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Competitor analysis

At the end of this module the learning outcomes


are:
- Importance of understanding competition
- Approaches to competitor analysis
- Identifying competitors likely response

Competitor analysis
Suggested Readings
Strategic Marketing Management by Wilson &
Gilligan (chapter 4)
Strategic Marketing by: David Cravens (chapter 7)

Competitor analysis
Who are the competitors of
Brooke Bond Red Label Tea
Samsung fax machine
Titan Watch
Rajdhani express

Competitor analysis
Think again
Have the sales of Samsung fax machines
gone down because of e-mail?
Who is your competitor?

Competitor analysis
Are they
Water
E-mail
Arrow shirt
Spice Jet

Competitor analysis
Harley Davidson perception of competition
Last American motorcycle
Symbol of freedom and adventure
Technically antiquated
Not seen as form of transport
Social statements
Compete against various recreations
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Competitor analysis
ASIAN PAINTS
Indian paint industry
Highly concentrated
Top four players
95% of the market share
Asian Paints
Market leader
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Competitor analysis
ASIAN PAINTS
Next player has less than half market share
How it has maintained
Strong value proposition
Higher customer perceived benefits
Lower costs
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Competitor analysis
ASIAN PAINTS
Higher customer perceived benefits
Initial foray in semi-urban and rural market
Required extensive distribution network
Bypasses wholesaler arrangement
Appointed retailers in semi-urban areas all
over India
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Competitor analysis
ASIAN PAINTS
Higher customer perceived benefits

Rural areas
Smaller size paint products
Risk of inventory build up
Invested in IT to ensure strict inventory control
Networking of offices and depots
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Competitor analysis
Higher customer perceived benefits
Urban areas
Paints for every price points
Competitively priced thus encouraging economies
of scale
Launch of premium paints
Launch of color world tinting system
Customers mix shade before buying
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Competitor analysis
Higher customer perceived benefits
Entry into painting solutions
Dominated by unorganized sector
Offer solutions
Higher margins in services

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Competitor analysis
Lower costs
Color world tinting
Means lower stocks
Reducing inventory and working capital
Tight control on receivables
Inventory in number of days and
receivables lower than industry average
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Competitor analysis
These initiatives have helped Asian Paints
to maintain its competitive advantage
and distinct edge over competitors

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Competitor analysis
Importance
- Provides an understanding of your competitive
advantage / disadvantage relative to your
competitors position.
- Insights into competitors strategies
- Developing future strategies to sustain/establish
advantages over your competitors.

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Competitor analysis
Seeking competitive advantage
Two types of analysis
Industry analysis
Comparative analysis

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Competitor analysis
Industry analysis
Every industry
Peculiar characteristics
Porters five-force model

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Competitor analysis
Porter's approach to competitive structure
analysis
Nature and intensity of competition within any
industry is determined by the interaction of five key
forces:
1. The threat of new entrants
2. Power of buyers
3. Threat of substitutes
4. Extent of competitive rivalry
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5. Power of suppliers

Competitor analysis
1. Threat of new entrants
- Depends on barriers to entry
- How heavy is the capital investment
Intel's huge investment into research
- Strong brand image to overcome
Coke investments required to build brands
- Cost incurred to create distribution channels
Hindustan Levers huge investments
in distribution in rural areas
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Competitor analysis
2. Power of buyers
- Is likely to be higher if:
1. There are large number of suppliers
2. Alternative sources of supply
3. Threat of backward integration
Example
Reliance Industries
1. Started as textiles company
2. Makes raw materials to produce textiles
3. Vertically integrated
4. Bargains on price for huge quantities it picks20up.

Competitor analysis
3. Threat of substitutes
- Will be more prevalent if:
- Customers perceive other offers to perform
the same function as ours
- Substitute products offer higher value for
money
- Substitute products earn higher profits

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Competitor analysis
Onion versus ready to make paste
Dabur Hommade pastes

Tomato versus tomato puree


Scooters versus Motorcycles
Hero Honda sales at the expense of Bajaj

Vanaspati versus edible oils

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Competitor analysis
4. Extent of competitive rivalry
Intensity of rivalry will be greater if:
- Competitors are of equal size and are seeking
dominance
- High fixed costs provoke price wars to maintain
capacity. E.g: Airlines industry

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Competitor analysis
New addition of capacity have created excess
capacity
Hotel industry
Automobile industry

Product homogeneity necessitates activity to


maintain share.

