Dealing with competition Assembled by Arsene Kodjo

Dealing with the competition Industry definition of competition Pure competition :- Many competitors offering the same product and services, almost identical, no control over price and free entry for competitors. Ex. Printing, laundry Monopolistic competition :- Many competitors focus on identifiable segments and provide excellent services at premium prices. Relatively easy entry and have some control over price. Ex. Restaurant, clothing industry Oligopoly: Few or few dominant firms providing differentiated or standardised products or services, difficult to enter and do not compete on price. Ex. Cement, fertiliser Pure monopoly : Only one firm provide a certain product or service in the country. Ex. Water company, electricity

Dealing with the competition Market definition of competition- Existing and potential competitors The treat of new entrants- How easy it is for other companies to enter a market or industry and start operating. Power Of Suppliers- how easy it is to do business with your suppliers. A concentrated industry creates powerful supplying companies. The power of buyers- How easy it is to do business with your customers or buyers. large customers bargain strongly when making a purchase. Treat of substitute products or services : A market is unattractive if there are actual or potential substitutes for the product or service. Rivalry among existing competitors: A market is unattractive if it already contains numerous and aggressive competitors, with few opportunity to differentiate or increase their market share.

Dealing with the competition Analysing competitors Customer awareness Product availability Product quality Technical assistance Selling staff Competitor A Competitor B Competitor C

Dealing with the competition classes of competitors Strong versus weak competitors: A strong competitor can be a market leader enjoying a high market share, whereas a weak competitor might be slow in reacting to market changes or other competitors’ moves in the market. Close versus distant competitors: Companies servicing a market with the same products are close competitors, but companies servicing a market’s need with substitutes products are called distant competitors. Good versus bad competitors- Good competitors play by the industry rules but, bad competitors buy market share instead of earning it through aggressive price cut.

Dealing with the competition Designing competitive strategies Market leader strategies 1.Expand total market demand- Find new users, new uses or encourage frequent purchase 2.Defending market share: Protect hard-won market share by: preemptive, counteroffensive, mobile, contraction and flanking defensive strategies. 3.Expanding market share: Design new or improved product for existing or new market.

Dealing with the competition Designing competitive strategies Market challenger strategies - Attack market leader or other competitors Frontal attack – matching opponents’ products, advertising budget, price, and distribution Flank attack- flanking the competitors product Encirclement attack: attacking the competitor from different fronts Bypass attack: bypassing the competitor and focus attention on other areas of possible growth. Guerrilla warfare: waging intermittent attack on the competitor through,price cut, legal battle and so on..

Dealing with the competition Designing competitive strategies Market -Follower strategies: Prefer to follow rather than challenge the market leader. 1.Counterfeiter: Duplicate leader’s product and sell It in the black market. 2.Cloner : Emulates leader’s product, name, with slight variations. 3.Imitator: Copy some aspect of the product by maintain differentiation. 4.Adapter : Adapt the leader’s product and improve upon it.

Dealing with the competition Designing competitive strategies Market-Nicher strategies- specialization on a small market size. Ex. End user specialisation Specific –customer specialist

Dealing with the competition Responding to price changes Maintain price- As the company may lose too much profits if it reduced price, lose market share or be able to regain market share quickly. Maintain price and add value Reduce price- if it will lose market share, hard to rebuild market share. Increase price and improve quality Launch a low-price fighter line.

Dealing with the competition Strategic optionReasoningConsequences Maintain price and perceived quality. Engage in selective customer pruning Firm has higher customer loyalty. willing to lose unprofitable customers Smaller market share. Lowered profitability Raise price and perceived quality Raise price to cover cost. Improve quality to justify higher prices Smaller market share. Maintained profitability Maintain price and raised perceived quality It is cheaper to maintain price and raise perceived value Short term decline in-profitability, long term maintained profitability Cut price partly, and raise perceived quality Must give customers some price reduction Log=term maintained profitability, Maintained market share Cut price fully and maintain perceived value Discipline and discourage price competition Maintained market share, short- term decline in profitability Cut price fully and reduce perceived quality Discourage price competition, but maintain profit margin Maintained market share but long-term reduction in profitability Maintain price but reduce perceived quality Cut marketing expense to combat rising cost Maintained margin, long-term reduction in profitability Introduce an economy modelGive the market what it wantsSome cannibaliation but higher total volume