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DEALING
Traditional brands:
Western Wranglers & Urban Lee cooper
Levi Strauss
$7.1billion (1996) US Sales $4 billion (2003)
Classic 501
Popular & lower-priced private labels: JC Penneys Arizona & Hip/ youthful lines: American Eagle, Bugle Boy, JNCO, Lucky & Diesel
Redesigned strategy Premium Red Tab line upscale department stores like Nordstrom & Neiman Marcus
Entry Barriers Economies of scale product differences Brand identity Switching costs Capital requirements Access to distribution Absolute cost advantages Proprietary learning curve
Access to necessary inputs Proprietary low-cost product design
New Entrants
Product differences Brand identity Switching costs Informational complexity Diversity of competitors Corporate stakes Exit barriers
Bargaining Power
of Suppliers Suppliers
Industry Competitors
Bargaining Power
of Buyers Buyers
Threat of Determinants of Supplier Power Differentiation of inputs Switching costs of suppliers and firms in the industry Presence of substitute inputs Supplier concentration Cost relative to total purchases in the industry Impact of inputs on cost or differentiation Threat of forward integration relative to threat of backward integration by firms in the industry Substitutes Intensity of Rivalry Determinants of Buyer Power
Bargaining Leverage Buyer concentration vs. firm concentration Buyer volume Buyer switching costs Substitute products Buyer information
Substitutes
Price Sensitivity Price/total purchases Product differences Brand identity Impact on quality/ performance
Source: Porter's 5 Forces - Elements of Industry Structure (source: Porter, 1985, p.6)
Determinants of Substitution Threat Relative price performance of substitutes Switching costs Buyer propensity to substitute
Buying of Medicines.
Confectioneries
Producers supply critical portions of buyers' input Intel's relationship with PC manufacturers - distribution of purchases
Backward integration threat by purchasers Tea producers relationship to Tea estate companies Concentrated purchasers Garment industry relationship to major retail stores like Wal-Mart
e.g. Confectionery.
Threat of Substitutes:
Options of cheaper travel means like trains etc. Domestic airlines have greater threats than the international carriers.
Analyzing Competitors
Strategies Competitor Actions Objectives
Reaction Patterns
Competitor Analysis
Identifying Competitors Assessing Competitors
Determining Objectives
Identifying Strategies Assessing Strengths and Weaknesses Estimating Reaction Patterns
Competitor Analysis
The Strength of the Competitors positioning What market share does each competitor have? (secondary sources) How strong is each competitors image? (primary sources- highly sensitivity) how is the financial performance of each competitor? (secondary sources) Is there any focus or areas of concentration of competitors? (published & primary sources highly sensitive data) How is each element of marketing mix deployed by competitors? (secondary & primary sources) How satisfied is competitors customer base? (primary sources- highly sensitive data) What are the loyalty levels exists for competitors? (primary sources- highly sensitive data) How satisfied are each distribution channels with the competitors (primary sourcesmoderately sensitive data)
Size of the resource base. Level of efficiency of production base Effectiveness of product development process support of R&D. What is the competitors strategic motive? What are their moves and reactions?
Kodaks products Instant cameras & instant film Photogra phic paper
cameras faster
than competitors Medium Sustaining share by emphasizing quality of Kodak paper & educating consumers Separate sales & service networkleveraging firms image and marketing capabilities in microfilm equipment area
High the attack is due to stress on lower prices & quality Very high due to greater emphasis to innovation, cost & service
threatened by Fuji
& other Japanese companies
Office copiers
Xerox, IBM, 3M
Very high
(from
Japanese firms)
Industry Competition
Number of Sellers & Degree of Differentiation Entry, Mobility, Exit barriers
Cost Structure
Degree of Vertical Integration Degree of Globalization
Pure Oligopoly: few firms produce the same product (e.g. BHEL & Cromptons - Switchgears division)
Oligopolistic: Small number of producers who often act together to control the supply of a particular good and its market price It is dominated by a few large suppliers who are
interdependent on each other, before making any pricing and investment decisions. e.g. OPEC (The Organization of the Petroleum Exporting Countries, twelve countries made up of Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, UAE
and Venezuela) is an example of Oligopolistic since few countries control the production of oil. Monopolistic competition: many firms offer differentiated product/ service. (e.g. Banking, Insurance, Mutual Fund Companies) Pure competition: numerous firms offer the same product/ service. (e.g. reaching a stage similar to pani-puri wallas)
Undifferentiated product
Number of Sellers
1. Pure Monopoly
FEW
MANY
Exit Barriers:
Legal obligations
Capital blockage/ investment Government restrictions Lack of alternative opportunities
Cost Structure
Heavy manufacturing high raw material costs. Confectionery & FMCG high
Degree of Globalization
Nature of business like Oil, Aircrafts,
Quality
Group C Moderate line Medium mfg. cost Medium service Medium price
V-mart, Big Bazar
Low
Group D Broad line Medium mfg. cost Low service Low price
High
Vertical Integration
Low
Budget Wines
Massive Choice
High
Normal
Low
Very low
Nonexistent
Budget
High
Normal
Low
Very low
Nonexistent
Results
No 1 imported wine (outsells France and Italy) Fastest growing wine in the history of the USA industry: New consumers of wine
Summary
Conventional Logic
Industry Assumption Strategic Focus
Create an equity and buyer value to dominate and sustain the market.
