree of vertical integration  Degree of globalization Industries Can Be Classified By:

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

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

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

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

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

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd 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 using the product, as well as direct and indirect competitors

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 12 in Chapter 8 Competitor Analysis  Key characteristics of the competition must be identified: –Strategies –Objectives –Strengths and Weaknesses Effect a firm’s competitive position in the target market –Reaction Patterns

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 13 in Chapter 8 Competitor Analysis  Dominant  Strong  Favorable  Tenable  Weak  Nonviable Competitive Positions in the Target Market

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 14 in Chapter 8 Competitive Intelligence Systems  Designing the system involves: –Setting up the system –Collecting the data –Evaluating and analyzing the data –Disseminating information and responding to queries

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

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd 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  Expanding market share

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

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 18 in Chapter 8 Designing Competitive Strategies  Position defense  Flank defense  Preemptive defense  Counteroffensive defense  Mobile defense  Contraction defense Defending Market Share

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

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd 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

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 21 in Chapter 8 Designing Competitive Strategies  General Attack Strategies: –Frontal attacks match competition –Flank attacks serve unmet market needs or underserved areas –Encirclement “blitzes” opponent –Bypassing opponent and attacking easier markets is also an option

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 22 in Chapter 8 Competitive Markets  Price-discount  Lower-price goods  Prestige goods  Improved services  Product proliferation  Product innovation  Distribution innovation  Manufacturing cost reduction  Intensive advertising promotion Specific Attack Strategies Include:

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 23 in Chapter 8 Designing Competitive Strategies Major Strategies  Market-Leader  Market- Challenger  Market-Follower  Market-Nicher  Imitation may be more profitable than innovation  Four broad strategies: –Counterfeiter –Cloner –Imitator –Adapter

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd 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 –Job-shop –Quality-price –Service –Channel

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