Chapter 8

Dealing with the

Competition

PowerPoint by Karen E. James

Louisiana State University - Shreveport

2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 0 in Chapter 8
 Objectives

Understand how a company

identifies its primary competitors
and ascertains their strategies.
Review how companies design
competitive intelligence systems.

2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 1 in Chapter 8
 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.
2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 2 in Chapter 8
 Competitive Markets

Porters 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
2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 3 in Chapter 8
 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
2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 4 in Chapter 8
 Competitive Markets

Industries Can Be Classified By:

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

2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 5 in Chapter 8
 Competitive Markets

Industry Structures Only one firm offers

an undifferentiated
Pure Monopoly product or service
Pure Oligopoly in an area
Differentiated Unregulated
Oligopoly Regulated

Monopolistic Example: Most

Competition utility companies
Pure Competition
2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 6 in Chapter 8
 Competitive Markets

Industry Structures A few firms produce

essentially identical
Pure Monopoly commodities and
Pure Oligopoly little differentiation
exists
Differentiated
Oligopoly Lower costs are the
Monopolistic key to higher profits
Competition Example: oil
Pure Competition
2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 7 in Chapter 8
 Competitive Markets

Industry Structures A few firms produce

partially
Pure Monopoly differentiated items
Pure Oligopoly Differentiation is by
key attributes
Differentiated
Oligopoly Premium price may
be charged
Monopolistic
Competition Example: Luxury
autos
Pure Competition
2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 8 in Chapter 8
 Competitive Markets

Industry Structures Many firms

differentiate items
Pure Monopoly in whole or part
Pure Oligopoly Appropriate market
Differentiated segmentation is key
Oligopoly to success
Monopolistic Example: beer,
Competition restaurants
Pure Competition
2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 9 in Chapter 8
 Competitive Markets

Industry Structures Many competitors

offer the same
Pure Monopoly product
Pure Oligopoly Price is the same
Differentiated due to lack of
Oligopoly differentiation
Monopolistic Example: farmers
Competition selling milk, crops
Pure Competition
2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 10 in Chapter 8
 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
2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 11 in Chapter 8
 Competitor Analysis

Key characteristics of the

competition must be identified:
Strategies
Objectives
Strengths and Weaknesses
Effect a firms competitive position in
the target market
Reaction Patterns
2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 12 in Chapter 8
 Competitor Analysis

Competitive Positions in
the Target Market

Dominant Tenable
Strong Weak
Favorable Nonviable

2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 13 in Chapter 8
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

2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 14 in Chapter 8
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

2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 15 in Chapter 8
Designing Competitive Strategies

Major Strategies Expanding the

total market
Market-Leader Defending
Market- market share
Challenger
Expanding
Market-Follower market share
Market-Nicher
2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 16 in Chapter 8
Designing Competitive Strategies

Expanding the Total Market:

Targeting Product to New Users
Market-penetrationstrategy
New-market strategy

Geographical-expansion strategy

Promoting New Uses of Product

Encouraging Greater Product Use
2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 17 in Chapter 8
Designing Competitive Strategies

Defending Market Share

Position Counteroffensive
defense defense
Flank defense Mobile defense
Preemptive Contraction
defense defense
2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 18 in Chapter 8
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
2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 19 in Chapter 8
Designing Competitive Strategies

Major Strategies First define the

strategic goals
Market-Leader and opponent(s)
Market- Choose general
Challenger attack strategy
Market-Follower Choose specific
Market-Nicher attack strategy

2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 20 in Chapter 8
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
2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 21 in Chapter 8
 Competitive Markets

Specific Attack Strategies Include:

Price-discount Product
innovation
Lower-price goods
Distribution
Prestige goods
innovation
Improved services
Manufacturing
Product proliferation cost reduction
Intensive advertising promotion
2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 22 in Chapter 8
Designing Competitive Strategies

Major Strategies Imitation may be

more profitable
than innovation
Market-Leader Four broad
Market- strategies:
Challenger Counterfeiter
Cloner
Market-Follower Imitator
Market-Nicher Adapter

2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 23 in Chapter 8
Designing Competitive Strategies

Niche specialties:
Major Strategies End-user
Vertical-level
Market-Leader Customer-size
Specific customer
Market- Geographic
Product/product line
Challenger
Product feature
Market-Follower Job-shop
Quality-price
Market-Nicher Service
Channel
2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 24 in Chapter 8
 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
2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 25 in Chapter 8