1. Strategic Marketing 052 430 Instructor: Michael Cooke
Address:
Office: IC room 817
Class hours: Friday 13:00-16:00
Class Location: IC room 806
Web: home/kku.ac.th/michco

2. Structure of Competitor Analysis
Who are the competitors?
Who are the most intense competitors?
What are the substitute products
Who are the potential entrants? Can they be discouraged?
What are the barriers to entry?
Evaluating the competitors
Their objectives and strategies? Level of commitment? (Note how exit from a geographic market is interpreted)
Do they have a cost advantage or disadvantage?
Image and positioning strategy
Which are the most successful over time?
Why?
Their strengths and weaknesses?
Customer problems, or unmet needs that competitors could exploit?

3. Competitor Analysis – Customer-based Approach
Look at competitors from a customer perspective
Product-use associations (which products do they associate with a given use or context?)
Customer choices (what other brands would be considered?)
Indirect competitors
Consider geographic regions (firms may expand)
Customer priorities change
The firm needs to understand positioning and new product strategies of indirect competitors
Customers do consider alternatives beyond current direct competitors
At what level is the analysis conducted?
Business unit, firm, an aggregation of businesses? Analysis may be need at all levels at which strategies are developed.
May need to include indirect competitors in some level of strategic analysis

4. Competitor Analysis - Strategic Groups
Concept is useful for making industry analysis manageable
Selection of strategy will often mean selecting or creating a strategic group
A strategic group is firms that:
Pursue similar competitive strategies
Have similar characteristics
Have similar assets and competencies
Specific assets and competencies often serve as mobility barriers
A firm competing across strategic groups is often at disadvantage (distribution channels, etc)

5. Potential Competitors
Market expansion – firms operating in other geo areas
Product expansion – firms in related product areas
Backward integration – customers that move upstream
Forward integration – suppliers that move downstream
Weak competitors can become strong via M&A situations
Retaliatory or defensive strategies in response to perceived threats

6. Understanding the Competitors
Image and Positioning
Objectives and Commitment
Size, Growth
& Profitability
Current and Past Strategies
Strengths and Weaknesses
Competitor Actions
Organization and Culture
Exit Barriers
Cost Structure
Figure 3.2
© Copyright 2010 John Wiley & Sons Ltd
Figure 4.3

7. Understanding Competitors
Size, growth and profitability
These indicate strength and successful strategy
Profitable businesses have access to capital (unless being milked)
Often have to use indirect measures to find these numbers
Image and positioning
Competitors positioning may present opportunities to differentiate
Can use consumer research or study of competitor products, adverts, websites, actions to determine competitor positioning
Competitor objectives, including parent company
Market share, sales growth, profitability objectives
Is the company or the parent company committed to the business? Will the parent make resources available? Exit barriers (chapter 14)?
Has the competitor abandoned markets?
Current and past strategies
Failed strategies are unlikely to be repeated
Pattern of new market or product moves may be predictive
Based on line breadth, product quality, service, brand, or distribution?
If niche or focus, what is the scope?
If low cost is the strategy, is it achieved via scale, experience, supplier access?
Cost structure indicates pricing strategy and staying power
Outsourcing strategy or investment in fixed assets
Sales relative to number of factories
Direct labor versus overhead (fixed costs)
Company websites are a good source of information

8. Relevant Assets and Competencies
Which assets or competencies contributed business successes?
Which businesses have had chronically low performance? Why? What assets or competencies do they lack?
What are the customer motivations? Service? Product quality?
Which assets and competencies are industry entry or exit barriers? (Mobility barriers)
Barriers to exit exist where assets have no alternative use
Some assets and competencies are difficult or impossible to reproduce to would be entrants
Value added components? Excelling on a value added component can be an SCA for a firm.
Start examination with suppliers
End with customer use
Checklist of Strengths and Weaknesses (see McLoughlin p54)
Innovation
Manufacturing
Access to capital (operations, net short term assets,
Customer base
Marketing
Figure 4.4

9. Key Learnings
Competitors can be identified by customer choice (the set from which customers select) or by clustering them into strategic groups, (firms that pursue similar strategies and have similar assets, competencies, and other characteristics). In either case, competitors will vary in terms of how intensely they compete.
Competitors should be analysed along several dimensions, including their size, growth and profitability, image, objectives, business strategies, organisational culture, cost structure, exit barriers, and strengths and weaknesses.
Potential strengths and weaknesses can be identified by considering the characteristics of successful and unsuccessful businesses, key customer motivations, and value-added components.
The competitive strength grid, which arrays competitors or strategic groups on each of the relevant assets and competencies, provides a compact summary of key strategic information.

