9

Dealing
with Competition
 Chapter Questions (cont.)
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?
 Chapter Questions (cont.)

How should market challengers attack

market leaders?
How can market followers or nichers
compete effectively?
Five Forces Determining Segment
Structural Attractiveness
Threat of intense segment rivalrycellular phone
market

Strong/aggressive competitors, frequent price wars,

advertising battles and new product introduction.
Five Forces Determining Segment
Structural Attractiveness
Threat of new entrantsCan come from anywhere
Entry barriers high and exit barriers low Most
attractive
Entry and exit barriers high High profit potential
Entry and exit barriers low low but stable returns
Entry barriers low and exit high chronic overcapacity
and depressed earnings airline industry.
Five Forces Determining Segment
Structural Attractiveness
Threat of substitute products
Five Forces Determining Segment
Structural Attractiveness
Threat of buyers growing bargaining power

Five Forces Determining Segment

Structural Attractiveness
Threat of Suppliers growing bargaining power
ExxonMobil, Shell, BP, and Chevron-Texaco are at
the mercy of oil-supplying cartels such as OPEC.
Five Forces Determining Segment
Structural Attractiveness
Threat of intense segment rivalrycellular phone
market
Threat of new entrantsCan come from anywhere
Threat of substitute productsGreyhound and
Amtrak profitability threatened by rise of air travel
Threat of buyers growing bargaining power
Wal-Mart buying power
Threat of Suppliers growing bargaining power
ExxonMobil, Shell, BP, and Chevron-Texaco are at
the mercy of oil-supplying cartels such as OPEC.
Five Forces Determining Segment
Structural Attractiveness
 Identifying Competitors

Marketers classify industry on the basis of

Number of sellers and degree of
differentiation
Entry, mobility, and exit barriers
Cost structure
Degree of vertical integration
Degree of globalization
 Analyzing Competitors

Strategies
Objectives
Strengths
Weaknesses
A Competitors Expansion Plans
 Analyzing Competitors

Share
Share of
of markettarget
markettarget market
market

Share
Share of
of mind--%
mind--% of
of customers
customers
who
who names
names companies
companies in
in an
an
Industry
Industry

Share
Share of
of heart--%
heart--% of
of customers
customers
who
who prefer
prefer aa companys
companys product
product
 Steps in Benchmarkingart of learning
from that perform certain tasks better than
other companies
Determine which functions or
processes to benchmark
Identify the key performance variables
to measure
Identify the best-in-class companies
Measure the performance of best-in-
class companies
 Steps in Benchmarking (cont.)

Measure the companys performance

Specify programs and actions to close
the gap
Implement and monitor results
 Selecting Competitors

Strong vs Weak
Close vs Distant
Good vs Bad
Selecting Customers
Competitive Strategies for Market
Leaders
Classifying firms on the basis of their
roles in target markets.
Leader 40% mkt share
Challenger 30% mkt share
Follower 20% mkt share
Nicher 10% mkt share
 Expanding the total market
New customers
Searching new users among three groups.
1.Those who might use it but do not (mkt penetration
Strategy)

2.Those who have never used it ( new mkt segment

Strategy)

3. Those who live else where ( Geographical expansion

strategy )
 Expanding the total market
More usage
Increasing the amount of consumption-
soft drinks, snacks etc.

Increasing the frequency of consumption

 Defending the Market Share
Responsive marketer Finds a stated need and fills it.

Anticipative marketer Looks ahead into what may

customers need in the future.

Creative marketer Discovers and produces solutions

customers did not ask for but to which they
enthusiastically respond.

Creative marketers are market driving firms and not

market driven.
 Six Types of Defense Strategies
Position Defenseoccupying the most desirable market spaces in the
consumers minds (e.g., Procter & GambleTide detergent; Nescafe-
Coffee, Pampers diapersdryness)
 Six Types of Defense Strategies
Flankerect outpost to protect a weak front (e.g., Smirnoff attacked by
low-priced competitor Wolfschmidt, Smirnoff introduce Relska to compete
with Wolfschmidt and Popov to sell less than Wolfschmidt)
 Six Types of Defense Strategies
Preemptiveattack before the enemy starts its offense (e.g., SBI 13500
branches nationwide and more than 7500 ATMs along with a range of
products)

Israel hints at pre-emptive strike on

Iran
 Six Types of Defense Strategies
Counteroffensivemeet the attacker frontally or hit its flank (i.e., invade
the attackers main territory so that it will pull back to defend it) (e.g.,
FedEx watched UPS successfully invade its airborne delivery system,
FedEx invested heavily in ground delivery service to challenge UPS on its
home turf)
 Six Types of Defense Strategies
Mobileleader stretches its domain over new territories that can serve
future centers for defense and offense; Market broadening (e.g., BP recast
itself from oil to energy); Diversification (e.g., Reynolds and Philip Morris
moved into new industriesbeer, liquor, soft drinks and frozen foods).

