Dealing with Competition

1. 9 Dealing with Competition Marketing Management, 13th ed- A South Asian Perspective

2. Chapter Questions • 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. Five Forces Determining Segment Structural Attractiveness • Number of sellers and degree of differentiation • Entry, mobility, and exit barriers • Cost structure • Degree of vertical integration • Degree of globalization

4. Exit barriers Low High Low, stable returns Low Entry Barriers High, stable returns High, risky returns High Barriers and Profitability Low, risky returns

5. Competitive Strategy

6. Objectives Competitor Actions Strategies Reaction Patterns Strengths & Weaknesses Analyzing Competitors

7. A Competitor’s Expansion Plans Customers’ ratings of competition on Key Success Factors: An example

8. Strengths and Weaknesses Share of market (The competitor’s share of the target market) Share of mind (The first company that comes to mind) Share of heart (The company from which you would prefer to buy)

9. Selecting Competitor Strong Vs Weak (Fewer Resources required)Close Vs Distant (Resemblance)Good Vs Bad

10. Market nicher Market leader Market challenger Market follower 40% 30% 20% 10% Competitive Strategies for Market Leaders Expand Market Attack leader Special- ize Imitate Defend Market Share Status quo Expand Market Share

11. Expanding the Total Market New customers (Penetration/new market segmentation/geographical-expansion) More usage (Consumption Amount/Frequency)

12. Defense Strategy- Creative/Anticipative/Responsive • A market leader should generally adopt a defense strategy • Six commonly used defense strategies • Position Defense • e.g. Mercedes was using a position defense strategy until Toyota launched a frontal attack with its Lexus. • Mobile Defense • By market broadening and diversification (Dialog Telekom Srilanka) • Flanking Defense • Secondary markets (flanks) are the weaker areas and prone to being attacked • Contraction Defense • Withdraw from the most vulnerable segments and redirect resources to those that are more defendable • Pre-emptive Defense • Detect potential attacks and attack the enemies first • Counter-Offensive Defense • Responding to competitors’ head-on attack by identifying the attacker’s weakness and then launch a counter attack • e.g. Toyota launched the Lexus to respond to Mercedes attack

13. Market Challenger Strategies The market challengers’ strategic objective is to gain market share and to become the leader eventually How? • By attacking the market leader • By attacking other firms of the same size • By attacking smaller firms

14. Market Challenger Strategies (cont’d) Types of Attack Strategies • Frontal attack • Flank attack • Encirclement attack • Bypass attack • Guerrilla attack

15. Frontal Attack • Seldom work unless • The challenger has sufficient fire-power (a 3:1 advantage) and staying power, and • The challenger has clear distinctive advantage(s) • e.g. Japanese and Korean firms launched frontal attacks in various ASPAC countries through quality, price and low cost • Surf Vs Ariel

16. Flank attack • Attack the enemy at its weak points or blind spots i.e. its flanks • Ideal for challenger who does not have sufficient resources • e.g. Google Vs ChaCha and or Wikipedia

17. Encirclement attack • Attack the enemy at many fronts at the same time • Ideal for challenger having superior resources • e.g. Seiko attacked on fashion, features, user preferences and anything that might interest the consumer • Zong???

18. Bypass attack • By diversifying into unrelated products or markets neglected by the leader • Could overtake the leader by using new technologies • e.g. Pepsi used a bypass attack strategy against Coke by acquiring Tropicana Vs. Minute Maid • Telenor in Pakistan • Instead of launching carbonated drinks Nestle brought pure jiuces vs. the carbonated drinks

19. Guerrilla attack • By launching small, intermittent hit-and-run attacks to harass and destabilize the leader • Usually use to precede a stronger attack • e.g. airlines use short promotions to attack the national carriers especially when passenger loads in certain routes are low • local water brands vs. multinational water brands

20. Which Attack Strategy should a Challenger Choose? Use a combination of several strategies to improve market share over time

21. Market-Follower Strategies • Theodore Levitt in his article, “Innovative Imitation” argued that a product imitation strategy might be just as profitable as a product innovation strategy e.g. Product innovation--Sony Product-imitation--Panasonic

22. Market-Follower Strategies (cont’d) • Each follower tries to bring distinctive advantages to its target market--location, services, financing • Four broad follower strategies: • Counterfeiter (which is illegal) • Cloner (emulation of leader’s product, name & package) • e.g. New Joshanda Brand Vs Qarshi • S&S Cycle Vs. Harley • Imitator e.g. car manufacturers imitate the style of one another • Adapter e.g. many Japanese firms are excellent adapters initially before developing into challengers and eventually leaders

24. Market-Nicher Strategies • Smaller firms can avoid larger firms by targeting smaller markets or niches that are of little or no interest to the larger firms e.g. Zippo Digicel Bullet-Proof Cars

25. Market-Nicher Strategies (cont’d) • Nichers must create niches, expand the niches and protect them • e.g. Nike constantly creates new niches--cycling, walking, hiking, cheerleading, etc • What is the major risk faced by nichers? • Market niche may be attacked by larger firms once they notice the niches are successful

26. Multiple Niching “[A] firm should `stick to its niching’ but not necessarily to its niche. That is why multiple niching is preferable to single niching. By developing strength in two or more niches the company increases its chances for survival.” Philip Kotler

27. Balancing Orientations Competitor- Centered Customer- Centered