Understanding Competitive Markets Analysis

1. Chapter 8 Dealing with the Competition PowerPoint by Karen E. James Louisiana State University - Shreveport To accompany A Framework for Marketing Management, 2nd Edition

2. Objectives • Understand how a company identifies its primary competitors and ascertains their strategies. • Review how companies design competitive intelligence systems. To accompany A Framework for Marketing Management, 2nd Edition

3. 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. To accompany A Framework for Marketing Management, 2nd Edition

4. 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 To accompany A Framework for Marketing Management, 2nd Edition

5. 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 To accompany A Framework for Marketing Management, 2nd Edition

6. Number of sellers and degree of differentiation Cost structure Entry, mobility and exit barriers Degree of vertical integration Competitive Markets Industries Can Be Classified By: • Degree of globalization To accompany A Framework for Marketing Management, 2nd Edition

7. 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 Competitive Markets To accompany A Framework for Marketing Management, 2nd Edition

8. 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 Competitive Markets To accompany A Framework for Marketing Management, 2nd Edition

9. 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 Competitive Markets To accompany A Framework for Marketing Management, 2nd Edition

10. 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 Competitive Markets To accompany A Framework for Marketing Management, 2nd Edition

11. 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 Competitive Markets To accompany A Framework for Marketing Management, 2nd Edition

12. 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 To accompany A Framework for Marketing Management, 2nd Edition

13. 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 To accompany A Framework for Marketing Management, 2nd Edition

14. Dominant Strong Favorable Tenable Weak Nonviable Competitor Analysis Competitive Positions in the Target Market To accompany A Framework for Marketing Management, 2nd Edition

15. 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 To accompany A Framework for Marketing Management, 2nd Edition

16. 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 To accompany A Framework for Marketing Management, 2nd Edition

17. Major Strategies Market-Leader Market-Challenger Market-Follower Market-Nicher Expanding the total market Defending market share Expanding market share Designing Competitive Strategies To accompany A Framework for Marketing Management, 2nd Edition

18. 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 To accompany A Framework for Marketing Management, 2nd Edition

19. Position defense Flank defense Preemptive defense Counteroffensive defense Mobile defense Contraction defense Designing Competitive Strategies Defending Market Share To accompany A Framework for Marketing Management, 2nd Edition

20. 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 To accompany A Framework for Marketing Management, 2nd Edition

21. 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 Designing Competitive Strategies To accompany A Framework for Marketing Management, 2nd Edition

22. 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 To accompany A Framework for Marketing Management, 2nd Edition

23. Price-discount Lower-price goods Prestige goods Improved services Product proliferation Product innovation Distribution innovation Manufacturing cost reduction Competitive Markets Specific Attack Strategies Include: • Intensive advertising promotion To accompany A Framework for Marketing Management, 2nd Edition

24. Major Strategies Market-Leader Market-Challenger Market-Follower Market-Nicher Imitation may be more profitable than innovation Four broad strategies: Counterfeiter Cloner Imitator Adapter Designing Competitive Strategies To accompany A Framework for Marketing Management, 2nd Edition

25. 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 Designing Competitive Strategies To accompany A Framework for Marketing Management, 2nd Edition

26. 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 To accompany A Framework for Marketing Management, 2nd Edition