0. Dealing with the Competition
Chapter 8
Dealing with the Competition

1. Objectives
Understand how a company identifies its primary competitors and ascertains their strategies.
Review how companies design competitive intelligence systems.

2. Objectives
Learn how a company decides whether to position itself as a market leader, a challenger, a follower, or a nicher.
Identify how a company can balance a customer vs. competitor orientation.

3. Competitive Markets
Porter’s Five Forces that Determine Market Attractiveness:
Threat of intense segment rivalry
Threat of new entrants
Threat of substitute products
Threat of buyers’ growing bargaining power
Threat of suppliers’ growing bargaining power

5. Barriers & Profitability

6. Competitive Markets
Failing to identify competitors can lead to extinction
Internet businesses have led to disintermediation of middlemen
Competition can be identified using the industry or market approach

7. Industries Can Be Classified By:
Competitive Markets
Industries Can Be Classified By:
Number of sellers and degree of differentiation
Cost structure
Entry, mobility and exit barriers
Degree of vertical integration
Degree of globalization

8. Competitive Markets Industry Structures
Pure Monopoly
Pure Oligopoly
Differentiated Oligopoly
Monopolistic Competition
Pure Competition
Only one firm offers an undifferentiated product or service in an area
Unregulated
Regulated
Example: Most utility companies

9. Competitive Markets Industry Structures
Pure Monopoly
Pure Oligopoly
Differentiated Oligopoly
Monopolistic Competition
Pure Competition
A few firms produce essentially identical commodities and little differentiation exists
Lower costs are the key to higher profits
Example: oil

10. Competitive Markets Industry Structures
Pure Monopoly
Pure Oligopoly
Differentiated Oligopoly
Monopolistic Competition
Pure Competition
A few firms produce partially differentiated items
Differentiation is by key attributes
Premium price may be charged
Example: Luxury autos

11. Competitive Markets Industry Structures
Pure Monopoly
Pure Oligopoly
Differentiated Oligopoly
Monopolistic Competition
Pure Competition
Many firms differentiate items in whole or part
Appropriate market segmentation is key to success
Example: beer, restaurants

12. Competitive Markets Industry Structures
Pure Monopoly
Pure Oligopoly
Differentiated Oligopoly
Monopolistic Competition
Pure Competition
Many competitors offer the same product
Price is the same due to lack of differentiation
Example: farmers selling milk, crops

13. Competitive Markets
A broader group of competitors will be identified using the market approach
Competitor maps plot buying steps in purchasing and using the product, as well as direct and indirect competitors

14. Competitor Analysis
Key characteristics of the competition must be identified:
Strategies
Objectives
Strengths and Weaknesses
Effect a firm’s competitive position in the target market
Reaction Patterns

15. Competitive Positions in the Target Market
Competitor Analysis
Competitive Positions in the Target Market
Dominant
Strong
Favorable
Tenable
Weak
Nonviable

16. Competitive Intelligence Systems
Designing the system involves:
Setting up the system
Collecting the data
Evaluating and analyzing the data
Disseminating information and responding to queries

17. Competitive Intelligence Systems
Value analysis helps firms to select competitors to attack and to avoid
Customers identify and rate attributes important in the purchase decision for the company and competition
Attacking strong, close, and bad competitors will be most beneficial

18. Designing Competitive Strategies
Major Strategies
Market-Leader
Market-Challenger
Market-Follower
Market-Nicher
Expanding the total market
Defending market share
Expanding market share

19. Designing Competitive Strategies
Expanding the Total Market:
Targeting Product to New Users
Market-penetration strategy
New-market strategy
Geographical-expansion strategy
Promoting New Uses of Product
Encouraging Greater Product Use

20. Designing Competitive Strategies
Defending Market Share
Position defense
Flank defense
Preemptive defense
Counteroffensive defense
Mobile defense
Contraction defense

21. Designing Competitive Strategies
Before Attempting to Expand Market Share, Consider:
Probability of invoking antitrust action
Economic costs involved
Likelihood that marketing mix decisions will increase profits

22. Designing Competitive Strategies
Major Strategies
Market-Leader
Market-Challenger
Market-Follower
Market-Nicher
First define the strategic goals and opponent(s)
Choose general attack strategy
Choose specific attack strategy

23. Designing Competitive Strategies
General Attack Strategies:
Frontal attacks match competition
Flank attacks serve unmet market needs or underserved areas
Encirclement “blitzes” opponent
Bypassing opponent and attacking easier markets is also an option

24. Specific Attack Strategies Include:
Competitive Markets
Specific Attack Strategies Include:
Price-discount
Lower-price goods
Prestige goods
Improved services
Product proliferation
Product innovation
Distribution innovation
Manufacturing cost reduction
Intensive advertising promotion

25. Designing Competitive Strategies
Major Strategies
Market-Leader
Market-Challenger
Market-Follower
Market-Nicher
Imitation may be more profitable than innovation
Four broad strategies:
Counterfeiter
Cloner
Imitator
Adapter

26. Designing Competitive Strategies
Major Strategies
Market-Leader
Market-Challenger
Market-Follower
Market-Nicher
Niche specialties:
End-user
Vertical-level
Customer-size
Specific customer
Geographic
Product/product line
Product feature
Job-shop – Quality-price
Service – Channel

27. Balancing Customer and Competitor Orientations
Competitor-centered companies evaluate what competitors are doing, then formulate competitive reactions
Customer-centered companies focus on customer developments when formulating strategy