0. Creating Competitive Advantage
Chapter 18

1. 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.

2. 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

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

4. 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.

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

6. 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

7. 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.

8. Figure 18-2:
Competitor Map

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

10. 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

11. Benchmarking In-Depth
Types of Benchmarking:
Process – searching for the best way to perform a process
Internal – enables users to compare similar activities within their own organization.
Types of Benchmarking:
Competitive – organization is compared to direct competitors or those who are selling to the same customer base.
Functional or generic –enables users to compare themselves to organizations that are recognized as the best, whether they are in the same industry or not.
“Experts discuss how benchmarking improves the healthcare industry” Healthcare Financial Management; Westchester; Sep 1994; Anonymous; Volume: 48, Issue:  9, Start Page:  90
Competitive Intelligence: A New Benchmarking Tool Management Review; New York; Oct 1992; Harkleroad, David H.; Volume: 81 Issue: 10 Start Page: 26

12. Benchmarking In-Depth
Sources of Information:
Competitive intelligence
Relevant industry publications
Electronic databases
Internal company experts
Sources of Information:
Industry observers such as professors or consultants
Industry participants, such as suppliers and customers
Competition itself
“Experts discuss how benchmarking improves the healthcare industry” Healthcare Financial Management; Westchester; Sep 1994; Anonymous; Volume: 48, Issue:  9, Start Page:  90
Competitive Intelligence: A New Benchmarking Tool Management Review; New York; Oct 1992; Harkleroad, David H.; Volume: 81 Issue: 10 Start Page: 26

13. 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

14. Competitor Analysis Designing Competitive Intelligence Systems
A Well-Designed CI System:
Identifies types and sources of competitive information
Continuously collects information
Checks reliability and validity of information
Interprets and organizes information
Distributes information to decision makers and responds to queries

15. Competitive Strategies
Approaches to Marketing Strategy
No single strategy is best for all companies
Marketing strategy and practice often passes through three stages:
Entrepreneurial marketing
Formulated marketing
Intrepreneurial marketing

16. 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

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

18. 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

19. Discussion Question
Firms that follow a customer intimacy strategy are willing to do almost anything for their customers.
Does such a strategy make sense for local businesses, or only for national / global corporations?
British Airways practices customer intimacy with select frequent flyers

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

21. 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

22. 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

23. 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

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

25. 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

26. Dial Corporation successfully uses a market follower strategy

27. 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

28. FedEx and UPS are two competitors in the package delivery business
FedEx and UPS are two competitors in the package delivery business. What competitive strategy seems to describe each company?

29. 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

30. Evolving Company Orientations
Figure 18-4:
Evolving Company Orientations