1. Dealing with Competition9
Dealing with Competition
Marketing Management, 13th ed-
A South Asian Perspective

2. Chapter Questions How do marketers identify primary competitors?
How should we analyze competitors’ strategies, objectives, strengths, and weaknesses?
How can market leaders expand the total market and defend market share?
How should market challengers attack market leaders?
How can market followers or nichers compete effectively?

3. Five Forces Determining Segment Structural Attractiveness
Number of sellers and degree of differentiation
Entry, mobility, and exit barriers
Cost structure
Degree of vertical integration
Degree of globalization

4. Barriers and Profitability
Entry Barriers
Exit barriers
High, stable
returns
High
Low
High, risky
returns
High
Low, stable
returns
Low
Low, risky
returns

5. Competitive Strategy Industry Force Generic Strategies Cost Leadership
Differentiation
Focus
Entry Barriers
Ability to cut price in retaliation deters potential entrants.
Customer loyalty can discourage potential entrants.
Focusing develops core competencies that can act as an entry barrier.
Buyer Power
Ability to offer lower price to powerful buyers.
Large buyers have less power to negotiate because of few close alternatives.
Large buyers have less power to negotiate because of few alternatives.
Supplier Power
Better insulated from powerful suppliers.
Better able to pass on supplier price increases to customers.
Suppliers have power because of low volumes, but a differentiation-focused firm is better able to pass on supplier price increases.
Threat of Substitutes
Can use low price to defend against substitutes.
Customer's become attached to differentiating attributes, reducing threat of substitutes.
Specialized products & core competency protect against substitutes.
Rivalry
Better able to compete on price.
Brand loyalty to keep customers from rivals.
Rivals cannot meet differentiation-focused customer needs.

6. Analyzing Competitors
Objectives
Competitor
Actions
Strategies
Strengths &
Weaknesses
Reaction
Patterns

7. A Competitor’s Expansion Plans
Customers’ ratings of competition on Key Success Factors: An example

8. Strengths and Weaknesses
Share of market
(The competitor’s share of the target market)
Share of mind
(The first company that comes to mind)
Share of heart
(The company from which you would prefer to buy)

9. Selecting Competitor
Strong Vs Weak (Fewer Resources required) Close Vs Distant (Resemblance) Good Vs Bad

10. Competitive Strategies for Market Leaders
10%
Market
nicher
40%
Market
leader
30%
Market
challenger
20%
Market
follower
Expand Market
Attack leader
Special-
ize
Imitate
Defend Market Share
Status quo
Expand Market Share

11. Expanding the Total Market
New customers
(Penetration/new market segmentation/geographical-expansion)
More usage
(Consumption Amount/Frequency)

12. Defense Strategy- Creative/Anticipative/Responsive
A market leader should generally adopt a defense strategy
Six commonly used defense strategies
Position Defense
e.g. Mercedes was using a position defense strategy until Toyota launched a frontal attack with its Lexus.
Mobile Defense
By market broadening and diversification (Dialog Telekom Srilanka)
Flanking Defense
Secondary markets (flanks) are the weaker areas and prone to being attacked
Contraction Defense
Withdraw from the most vulnerable segments and redirect resources to those that are more defendable
Pre-emptive Defense
Detect potential attacks and attack the enemies first
Counter-Offensive Defense
Responding to competitors’ head-on attack by identifying the attacker’s weakness and then launch a counter attack
e.g. Toyota launched the Lexus to respond to Mercedes attack

13. Market Challenger Strategies
The market challengers’ strategic objective is to gain market share and to become the leader eventually
How?
By attacking the market leader
By attacking other firms of the same size
By attacking smaller firms
The strategic choice is to attack the leader or to attack other firms
Porter cautioned that this “…may be the most dangerous move a company can make.”
Al Ries and Jack Trout suggested that if you are the number two firm in the market, you should attack the leader
In order to adopt the attack strategy, the challenger must meet 3 conditions:
Must have a SCA either in terms of cost or differentiation
Able to neutralize the leader’s advantage by doing as well as the leader
When there is some impediment to the leader retaliating
Success in attacking the leader is typically based on how well the challenger can reconfigure its market strategies and marketing mix strategies

14. Market Challenger Strategies (cont’d)
Types of Attack Strategies
Frontal attack
Flank attack
Encirclement attack
Bypass attack
Guerrilla attack

15. Frontal Attack Seldom work unless
The challenger has sufficient fire-power (a 3:1 advantage) and staying power, and
The challenger has clear distinctive advantage(s)
e.g. Japanese and Korean firms launched frontal attacks in various ASPAC countries through quality, price and low cost
Surf Vs Ariel

16. Flank attack
Attack the enemy at its weak points or blind spots i.e. its flanks
Ideal for challenger who does not have sufficient resources
e.g. Google Vs ChaCha and or Wikipedia

17. Encirclement attack Attack the enemy at many fronts at the same time
Ideal for challenger having superior resources
e.g. Seiko attacked on fashion, features, user preferences and anything that might interest the consumer
Zong???

18. Bypass attack
By diversifying into unrelated products or markets neglected by the leader
Could overtake the leader by using new technologies
e.g. Pepsi used a bypass attack strategy against Coke by acquiring Tropicana Vs. Minute Maid
Telenor in Pakistan
Instead of launching carbonated drinks Nestle brought pure jiuces vs. the carbonated drinks

19. Guerrilla attack
By launching small, intermittent hit-and-run attacks to harass and destabilize the leader
Usually use to precede a stronger attack
e.g. airlines use short promotions to attack the national carriers especially when passenger loads in certain routes are low
local water brands vs. multinational water brands

20. Which Attack Strategy should a Challenger Choose?
Use a combination of several strategies to improve market share over time

21. Market-Follower Strategies
Theodore Levitt in his article, “Innovative Imitation” argued that a product imitation strategy might be just as profitable as a product innovation strategy
e.g. Product innovation--Sony
Product-imitation--Panasonic

22. Market-Follower Strategies (cont’d)
Each follower tries to bring distinctive advantages to its target market--location, services, financing
Four broad follower strategies:
Counterfeiter (which is illegal)
Cloner (emulation of leader’s product, name & package)
e.g. New Joshanda Brand Vs Qarshi
S&S Cycle Vs. Harley
Imitator e.g. car manufacturers imitate the style of one another
Adapter e.g. many Japanese firms are excellent adapters initially before developing into challengers and eventually leaders

24. Market-Nicher Strategies
Smaller firms can avoid larger firms by targeting smaller markets or niches that are of little or no interest to the larger firms
e.g. Zippo
Digicel
Bullet-Proof Cars

25. Market-Nicher Strategies (cont’d)
Nichers must create niches, expand the niches and protect them
e.g. Nike constantly creates new niches--cycling, walking, hiking, cheerleading, etc
What is the major risk faced by nichers?
Market niche may be attacked by larger firms once they notice the niches are successful

26. Multiple Niching
“[A] firm should `stick to its niching’ but not necessarily to its niche. That is why multiple niching is preferable to single niching. By developing strength in two or more niches the company increases its chances for survival.”
Philip Kotler

27. Balancing Orientations
Competitor-
Centered
Customer-
Centered