Customers
Summary
Conventional Logic
Assets & Capabilities
Think in terms of
products/services offered by the industry. Seek to maximize the
Eliminate
Create What factors should be created that the industry has never offered?
What factors should be eliminated that the industry has taken for granted?
Reduce What factors should be reduced well below the industry standard?
Market nicher
Market Leader
Market Challenger
Market Follower
Attack leader
Imitate
Specialize
Competitive Positions
Competitive Positions
Firm with the Largest Market Share
Competitive Strategies
Expand Total Market Protect Market Share Expand Market Share Full Frontal Attack Indirect Attack
Market Leader
Market Challenger
Runner-Up Firms that Fight Hard to Increase Market Share
Runner-Up Firms that Want to Hold Their Share Without Rocking the Boat Firms that Serve Small Segments Not Being Pursued by Other Firms
Market Followers
Follow Closely Follow at a Distance By Customer, Market, Quality-Price, Service Multiple Niching
Market Nichers
Targeting customer groups that currently are non-users Identifying new uses for product/service
Strong market positioning Development & refinement of competitive advantages Continuous product & process innovation proactive Heavy promotions Strong customer relations Strong channel relations
Heavy
promotions Improved distribution Price incentives product portfolio expansion Mergers & Takeovers Geographic expansion Distribution expansion
1960s-1970s:
1980s:
identified potential for selling motorcycles delivering a fashion symbol styling become relevant repositioning.
Offer: Series of larger motorcycle. Supported by heavy advertising emphasis on youthful values.
used as synthetic fibre for used for shirts, tyres, carpets, various parachutes industrial and engineering uses
4. Walking before the photographers, the actress showing off her hair. "Paaiye dandruff free soft baal, dono ek saath...
6. It is work time and the star's coactor too busy admiring the former's hair, fails to hear the director
7. Seeing the two actors carrying on with the scene, the director has to once again scream, "Cut" and give them a jolt.
saying, "Cut."
More or additional usage: soft drinks and snacks markets identify opportunities/ gaps in HHs schedule.
cont
Satisfying
customer needs
CREATIVE MARKETING
Discovers & produces pdt./ service solutions, to which customer likely to response positively
e.g. Sony introduced many pdts. like Walkmans, VCRs, Videocameras, and CDs.
ANTICIPATED MARKETING
Predicting the future probable needs of the customers
e.g. HLLs toothpastes based on research on herbal, salts and other natural ingredients, & Nokia mobile phones etc.
Defense Strategies
Market leader uses the strategies to:
Defense Strategies
(2) Flank defense
(3) Preemptive
defense
Attacker
cont
Counter-offensive Defense: Attack the competitor from front or protect the weak front (Flank attack). e.g. US Automobile companies often launch a counteroffensive attack against Japanese counterparts in their markets for the disturbances that had been created by them in US market. Mobile Defense: Market leader stretches/ leverage its strengths into new sales territories can serve for future centers for defense & offense market broadening like Reliance from Petroleum into Energy (using R&D for Oil, coal, hydroelectric and chemicals), and market diversification like ITC from Cigarettes into e-choupals, garments etc. Contraction Defense: When it is difficult to defend the old territories, leader go for planned contraction (strategic withdrawal) giving up weaker/ unprofitable territories and reassigning resources to stronger territories - like US companies relocating their operations from Europe to emerging economies like India & China.
Attack Strategies
(4) Bypass attack (2) Flank attack Attacker (1) Frontal attack (3) Encirclement attack (5) Guerilla attack
Defender
Attacking Strategies
Frontal Attack: attacker concentrate on leaders product ranges, advertising, price & distribution like Pepsi-Coca Cola, HLL-P&G. Flank Attack: Hit competitors weak front at two strategic dimensions geographic and segmental. Geographical like IBMs rival Honeywell set-up sales branches in smaller cities, that were not targeted by IBM. Segmental like Japanese automobile co.s did against US auto makers by developing fuel-efficient cars.
Attacking Strategies
cont
Bypass Attack: Indirect assault strategy bypass the rival and attack the easier markets to broaden the resource base and share the risk. Can be done through:
Diversifying into unrelated product categories Diversifying into new geographical areas Launch new technologies to enhance existing products
Attacking Strategies
cont
Encirclement Attack: Capture large proportion of leaders share by launching massive offensive attack on several fronts. Use when challenger commands superior resources/ coverage. Mohans against Kelloggs Cornflakes in India based on price points and distribution coverage from groceries to organised chains. Guerrilla Attack: Launching small and irregular attacks to make competitor tired to secure permanent foothold in the market by both conventional & unconventional means like price cuts, intensive promotions etc. e.g. small Generic players against the Ethical drug manufacturers.
Nichemanship
End-user specialist (price premiums earned by retailers like Pantaloons and similar others) Vertical-level specialist (chemical or drug companies) Customer-size specialist (M80 mopeds in rural India being neglected by big players) Specific-customer specialist (BHEL, Crompton Ltd) Geographic specialist (Wagh Wakri tea in Gujarat)
Nichemanship
Parker)
cont
Customer
+ Identify opportunities + Long-run profit + Emerging needs & groups
Competition
+ Fighter orientation + Alert against future moves + Exploit weaknesses - Reactive
Differentiation
Customer Orientation
Yes
Market Orientation
SWOT ANALYSIS