10. “We often give our enemies the means for our own destruction.”
Aesop

11. P&G in China
Entry through joint venture with a Hong Kong based multinational in 1998
Chinese market characterized by:
Huge disparity in income levels and consumer needs within China
Large number of outlets for consumer goods
Three tier consumer segment system developed
Premium
Middle
Low price
Marketing objective to promote global products as Chinese brands
R&D in Beijing
Use local ingredients
Local cost and pricing targets
Local customer research staff
Tailor products to local traditions, local tastes, local budgets
Different and more costly products for wealthier urban markets

12. Global Strategy Elements
1. Competitive forces in an industry
2. Global industry – the extent of globalization
3. Competitive advantage (cost, differentiation, etc)
4. Hyper competition (disrupting the market)
5. Interdependency – standardized components

13. Competitive Industry Structure An element of global strategy Michael Porter
Industry competitors – rivalry among existing firms
Potential entrants – note barriers to entry
Barriers could be legislated
Time and investment
Bargaining power of suppliers (raw materials to components)
Bargaining power of buyers (supermarket chains, large volume operations like WalMart, government as customer, single large company customer)
Threats of substitutes

14. Competitive Industry Structure Substitute Products or Services
Often overlooked or underestimated by established industry players
HP in 2004 saw Personal Computers as a commodity
Build cheap in high volume
Main competitor thought to be Dell Computer of TX
$3BB R&D under-utilized
Substitutes can restructure entire industries
Common in technology industries
Always a threat in the petroleum industry
But cost of entry for substitutes is high
Once a substitute gains entry, costs may rapidly drop
Pattern is to have price spikes, followed by periods of prices too low for substitutes to thrive
Synthetic rubber became a substitute when war cut natural rubber supplies

16. Global Industry
Those industries where a firm’s competitive position in one country is affected by its position in other countries.
The first question that faces managers is the extent of globalization of their industry. Example: Foreign car brands in many countries are made locally.
Every industry could have global aspects. Some academics believe consumer tastes are converging globally, and firms drive tastes to converge.

17. Industry Globalization Potential
The potential globalization of an industry is determined by: 1. Market forces 2. Cost forces 3. Government forces 4. Competition forces

18. Exhibit 8-1: Industry Globalization Drivers
Copyright (c) 2009 John Wiley & Sons, Inc.

19. Global Industry Market Forces
Per capita income convergence
Rich consumers in emerging markets
Convergence of lifestyles and tastes
Increased international travel creates global customers
Organizations behaving as global customers (Toyota)
Growth of global and regional retail channels
More regional successes than global
Those that are global are adapted to regional culture (7-11)
Establishment of world brands
Global advertising
Spread of global and regional media
Revolution in communication technology*

20. *Revolution in Communication technology
Much bigger and more fundamental than e-commerce alone
Growth of worldwide secure financial settlements
Rapid spread of ATMs from the mid-90s for example
Ease of doing financial transactions across borders
Rapid spread of cellular technology connected whole regions to the outside world, from late 1990s
Rapid decrease in the price of bandwidth late 1990s
Large scale long distance data transfer became viable
Fiber optic technology means very cheap prices across oceans
Google and others have mix of local and central content
Offshore factories and suppliers have real time access
Distributors have real time access to retail inventory
Medical information and other data intensive documents exchanged real time
Cultural diffusion via better communication
Often thought of as spread of English
Growing exposure and interest works in both directions

21. Global Strategy Cost Forces
1. Global economies of scale and scope
2. Steep experience curve
3. Global sourcing efficiencies
4. Favorable logistics
5. Difference in country costs
6. High product development costs
Need to spread costs onto higher volumes
Emerging R&D centers in lower cost countries
7. Fast-changing technology
8. Shorter product life cycles
Copyright (c) 2009 John Wiley & Sons, Inc.

22. Global Strategy Government Forces Competitive Forces
1. Favorable trade policies (and trading blocks)
2. Compatible technical standards
3. World Trading Regulations
4. High growth/low labor cost developing countries
5. Deregulation/privatization of industries
6. Shift to market economies in China, Russia, E. Europe
Competitive Forces
1. High exports and imports
2. Competitors from different continents and countries
3. Interdependent countries (components specialization)
4. Globalized competitors
5. Globalized financial markets (and company ownership)
Copyright (c) 2009 John Wiley & Sons, Inc.

