CREATING COMPETITIVE ADVANTAGE Kotler, P. & Armstrong, G., 2006, Principles of Marketing, New Jersey: Pearson Education, Inc., Ch.17

OBJECTIVES OF THE SESSION After attending the session, students should be Able to: Discuss the need to understand competitors as well as customers through competitor analysis. Explain the fundamentals of competitive marketing strategies based on creating value to customers. The need for balancing various orientations in becoming a truly market-centered organization.

DEFINITIONS COMPETITIVE ADVANTAGE = an advantage over competitors gained by offering consumers greater value, either through lower prices or by providing more benefits that justify higher prices. COMPETITOR ANALYSIS = the process of identifying key competitors; assessing their objectives, strategies, strengths and weaknesses, and reaction patterns; and selecting which competitors to attack or avoid. COMPETITIVE MARKETING STRATEGIES = strategies that strongly position the company against competitors and that give the company the strongest possible strategic advantage.

STEPS IN ANALYZING COMPETITORS Identifying the company’s competitors Assessing competitors’ objectives, strategies, strengths and weaknesses , and reaction patterns Selecting which competitors to attack or avoid

IDENTIFYING COMPETITORS Industry concept of competition: group of firms that offer a product or class of products that are close substitutes for one another. Market concept of competition: companies that satisfy the same customer need.

ANALYZING COMPETITORS DETERMINING COMPETITORS’ OBJECTIVES Each competitor has a mix of objectives Knowing a competitor’s mix of objectives reveals whether the competitor is satisfied with its current situation and how it might react to different competitive actions. A company also must monitor its competitors’ objectives for various segments.

ANALYZING COMPETITORS IDENTIFYING COMPETITORS’ STRATEGIES Strategic group = group of firms in an industry following the same or a similar strategy in a given target market. Although competition is most intense within a strategic group, there is also rivalry among groups due to: Some of the strategic groups may appeal to overlapping customer segments. The customers may not see much difference in the offers of different groups. Members of one strategic group might expand into new strategy segments.

ANALYZING COMPETITORS ASSESSING COMPETITORS’ STRENGTHS & WEAKNESSES Company normally learn about their competitors’ strengths and weaknesses through secondary data; conduct marketing research with customers, suppliers, and dealers; personal experience, and word of mouth. Conduct benchmarking = the process of comparing the company’s products and processes to those of competitors or leading firms in other industries to find ways to improve quality and performance.

ANALYZING COMPETITORS ESTIMATING COMPETITORS’ REACTIONS Marketing managers need a deep understanding of a given competitor’s mentality if they want to anticipate how the competitor will act or react. Each competitor reacts differently: THE TIGER COMPETITOR THE LAID BACK COMPETITOR THE SELECTIVE COMPETITOR THE STOCHASTIC COMPETITOR

SELECTING COMPETITORS TO ATTACK and AVOID STRONG or WEAK COMPETITORS CLOSE or DISTANT COMPETITORS “GOOD” or “BAD” COMPATITORS

COMPETITIVE POSITIONS Market leader = the firm in an industry with the largest market share. Market challenger = a runner-up firm that is fighting hard to increase its market share in an industry. Market follower = a runner-up firm that wants to hold its share in an industry without rocking the boat. Market nicher = a firm that serves small segments that the other firms in an industry overlook or ignore.

BASIC COMPETITIVE STRATEGIES Overall cost leadership. The company works hard to achieve the lowest production and distribution costs. Differentiation. The company concentrates on creating a highly differentiated product line and marketing program so that it comes across as the class leader in the industry. Focus. The company focuses its efforts on serving a few market segments well rather than going after the whole market.

COMPETITIVE MARKETING STRATEGIES Strategies –called value discipline– for delivering superior customer value : Operational excellence. The company provides superior value by leading its industry in price and convenience. E.g. Wal-Mart Customer intimacy. The company provides superior value by precisely segmenting its markets and tailoring its products or services to match exactly the needs of targeted customers. E.g. British Airways Product leadership. The company provides superior value by offering a continuous stream of leading-edge products or services. E.g. Microsoft

MARKET LEADER STRATEGIES EXPANDING the total DEMAND MORE USAGE NEW USERS NEW USES EXPANDING MARKET SHARE PROTECTING MARKET SHARE PREVENT OR FIX WEAKNESSES CONTINUOUS INNOVATION

MARKET LEADER STRATEGIES DEFENSE STRATEGIES POSITION DEFENSE. Occupying the most desirable market space in the mind of the consumers, making the brand almost impregnable. FLANK DEFENSE. Erect outposts to protect a weak front or possibly serve as an invasion base for counterattack. PREEMPTIVE DEFENSE. Attack before the competitor starts its offence. COUNTEROFFENSE DEFENSE. The leader meet the attacker frontally. MOBILE DEFENSE. The leader stretches its domain over new territories that can serve as future centers for defense & offense through market broadening & market diversification. CONTRACTION DEFENSE. Giving up weaker territories & reassigning resources to stronger territories.

MARKET CHALLENGER STRATEGIES DEFINING THE STRATEGIC OBJECTIVE AND OPPONENT(S) CHOOSING A GENERAL ATTACK STRATEGY FRONTAL ATTACK FLANK ATTACK ENCIRCLEMENT ATTACK BYPASS ATTACK GUERRILLA WARFARE

MARKET FOLLOWER STRATEGIES COUNTERFEITER: DUPLICATES THE LEADER’S PRODUCT & PACKAGE AND SELLS IT ON THE BLACK MARKET CLONER: EMULATES THE LEADER’S PRODUCT, NAME, PACKAGING WITH SLIGHT VARIATIONS IMITATOR: COPIES SOMETHINGS FROM THE LEADER BUT MAINTAINS DIFFERENTIATION ADAPTER: TAKE THE LEADER’S PRODUCTS AND ADAPTS OR IMPROVES THEM

MARKET NICHER STRATEGIES MULTIPLE NICHING IS PREFERABLE TO SINGLE NICHING THREE TASKS CREATING EXPANDING PROTECTING NICHES

BALANCING COMPANY ORIENTATIONS COMPETITOR-CENTERED COMPANY – a company whose moves are mainly based competitors’ actions and reactions. CUSTOMER-CENTERED COMPANY – a company that focuses on customer developments in designing its marketing strategies and on delivering superior value to its target customers. MARKET-CENTERED COMPANY – a company that pays balanced attention to both customers and competitors in designing its marketing strategies.

EVOLVING COMPANY ORIENTATIONS Customer centered No Yes Competitor centered Product orientation Customer orientation Competitor orientation Market orientation