1. MARKETING MANAGEMENT 12th edition11
Dealing with Competition
Kotler Keller

2. Objectives 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. Competitive Forces & Analyzing Competition
DEFINITION
Competition is any past, current or future potential
solution to an application need from either an
internal or external entity = risk and opportunity
ANALYZING COMPETITORS - INDIVIDUALLY
Who is the Competition / leaders and key
others per target market
What are their strengths and weaknesses
(products, resources, alliances, value chain
integration, market share, etc.)
What are their objectives and strategies
What trends have their historical
performance demonstrated
How do they react to new competitors and
current competitors with new initiatives
Determine Segment Structural Attractiveness
Five Forces
DINDUSTRY CONCEPT
INDUSTRIES Groups of firms with products that are close substitutes for each other
Number of sellers
Degree of differentiation
Entry, mobility, and exit barriers
Cost structure
Degree of vertical integration
Degree of globalization
Pure Monopoly
Oligopoly
Monopolistic
Pure Competition
MARKETING CONCEPT
Any type of functional solution to an application need
versus grouping competitors by common product attributes

4. Analyzing Competition By Group
What are the strategic groups that comprise the industry
What are the marketing mix characteristics that define each group
What market share (and history) does each group constitute in the industry
What group offers the product mix within which it is best to compete
Who are the leaders and key players in each group
What are the objectives, strategies, strengths and weaknesses of each
What are their reaction patterns to competitive initiatives
EXAMPLES: Industry Strategic Groups
SURVEY: CUSTOMER RATINGS OF COMPETITORS – KEY SUCCESS FACTORS
Customer Awareness
Product Quality
Product Availability
Technical Assistance
Selling Staff
Competitor A E P G
Competitor B
Competitor C F
Note: E = excellent, G = good, F = fair, P = poor.
Dominant
Strong
Favorable
Tenable
Weak
Nonviable
SURVEY: CUSTOMER MIND SHARE AND HEART SHARE
Market Share
Mind Share
Heart Share
2000
2001
2002
Competitor A
50%
47%
44%
60%
58%
54%
45%
42%
39%
Competitor B 30 34 37 31 35 44 47 53
Competitor C 20 19 10 11 8
Dell Market Objectives and Strategies

5. Hypothetical Market Structure
Competitive Strategies for Market Leaders
Hypothetical Market Structure
Market-Leader Strategies
Expanding the Total Market
New Users
Market-penetration strategy
New-market segment strategy
Geographical-expansion strategy
New Uses
More Usage
Defending Market Share
Expanding Market Share
May Not Always Increase
Profits Because:
Provoking antitrust action is a possibility
Economic cost could increase
Pursuing the wrong marketing-mix strategy
may occur
Of the effect of increased market share on actual and perceived quality
Defense Strategies
Position Defense
Flank Defense
Preemptive Defense
Counteroffensive Defense
Mobile Defense
Market broadening
Principle of the objective
Principle of mass
Market diversification
Contraction Defense
Planned contraction (Strategic withdrawal)
Concept Of
Optimal
Market
Share
Expanding Market Share

6. Other Competitive Strategies & Balancing Orientations
Hypothetical Market Structure
Market-Challenger Strategies
Defining the Strategic Objective
and Opponent(s)
It can attack the market leader
It can attack firms of its own
size that are not doing the job
and are under financed
It can attack small local and
regional firms
Choosing a General Attack Strategy
Market-Nicher Strategies
High margin versus high volume
Nicher Specialist Roles
End-user specialist
Value-added reseller
Vertical-level specialist
Customer-size specialist
Specific-customer specialist
Geographic specialist
Product or product-line
specialist
Encirclement
Flank
Bypass
Guerrilla
Choosing a Specific Attack Strategy
Price-discount
Lower price goods
Prestige goods
Product proliferation
Product innovation
Improved services
Distribution innovation
Manufacturing cost reduction
Intensive advertising promotion
Market-Follower Strategies
Innovative imitation (Product imitation)
Product innovation
Four Broad Strategies:
Counterfeiter
Cloner
Imitator
Adapter
Product-feature specialist
Job-shop specialist
Quality-price specialist
Service specialist
Channel specialist
MUST BALANCE BETWEEN BEING
A CUSTOMER VS COMPETITOR
CENTERED COMPANY

7. SUMAMRY Know Who Our Competition is Analyze the Competition
Design a competitive intelligence system to assure accurate data
Develop market objectives and a competitive strategy based on:
opportunities from customer needs, strengths of core competencies
and probability for success relative to the strength of competitors
and factors that facilitate or inhibit competition within the industry
Focus on Being Customer-Centered versus Competitor Centered

8. Additional Perspectives
Other Supporting Foils

9. Analyzing Competitors
REACTION PATTERNS
If competitors are nearly identical and make their living the same way, then their competitive equilibrium is unstable. Since differentiation is hard to maintain then price wars are frequent.
2. If a single major factor is the critical factor, then the competitive equilibrium is unstable. Here economies of scale often provide cost differentiation opportunity. Improvements in cost generally result in price wars.
3. If multiple factors may be critical factors, then it is possible for each competitor to have some advantage and be differentially attractive to some customers. The more factors that may provide an advantage, the more competitors who can coexist. Competitors all have their segment, defined by the preference for the factor trade-offs they offer. Opportunities for reasonable margins exist through multiple differentiation (quality, service, support, etc.) opportunities.
4. The fewer the number of critical competitive variables, the fewer the number of competitors.
5. A ratio of 2 to 1 in market share between any two competitors seems to be the equilibrium point at which it is neither practical nor advantageous for either competitor to increase or decrease share.

10. The Competitive Intelligence System Selecting Competitors
Customer Value Analysis (CVA) – Another Tool for Developing
Competitive Strategies
Customer Value = Customer Benefits – Customer Costs
Customer Benefits = product benefits, service benefits, personnel benefits, image benefits
Customer Costs = purchase price, acquisition costs, usage costs, maintenance costs, ownership costs, disposal costs A B C
Price
$100
$ 90
$ 80
Acquisition costs 15 25 30
Usage costs 4 7 10
Maintenance costs 2 3
Ownership costs 5
Disposal costs 6 8
Total costs
$130
$135
$140
Major Steps in Customer Value Analysis:
1. Identify the major attributes customers value.
2. Assess the quantitative importance of the different attributes.
3. Assess companies’ & competitors’ performances on the different customer values against their rated importance.
4. Examine how customers in a specific segment rate the company’s performance against a specific major competitor on an attribute-by-attribute basis.
5. Monitor customer values over time.