Coke versus Pepsi

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Competitor analysis
5.Power of suppliers
Is likely to be higher if:
- There are few suppliers
- Cost of switching from one supplier to another is
high
E.g: Intel
Suppliers are likely to integrate forward
Kirloskar compressors into airconditioners.
Reliance entry into petroleum products retailing
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Competitor analysis
Comparative analysis
Specific advantage of competitors within a
given market
Two types
Structural advantage
Responsive advantage
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Competitor analysis
Structural advantage
Built into business
A manufacturing plant at Chennai for
Hyundai to carry out exports

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Competitor analysis
Responsive advantage
Position of comparative advantage that have
accrued to business over time
Leveraging strategic phenomena at work in
the business
Either cost or unique value
Indigo over Air India
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Competitor analysis
Intensity and Degree of competition
Factors
Opportunity potential
Ease of entry
Nature of product
Exit barriers
Homogeneity of market
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Competitor analysis
Intensity and Degree of competition
Factors

Industry structure or competitive position of firms


Commitment to the industry
Feasibility of technological innovations
Scale economies
Economic climate
Diversity of firms
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Competitor analysis
Opportunity potential
Promising industry attracts rivals
Telecom service operators

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Competitor analysis
Ease of entry
Easy entry
Attracts marginal players
Committed players discourage potential
entrants
Colgate trying to thwart Anchor with
Brands
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Competitor analysis
Nature of product
Offerings perceived to be similar
Tends to go on price
Severe competition

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Competitor analysis
Exit barriers
Regulated
Exit difficult
Mobile services

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Competitor analysis
Homogeneity of market
Intensity is higher than segmented
Telecom services versus Telecom handset
players

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Competitor analysis
Industry structure or competitive position
of firms
Large number of firms
Intensity higher
Aggression leads to retaliation
Fewer players leads to less retaliation
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Competitor analysis
Commitment to the industry
Contribution to overall sales
Maintain position at any cost
Wipro versus Infosys

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Competitor analysis
Feasibility of technological innovations
Frequent innovations
Do their best in short time
Intensity is higher

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Competitor analysis
Scale economies
Economies of scale benefits are high
Will do everything to get volume
Aggressive competition for market share
Escalates pressure
Airlines industry
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Competitor analysis
Economic climate
Boom times
Relatively moderate
Recession
Companies bite each other
Intensity is higher
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Competitor analysis
Diversity of firms
Old players in the industry
Display a predictable behavior
New participants
Can do many unconventional behavior to
upset existing players
Dells model
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Competitor analysis
Marketing Myopia
Theodore Levitt
Marketing Guru
How business is defined
Why American rail business a massive
decline
Onslaught of airlines
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Competitor analysis
THE COURIER MARKET
came in 70s
Launch of fax
Later email
How players handled competition

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Competitor analysis
Two approaches
Adopt new products
Strengthen existing business

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Competitor analysis
Adopt new products
IBM
Hardware in 70s
Threat from low-cost producers
Shifted focus to software

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Competitor analysis
Strength existing business
FED EX
Earlier couriers
Competition from fax, email
Shifted focus on parcel market
Physical distribution required
Offered door-to-door delivery
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Competitor analysis
FED EX
Offer complete logistics solutions
Found existing players not offering these
solutions
Gradually left the space for document
courier to smaller companies

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Competitor analysis
MOSQUITO REPELLANT DEVICES
BALSARA
Launched ODOMOS in 1964
Unattended need
Cream based product
Inhouse R & D
Earlier smoke sensing devices were used
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Competitor analysis
MOSQUITO REPELLANT DEVICES
Now creams
Held 97% share of the cream market
What are the concerns
Later Tortoise was launched
Used smoke concept
Economical
Gained 70% market share
Odomos 20% share
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Competitor analysis
MOSQUITO REPELLANT DEVICES
1984
Goodknight brand
No use of cream or coil
Value proposition
Cleaner
Less messy
Convenient
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Competitor analysis
MOSQUITO REPELLANT DEVICES
By late 90s
Mats/liquid-70%
Coils-22%
Creams-9%
Balsara tried to launch mats/liquid
BALSARA lost the market which it created
in 1964
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Competitor analysis
Poor understanding of the competition
Decline
Air coolers
Mopeds
Soya-based drinks

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Competitor analysis
Competition happens at four levels
1.Companies offering only similar products
- Kitkat versus Perk
- Nescafe versus Bru

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Competitor analysis
Competition happens at four levels
2 Companies consisting of all companies operating
in the same category
- Cadbury's Eclairs versus. Nestle Kitkat
- Canada Dry versus Pepsi Cola

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Competitor analysis
Competition at four levels
3. Competitor consists of all companies manufacturing
or supplying products which deliver the same service
- Airlines versus Railways
- Second hand cars versus scooters versus Tata Nano

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Competitor analysis
Competition happens at four levels
4. Competition consists of all companies competing
for the same spending power
- Dishwasher versus Microwave oven
- Designer jewelry versus Ritu Beri's fabrics
- Debeers versus Nokia mobile phones

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Competitor analysis
COMPETITIVE EQUILIBRIUM
Five scenarios
If competitors are nearly identical and make their
living in the same way, then the competitive
equilibrium is unstable.
Identical products
Commodity industries
Competitive equilibrium gets upset if one cuts
prices
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Competitor analysis
If a single major factor is the critical factor, then
competitive equilibrium is unstable
Differentiation is possible
Breakthrough in technologies
Cut costs
Change habits of consumers
Apples Iphone
Amazon.com
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Competitor analysis
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 the multiple factors
that may provide an advantage, the more the
number of competitors who can coexist. Each
competitor has his competitive segment defined
by the preference for the factor trade-offs that
he offers.
Retailing industry in India
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Competitor analysis
The fewer the number of competitive
variables that are critical, the fewer the
number of competitors.
If one factor is critical, fewer competitors.
More variables, larger number of
competitors, but smaller in size.
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Competitor analysis
Is it always prudent to increase your market
share?

