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The Benefits and Strategies of Competition in the Market

Learn about the benefits of competition in the market, including increased selection, better prices, and product improvements. Explore the different market structures and competitive advantages businesses seek. Understand how service competition and value-added services impact the market.

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The Benefits and Strategies of Competition in the Market

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  1. Chapter 3 The Competitive Market

  2. Competition • https://www.youtube.com/watch?v=MHZQAYrr5-Y • Iconic commercial: https://www.youtube.com/watch?v=1VM2eLhvsSM

  3. The Benefits of Competition • Increased Selection • Alternative Choices – i.e. bad service • Better Prices • Increased Productivity • Product Improvements • Technology Advancements

  4. 3.1 Competition in a Free Market • In a free market, businesses can make a profit. Profit drives business; the more successful a business becomes, the more profit the owner keeps. (private property) • Competition is allowed and defines the structure of market

  5. Four major market structures • Perfect competition - large # of small companies; nobody controls market • Agricultural Market, eBay • Monopolistic Competition – large # of companies; each of them has an opportunity for market control • Most products e.g. detergent, fast food • Oligopoly - small # of large companies, each with a substantial amount of market control • Banking Industry, Apple Micosoft • Monopoly – a single company has complete market control • Hydro, Enbridge,

  6. Benefits of Competition • Direct competition • Products that are similar • Consumers choose among products in the same category • Indirect competition • Every business is in competition with every other business for consumers’ discretionary income. • Competition leads to better products at better prices.

  7. Example: INDIRECT COMPETITION DIRECT COMPETITION

  8. 3.2 Competitive Advantage • Businesses look for advantages over their competition. A true advantage is one that is sustainable over the long term. • Sustainable competitive advantages: methods by which a business holds on to its customers, in spite of the competition (ideas?)

  9. Sustainable competitive advantages • Create a unique selling proposition (USP) – patented design, licensed products • Lowering production costs: cost-efficient, high technology manufacturing systems • Servicing a niche market – keep competitors out of that market • Create customer loyalty – relationship marketing

  10. Non-sustainable competitive advantages • Non-SP used by competitors to shift sales in their direction • Promotion: “top of mind” • Placement: more placement=more competitive (Category Killer ) • Quality: high quality vs boost sales by improvement CS • Benefits of use: do more and better than other products • Price: all features being equal…price & reputation • Design features: catch consumers’ interest – product design

  11. Activity! Before entering a market, marketers must study the competition. One way of doing so is by preparing a competitive analysis of the sustainable and non-sustainable advantages that the major competitors have. In this activity, you will develop a comparative analysis for a marketer in the video game market.

  12. Activity Time – try it for yourself!

  13. 3.3 Service Competition • Some Businesses offer services: Fed Ex, Moving companies) • Others offer Value – Added Services:support the sale of a product or other service. • Both service businesses and businesses that offer value-added services market intangibles. (hair salons, dentists, personal trainers)

  14. Service Competition Service companies are in competition with other companies that perform the same service. e.g., UPS vs. FedEx • Convenience • Internet shopping, ease of use • Degree of service • e.g., Barber vs. Hair Salon • Selection • Reputation • Price

  15. Convenience • Making some activity easier or more comfortable. Some services actually sell convenience.

  16. DegreeofService • : offers more services (full service salon/spa) or fewer services (West Jet, Ikea)

  17. Selection • Offering a greater selection of services • Wide – a store carries a wide array of different brands of types of merchandise or it can be • Deep – a store carries a large quantity of one specific product or type of product. • See page 103

  18. Reputation • Important for a service business to maintain a good reputation because it does not have a tangible product to show the customer (word of mouth, professional reviews)

  19. Price • If two services are similar, the business with the lower price has the competitive edge. • However, in some cases, consumers may question services with prices that seem ‘too low’. • Price depend on supply & demand

  20. Product/Service Mix • Retail & wholesale businesses are part of the service sector, providing a service to both the consumer and to the manufacturer…

  21. The Competitive Market • Every new product introduced into the market has the potential to dislodge at least one product that is already there. • Businesses look at all the similar products in a category to determine the nature of the competitive market.

  22. The Competitive Market • Competitivemarket consists of specific types of products as well as the companies that manufacturer these products. • The amount of money consumers spend annually on these specific products defines the competitive market in dollars.