23. Global Strategy Competitive Advantage
Cost leadership
Builds on economies of scale
Learning effects (how to be more efficient)
Long production runs (high cost to change lines)
Amortize fixed costs over more units (R&D often fixed)
Cost leadership can be a barrier to entry (and a trap!)
Product differentiation
Customers willing to pay premium price for unique products
Can be a barrier to entry (note Brand Relevance, “own a category”)
Niche strategy
Focus on a highly specialized segment
Try to achieve a dominant global position in that segment
Pays to stay ‘under the radar’
A overlooked niche can grow into something much bigger
Global marketers combine cost control and product differentiation

24. Global Strategy Gaining Competitive Advantage
Firms create series of temporary advantages
Most advantages are temporary (methods are learned)
Firms must innovate to stay ahead (think of Brand Relevance)
Experiment with small product introductions – some will work
Advantages and disadvantages of being the pioneer
Can grow quickly in absence of competitors (a reason small firms with innovative ideas seek to go public or be bought – marketing)
Can become the standard for a product
But others may learn from mistakes of pioneers – first mover costs
Competitor-focused approach
Comparisons with competitor costs, prices, technology
Firm might focus too intently on competitors
Customer-focused approach (How would we describe P&G China?)

25. Global Strategy Interdependency
Interdependency of modern companies
Firms draw on outside technologies – purchase use of ideas
Standardized components enable scale economies to suppliers
Standardized components enable different firms to use same components
Note that many firms may cooperate for open standards
Governments affect parts of a firm’s cost structure
Export restraints (to protect domestic markets or for defense purposes)
Tariff and non-tariff barriers

26. Global Marketing Strategy
Benefits of Global Marketing:
Cost Reduction
Standard packaging (include lower inventory)
Consolidate multiple marketing functions
Reduced total advertising costs
Improved Products and Program Effectiveness (from integration of ideas and spreading costs over larger base)
Enhanced Customer Preference through consistent theme
Competitive Advantage through coordinating the worldwide organization (employee communication, intelligence gathering)
Limits to Global Marketing:
Globalization vs. localization (local adaptation)
Worldwide Web has elements of both
Languages and cultural values differ among national sites
Global integration vs. local responsiveness
Global companies create local subsidiaries to respond locally
Local R&D etc
Scale vs. sensitivity to local cultures

27. Degrees of Standardization of Products in World Markets
Chapter 8
Copyright (c) 2009 John Wiley & Sons, Inc.

28. Typical Income Statement
Net Revenue
Less COGS (includes provision for inventory write-off)
Gross Profit
SG&A (mostly fixed cost in short term)
Administration (includes finance)
Sales and Marketing
Distribution
Research and Development
Net (operating) income before taxes and depreciation
Taxes etc
Net income

29. Marketing Interactions within the Company
Marketing interacts with Finance, Operations, and R&D to determine whether new products are viable from a resources and opportunities perspective
Financial resources (can we afford to launch?)
Human and manufacturing hardware resources
Marketing interacts with Finance to make forecasts and budgets
Top line numbers – budgeting usually begins with revenue forecasts
Marketing expenses
Marketing interacts with Finance, Manufacturing, and Distribution to determine pricing and promotion strategies (what do we need to move this month?), fine tuning of production runs, and inventory obsolescence

30. R&D, Operations and Marketing Interfaces
R&D/Operations Interface (basic R&D vs production R&D) – design new products to use existing resources
Manufacturing/Distribution/Marketing Interface
Core Components Standardization in adapting to local needs
Some cosmetic or packaging considerations might be applied in packaging and distribution
Some adaptation might occur only in customer perceptions
Timing and length of factory production runs
Cost and pricing considerations
Inventory management
Avoiding excess inventory through coordinating sales with production
Getting rid of unused inventory (obsolete product might be sold in LDC)
Marketing/R&D Interface (customers as idea sources)

31. Exhibit 8-5: Interfaces among R&D, Manufacturing, and Marketing
Chapter 8
Copyright (c) 2009 John Wiley & Sons, Inc.

32. Regionalization of Global Marketing Strategy
Regional strategies are cross-subsidization in pursuit of regional production, branding, and distribution advantages.
Issues in regionalization of global marketing strategy:
Cross-Subsidies of Markets (competitor bases)
Kodak ignored Japan when Fuji targeted economy segment
Failure to counter an attack can be catastrophic
Identification of Weak Market Segments
Use a weak niche to expand in a foreign market
Established players often ignore niches
Lead Markets set standards for the world (India tractors)
Marketing Strategies for Emerging Markets
Local companies identify their relative strengths
Local businesses closer to customers, part of local culture

33. Competitive Analysis
SWOT (Strengths, Weaknesses, Opportunities, and Threats) Analysis (See Exhibit 8-6.)
A SWOT analysis divides the information into two main categories: internal and external factors.
Based on SWOT analysis, marketing executives can construct alternative strategies.
The aim of any SWOT analysis should be to isolate the key issues that will be important to the future of the firm and that will be addressed by subsequent marketing strategy.
Copyright (c) 2009 John Wiley & Sons, Inc.

34. Exhibit 8-6: SWOT Analysis
Chapter 8
Copyright (c) 2009 John Wiley & Sons, Inc.