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Competitor analysis
A ratio of 2 in 1 in market share between
two competitors seems to be the
equilibrium point at which it is neither
practical nor advantageous for other
competitor to increase or decrease share.

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Competitor analysis
Marketing Myopia
Traditional way of looking competition
Narrow definition
Identify direct and indirect competition

Competitor analysis
Red-Ocean thinking
Seeking bloody
Head-to-head battles with competitor
Based on improvements in costs, quality or
both

Competitor analysis
Blue-Ocean thinking
Creating products and services
There are no direct competitors
Go beyond conventional boundaries
Find unoccupied competitions
Represent real value innovation

Competitor analysis
Blue-Ocean thinking
EASYJET
Low-cost carrier
European carrier
Quite successful
Fly to Scotland for a pair of jeans.
Competitor to full-price carriers like British
Airways, Lufthansa
How 3Vs were used?
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Competitor analysis
Valued customer-who to serve
Traditional carriers targeted everyone
Mainly business travelers
Travel mostly on company expenses
EasyJet
Target those customers who pay from their own
pocket,
Predominantly entrepreneurs, small business owners
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Competitor analysis
EasyJet
Target those customers who pay from their own
pocket
Predominantly entrepreneurs, small business
owners
Large segment in Europe
Were unhappy with offerings of full-price carriers
Two strategic segments identified
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Competitor analysis
Valued-proposition-what to offer?
Major differences between two segments
Business segment

Demanding
Freebies such as newspaper, meals
Want seamless connections
Less waiting
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Competitor analysis

Small business travel


Willing to forgo these services
Lower prices
EasyJets value proposition answers four
issues

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Competitor analysis
Which attributes that our industry takes
for granted should be eliminated?
Free meals and travel agents to be
eliminated.
Sells food on aircraft
Eliminated travel agents
Tickets sold on internet
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Competitor analysis
Which attributes should be reduced to below
industry standards?
Have the offering been overdesigned?
What can be reduced
Flexibility in flight changes and seat selection
Non-refundable fares
Seat on first-come, first-served basis
Incentive for passengers to board earlier
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Competitor analysis
Which attributes should be increased to
above industry standards?
Lower prices
Punctuality
Younger fleet of aircraft

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Competitor analysis
Which new attributes should be created
that the industry has never offered?
New sources of value creation
One-way fares refund if the flight is delayed
beyond four hours

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Competitor analysis
Value curve
Compare the value proposition of various
players in the industry
Full-price carriers are superior on every
dimension
Which attributes are most important to air
travelers?
Reach safely
Low prices a concern
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Competitor analysis
Easy Jet
Streamlined operations
Fast turnaround
Greater utilization
single type of aircraft (Boeing 737)
Reduces spare parts inventory
Increases bargaining power with vendors
Lower pilot training costs
Elimination of business class means more seats can be
accommodated
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Competitor analysis
FIVE PRINCIPLES OF EASYJET VALUE
NETWORK
1. Avoid fixed costs wherever possible
No secretarial staff

2. Cover fixed costs quickly


Aircrafts remain in air for 11 hours

3. Eliminate variable costs wherever possible


Avoid use of travel agents

4. Keep variable costs low


Avoid landing at major ports

5. Convert fixed costs into revenue generators


Sell food items in aircraft
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Customer and Competitor


Orientations
Competitor-Centered Companies
Example
Competitor launching a new product next
brand of soap in Delhi region
Float a scheme for retailers for our existing
soap

Customer and Competitor


Orientations
Competitor-Centered Companies
Advantages
Organization develops a fighter orientation
Trained to be on constant alert
Disadvantages
Too reactive
Too much dependent on competitor moves

Customer and Competitor


Orientations
Customer-Centered Companies
Focus on customer developments
The market of children is getting saturated
Let us reposition the product to widen the
market to include youth.

Customer and Competitor


Orientations
Customer-Centered Companies
Advantages
Better position to identify new opportunities
Choose a course which delivers long-term
growth and profits
Monitoring customer needs
Amazon.com

Customer and Competitor


Orientations
Customer-Centered Companies
Disadvantages
Counter attack by competitors
Odomos by Good Knight mosquito
repellant
Good Knight became the leader