  23. Sectors • What is a sector? • A business sector is a closely related group of products or services • Also called a market segment

  24. Measuring Results • We compare within certain market segments to understand how a company performs vs. the competitive set. (Direct Competition) • How it is Measured: • Market Share – what % of the category or sector sales is a certain brand • Example: Ready to Drink, Chilled Fruit Juice Market

  25. 59% market share Market leader – how to sustain position over compeititors? 18% market share Market follower – how to increase market share from leader? Example:

  26. Competing within Sectors • How can a company improve MARKET SHARE? • Give competition handout- Recall: Coke vs Pepsi

  27. A company can increase market share in one of two ways: • increase the size of the overall market • E.g. Drink more juice • take sales away from its competitors. • Other promotion effort • School Cafeteria, etc.

  28. International Competition • What do you think the impact has been of the internet with international competition? • Multinational Corporations • Does business in more than one country • Some large MNCs have budgets greater than an entire country’s wealth! • Trend of “micro-multinationals” = small businesses enabled by technology

  29. DOMESTIC Canadian products Domestic production or international production INTERNATIONAL International-based products/companies Produced outside of North America International Competition May want to expand internationally for future growth Factors to consider with International Competition

  30. Factors to consider with International Competition • Regulations • Promotion restrictions / local laws • Research • Consumer preferences / consumer needs • Distribution • How will it be sold? Local partners? • Pricing • Covering expenses, plus tariffs • Design • Legal standards + local taste

  31. Competing in International Markets • Businesses use the same methods to compete in international markets that they use in domestic markets: promotion, placement, quality, benefitsofuse, price & design • Business must tailor its competitive efforts to the foreign market customs and preferences.

  32. Culture • It is important to consider factors such as climate and religious beliefs when considering entering a foreign market. • For example, there is no market for Canadian pork in Pakistan or Egypt, as Islamic culture forbids eating this product.

  33. Cultural Differences The Culture of Saudi Arabia • Revolves around the religion of Islam • Activity stops five times a day for prayer • Friday is the holiest day for Muslims; weekend begins on Thursday and ends on Saturday • Clothing is loose and flowing as climate is extremely hot • Women must wear clothing that leaves only the hands, feet, and face bare Used under license from Shutterstock, Inc.

  34. The name Coca-Cola in China was first rendered as Ke-ke-ken-la. Unfortunately, the Coke company did not discover until after thousands of signs had been printed that the phrase means "bite the wax tadpole" or "female horse stuffed with wax" depending on the dialect. Coke then researched 40,000 Chinese characters and found a close phonetic equivalent, "ko-kou-ko-le," which can be loosely translated as "happiness in the mouth."

  35. Volkswagen Named the sedan version of Golf the Jetta. However, the letter "J" doesn't exist in the Italian alphabet, so Jetta is pronounced "Ietta", which means Misfortune...

  36. IKEA Sells this workbench as the FARTFULL. Swedish is a Germanic language, and "Fährt" is German for travel, so "fartfull" is being used here to suggest mobility. Swedish has several words for fart, but one of them is "Fjärt", which strikes as close enough that their marketing department knew what it was doing. If even bad press is good public relations, then this is a case of allowing an ill wind to blow some good.

  37. Pepsi In Taiwan, the translation of the Pepsi slogan "Come alive with the Pepsi Generation" came out as "Pepsi will bring your ancestors back from the dead."

  38. Promotion - Distribution • Promotion is challenging in international markets. In many cases, a Canadian promotion may not translate well in other countries • Distribution of products in other countries can also be difficult. Canadian firms may set up their own offices in other countries, or they may enter into joint ventures.

  39. Joint Ventures

  40. Joint Venture • A Canadian firm and a foreign business with similar goals combine resources (money, facilities, distribution networks) to make or sell a specific product in another country

  41. Tariffs are taxes placed on goods being imported into a country in order to protect the local industries from too much foreign competition. • Marketers must also be able to calculate the landedcost of the product which takes into account the shipping costs and the currency exchange as well as tariff rates.

  42. FLAG OF NATIONS Identify each flag in the space provided below. Combine the first letter of every country to make a word. (a) _____________ (b) _____________ (c) ______________ (d) _____________ (e) _____________ (f) _____________ (g) ______________ (h) _____________ (i) _____________ (j) _____________ (k) ______________ (l) _____________ Bonus (m) ____________ Word: (a) ___ (b) ___ (c) ___ (d) ___ (e) ___ (f) ___ (g) ___ (h) ___ (i) ___ (j) ___ (k) ___ (l) ___ (m) __

  43. Activity – SECTOR STATIONS ROTATION • Travel in pairs to the stations around the room – but EVERYONE MUST COMPLETE THEIR OWN HANDOUT • Must fill in questions for at least 6 sectors • Hand-in sheets at the end of class

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