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COMPETITIVE BUSINESS STRATEGY

COMPETITIVE BUSINESS STRATEGY. Besting one’s Rivals. How Do Firms Dominate their Rivals?. Collusion Special knowledge about customers, products, or production techniques that enables them to make better products than other firms or make them at a lower cost Government protection

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COMPETITIVE BUSINESS STRATEGY

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  1. COMPETITIVE BUSINESS STRATEGY Besting one’s Rivals

  2. How DoFirms Dominate their Rivals? • Collusion • Special knowledge about customers, products, or production techniques that enables them to make better products than other firms or make them at a lower cost • Government protection • Effective product-market strategies and tactics.

  3. Goals of this class: You will know about • Identifying competitor strategies • Selecting competitors to attack or avoid • Understanding the conflicts between customer and competitor orientation

  4. Basic Concepts • Porter’s Five Forces -- first 3 focus on rivals • Identifying rivals • Understanding their objectives • Anticipating their reactions • Designing competitive intelligence systems

  5. Fig. 8.01 T30 Five Forces Determining Segment Structural Attractiveness Potential Entrants (Threat of Mobility) Suppliers (Supplier power) Industry Competitors (Segment rivalry) Buyers (Buyer power) Substitutes (Threats of substitutes)

  6. T32 Fig. 8.03 Product / Market Battlefield for Toothpaste Customer segmentation Children / Teens Age 19-35 Age 36+ Plain toothpaste Colgate-Palmolive Procter & Gamble Colgate-Palmolive Procter & Gamble Colgate-Palmolive Procter & Gamble Toothpaste with fluoride Colgate-Palmolive Procter & Gamble Colgate-Palmolive Procter & Gamble Colgate-Palmolive Procter & Gamble Gel Colgate-Palmolive Procter & Gamble Lever Bros. Colgate-Palmolive Procter & Gamble Lever Bros. Colgate-Palmolive Procter & Gamble Lever Bros. Product segmentation Striped Beecham Beecham Smoker’s toothpaste Topol Topol

  7. Fig. 8.04 T33 Strategic Groups in the Major Appliance Industry • Group A • Narrow line • Lower mfg. cost • Very high service • High price High • Group C • Moderate line • Medium mfg. cost • Medium service • Medium price Quality • Group B • Full line • Low mfg. cost • Good service • Medium price • Group D • Broad line • Medium mrg. cost • Low service • Low price Low High Low Vertical Integration

  8. Fig. 9.05 T37 Five Patterns of Target Market Selection Single-segment concentration Selective specialization Product specialization M1 M2 M3 M1 M2 M3 M1 M2 M3 P1 P2 P3 P1 P2 P3 P1 P2 P3 Market specialization Full market coverage M1 M2 M3 M1 M2 M3 P1 P2 P3 P1 P2 P3 P = Product M = Market

  9. Fig. 9.06 T38 Segment-by-SegmentInvasion Plan Customer Groups Airlines Railroads Truckers Large computers Mid-size computers Product Varieties Personal computers Company A Company B Company C

  10. TACTICS All’s Fair in Love & War?

  11. GET THERE FIRST WITH THE MOST • Positioning • Entrenched products have several competitive advantages • Consumer awareness and product reputation • Production experience • Advantageous arrangements with suppliers, wholesalers, and retailers Barriers to Entry

  12. Fig. 8.02 T31 Barriers and Profitability Exit barriers Low High Low, stable returns Low, risky returns Low Entry Barriers High, stable returns High, risky returns High

  13. THREATEN, BLUFF, LIE • Tacit -- take steps that CREDIBLYcommit the firm to defend position -- • Price, product, place, promotion • Example: Walmart -- we will not be undersold • Explicit THREATS-- if successful, will probably get you in trouble with law • LIES may not

  14. EXPLOIT YOUR STRENGTHS TO HANDICAP RIVALS • ALLIANCES • Tacit example: GM • Explicit example: Wintel • Plus threat example: Microsoft • Government & Mafias • KNOWLEDGE • Market example: LiviCo/Mannesman • Resource example: Shell, Exxon

  15. UTILIZE SURPRISE AND MISDIRECTION • DO THE UNEXPECTED (pursue avenues that the conventional wisdom rejects -- research) • SEND ambiguous or deliberately misleading signals about your intentions • KNOW YOUR RIVAL’ TENDANCIES AND TELLS -- formulas and recipes can be identified, anticipated, and defeated

  16. DON’T GET SURPRISED OR MISLEAD • KNOW YOUR CUSTOMERS AND YOUR BUSINESS and don’t get distracted by your RIVALS (Execution usually trumps strategy) • SWOT

  17. The Costs of Competitive Strategy • Distracts attention from core business • Corrupts • Behavior tends to spill over into relationships with customers, suppliers, and employees • Poisons those relationships • Criminal behavior • Leads to distorted aims -- winning as beating rivals rather than increasing value

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