1. Creating Competitive Advantage
Chapter 18

2. Objectives
Learn how to understand competitors as well as customers via competitor analysis.
Learn the fundamentals of competitive marketing strategies based on creating value for customers.
Realize the need for balancing customer and competitor organizations in order to become a truly market-centered organization.

3. Intel Has dominated the chip industry
Success is directly related to Intel’s competitive strategy
Strategy focuses on superior value and product leadership
Heavy focus on product and advertising innovation and R&D investments
Changing market needs have challenged Intel to adapt
Intel is capitalizing on the Internet now

4. Definition Competitive Advantage
An advantage over competitors gained by offering consumers greater value than competitors offer.

5. Definition Competitive 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.

6. Steps in Analyzing Competitors
Figure 18-1:
Steps in Analyzing Competitors

7. Competitor Analysis Steps in the Process:
Firms face a wide range of competition
Be careful to avoid “competitor myopia”
Methods of identifying competitors:
Industry point-of-view
Market point-of-view
Competitor maps can help
Steps in the Process:
Identifying Competitors
Assessing Competitors
Selecting Competitors to Attack or Avoid

8. 230-year-old Encyclopedia Britannica viewed itself as competing with your publishers of printed encyclopedias. Big mistake! Its real competitors were software encyclopedias and the Internet.

9. Figure 18-2:
Competitor Map

10. Discussion Question Create a competitor map for one of the following:
WalMart
McDonald’s
Nike
Starbucks
Google

11. Competitor Analysis Steps in the Process: Identifying Competitors
Determining competitors’ objectives
Identifying competitors’ strategies
Strategic groups
Assessing competitors’ strengths and weaknesses
Benchmarking
Estimating competitors’ reactions
Steps in the Process:
Identifying Competitors
Assessing Competitors
Selecting Competitors to Attack or Avoid

12. Competitor Analysis Steps in the Process: Identifying Competitors
Strong or weak competitors
Customer value analysis
Close or distant competitors
Most companies compete against close competitors
“Good” or “Bad” competitors
The existence of competitors offers several strategic benefits
Steps in the Process:
Identifying Competitors
Assessing Competitors
Selecting Competitors to Attack or Avoid

13. Competitive Strategies
Basic Winning Competitive Strategies: Porter
Overall cost leadership
Lowest production and distribution costs
Differentiation
Creating a highly differentiated product line and marketing program
Focus
Effort is focused on serving a few market segments

14. Hohner has successfully implemented a focus strategy to capture an 85% share of the harmonica market.

15. Competitive Strategies
Basic Competitive Strategies: Value Disciplines
Operational excellence
Superior value via price and convenience
Customer intimacy
Superior value by means of building strong relationships with buyers and satisfying needs
Product leadership
Superior value via product innovation

16. Hypothetical Market Structure
Figure 18-3:
Hypothetical Market Structure

17. Competitive Positions
Competitive Strategy
Expanding the total demand
Finding new users
Discovering and promoting new product uses
Encouraging greater product usage
Protecting market share
Many considerations
Continuous innovation
Expanding market share
Profitability rises with market share
Competitive Positions
Market Leader
Market Challenger
Market Follower
Market Nicher

18. Competitive Strategy
WD-40 has a knack for developing new uses for its product.
What other brands have adopted a similar strategy?
Clicking the WWW icon will open your web browser and link to the web site pictured in the screen shot.
WD40

19. Competitive Positions
Competitive Strategy
Option 1: challenge the market leader
High-risk but high-gain
Sustainable competitive advantage over the leader is key to success
Option 2: challenge firms of the same size, smaller size or challenge regional or local firms
Full frontal vs. indirect attacks
Competitive Positions
Market Leader
Market Challenger
Market Follower
Market Nicher

20. Pepsi is an example of market challenger that has chosen to use a full frontal attack

21. Competitive Positions
Competitive Strategy
Follow the market leader
Focus is on improving profit instead of market share
Many advantages:
Learn from the market leader’s experience
Copy or improve on the leader’s offerings
Strong profitability
Competitive Positions
Market Leader
Market Challenger
Market Follower
Market Nicher

22. Dial Corporation successfully uses a market follower strategy

23. Competitive Positions
Competitive Strategy
Serving market niches means targeting subsegments
Good strategy for small firms with limited resources
Offers high margins
Specialization is key
By market, customer, product, or marketing mix lines
Competitive Positions
Market Leader
Market Challenger
Market Follower
Market Nicher

24. Balancing Customer and Competitor Orientations
Companies can become so competitor centered that they lose their customer focus.
Types of companies:
Competitor-centered companies
Customer-centered companies
Market-centered companies

25. Game playing industry Nintendo Microsoft Sony Wii hyperlink Xbox 360
Play Station

27. Threat of New Entry the existence of barriers to entry
economies of product differences
brand equity
switching costs
capital requirements
access to distribution
absolute cost advantages
learning curve advantages
expected retaliation
government policies

28. Competitive Rivalry number of competitors rate of industry growth
intermittent industry overcapacity
exit barriers
diversity of competitors
informational complexity and asymmetry
brand equity
fixed cost allocation per value added
level of advertising expense

29. Supplier Power
supplier switching costs relative to firm switching costs
degree of differentiation of inputs
presence of substitute inputs
supplier concentration to firm concentration ratio
threat of forward integration by suppliers relative to the threat of backward integration by firms
cost of inputs relative to selling price of the product

30. Buyer Power buyer concentration to firm concentration ratio
bargaining leverage
buyer volume
buyer switching costs relative to firm switching costs
buyer information availability
ability to backward integrate
availability of existing substitute products
buyer price sensitivity
price of total purchase

31. Threat of Substitution
buyer propensity to substitute
relative price performance of substitutes
buyer switching costs
perceived level of product differentiation