SPYDER Mobile Firing Unit

 Six Types of Defense Strategies
Contractiongiving up weaker territories and reassigning resources to
stronger territories (e.g.,ASTRA-ZENECA stops the marketing of STOP-IT
an antiinfective and NIMBID analgesic preparation to concentrate on its
Antihypertensive range of products)
Six Types of Defense
Strategies
 Factors Relevant to Pursuing
Increased Market Share
Possibility of provoking antitrust action--
monopoly
Economic costmarket share might exceed
value
Pursuing the wrong marketing-mix strategy
may be irrelevant to target customers
The effect of increased market share on
actual and perceived qualitydilute brand
equity by putting a strain on resources.
 Other Competitive Strategies

Market challengers
Attack the market leader (e.g., Bajaj
Automobiles attacks HeroHonda on
technological grounds, CANON vs
XEROX)
Attack firms of its own size and are not
doing the job and are underfinanced
Attack small local and regional firms
Market followers
Market niches
 Market Challenger Strategies

Define the strategic objective and

opponents
Choose a general attack strategy
Choose a specific attack strategy
 General Attack Strategies
Frontal attackMatching the opponents product, advertising,
price, and distribution. ( COCACOLA vs PEPSI )
 General Attack Strategies
Flank attackAttacking weak spots of opponent on geographic
& segmental dimensions. Geographic (e.g., Internet has
siphoned newspaper readers and advertisers in many markets,
Independent News & Media sells a majority of its 175 newspaper
and magazine titles in cities where the economy is strong but the
Internet is still relatively weakIreland, South Africa, Australia,
New Zealand, and India
 General Attack Strategies
Encirclement attack--Blitz the territory (e.g., Sun Microsystems
licensed its java software to hundreds of companies and many
software developers to make a stand against Microsoft)
 General Attack Strategies
Bypass attackAttacking easier markets to broaden the firms
resource base by diversifying into unrelated product and into new
geographic areas and also by adopting new technologies. (e.g.
Pepsi rolled out Aquafina Bottled water before Coke introduced
Dasani brand), new geographically and new technology (e.g.,
Google search overtook Yahoo), NOKIA vs SAMSUNG.
 General Attack Strategies
Guerilla warfare--Small, intermittent attacks to harass &
demoralise the opponents includes price cuts, intense
promotional blitzes & occasional legal action. (e.g., Princeton
Review successfully challenged Kaplan Educational Centers for
test preparation), ( eg. BAJAJ vs TVS )
Pepsi buys Gatorade in a Bypass Strategy
 Specific Attack Strategies
Price discounts Product innovation
Lower-priced goods- improvement or
lower quality breakthrough3M
Value-priced goodslow Improved servicesnew
price and high quality or better services--Avis
Southwestern Airlines Distribution innovation
Prestige goodshigh developing a new
quality and high price-- channel--Avon
Mercedes Manufacturing-cost
Product proliferation reductionLower
large product variety production costs
Baskin-Robbins Intensive advertising
promotionincreased
spending
 Market Follower Strategies

Counterfeiter
(Duplication) Rolex
Cloner
(Emulates) Corn Flakes
Imitator
(Copy/Differentiation)

Adapter
(Modifies or improves)
Counterfeiter- Duplicating the leaders product and
packages and selling it on the blackmarket.
Ex- Music firms, Apple and Rolex have been plagued by
this strategy.
Cloner- Emulating the leaders products name &
packaging by slight changes.
Imitator- Copying somethings from the leader but
maintaining differentiation in terms of packaging,
advertising, pricing etc. The leader doesnt mind as long
as the imitator does attack the leader aggresively.
Adapter- Adapter takes the leaders product and adapts or
improves them. The adapter may choose to sell to
different markets but often grows into future challenger.
 Market-Nicher Strategies
Offer high value
Charge a premium price
Achieve low manufacturing costs
Shape a strong corporate culture and
vision
Balancing Orientations
Competitor-centered--
Reactive fighter
Customer-centered--
focused on Customer
Developments
 Study Question 1
A segment is unattractive when there are
actual or potential ________ for the
product.

A.contenders
B.Competitors
C.Substitutes
D.unclear demand
E.profit fluctuation
 Study Question 2
A segment is unattractive if the companys suppliers are able to
raise prices or reduce quantity supplied. Which of the following is
the best illustration of the threat of suppliers growing bargaining
power?

A. Wal-Mart has almost no competitors in its marketspace.

B. Oil companies must purchase a significant amount of their
product from OPEC.
C. McDonalds is the largest fast-food franchise and is still growing.
D. The U.S. Post Office has merged package operations with
FedEx.
E. Sears unsuccessfully attempted to compete with Wal-Mart and
Kmart.
 Study Question 3
In general, a company should monitor the
following variables when analyzing competitors:
________, share of heart, and share of market.

A.share of demand
B.share of profits
C.share of promotion
D.share of universe
E.share of mind
 Study Question 4
The ________ in a given marketplace has the largest
market share in the relevant product market and
usually leads other firms in price changes, new-product
introductions, distribution coverage, and promotional
intensity.

A. market challenger
B. market leader
C. market follower
D. market nicher
E. market entrant
 Study Question 5
A firm that is willing to maintain its market
share and not rock the boat is known as a
________.

A.market challenger
B.market leader
C.market follower
D.market nicher
E.market entrant