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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?
Number of sellers and degree of differentiation Entry, mobility, and exit barriers Cost structure Degree of vertical integration Degree of globalization
Entry Barriers
Low
High
Competitive Strategy
Industry Force
Entry Barriers Buyer Power Supplier Power Threat of Substitutes
Generic Strategies
Cost Leadership
Ability to cut price in retaliation deters potential entrants. Ability to offer lower price to powerful buyers.
Differentiation
Customer loyalty can discourage potential entrants. Large buyers have less power to negotiate because of few close alternatives.
Focus
Focusing develops core competencies that can act as an entry barrier.
Large buyers have less power to negotiate because of few alternatives. Suppliers have power because of low volumes, but a differentiation-focused firm is better able to pass on supplier price increases. Specialized products & core competency protect against substitutes. Rivals cannot meet differentiationfocused customer needs.
Better able to pass on Better insulated from supplier price increases to powerful suppliers. customers. Can use low price to defend against substitutes. Better able to compete on price. Customer's become attached to differentiating attributes, reducing threat of substitutes. Brand loyalty to keep customers from rivals.
Rivalry
Analyzing Competitors
Objectives
Strategies
Competitor Actions
Reaction Patterns
Share of mind
(The first company that comes to mind)
Share of heart
(The company from which you would prefer to buy)
Selecting Competitor
Market Share Junaid Jamshed R-Sheen Shahid Afridi 2006 50% 30 20 2007 47% 34 19 2008 44% 37 19 2006 60% 30 10 Mind Share 2007 58% 31 11 2008 54% 35 11 2006 45% 44 11 Heart Share 2007 42% 47 11 2008 39% 53 8
Strong Vs Weak (Fewer Resources required) Close Vs Distant (Resemblance) Good Vs Bad
40%
Expand Market Defend Market Share Expand Market Share
30%
Attack leader Status quo
20%
Imitate
10%
Specialize
New customers
(Penetration/new market segmentation/geographical-expansion)
More usage
(Consumption Amount/Frequency)
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.
By market broadening and diversification (Dialog Telekom Srilanka) Secondary markets (flanks) are the weaker areas and prone to being attacked Withdraw from the most vulnerable segments and redirect resources to those that are more defendable
Mobile Defense
Flanking Defense
Contraction Defense
Pre-emptive Defense
Counter-Offensive Defense
Frontal attack Flank attack Encirclement attack Bypass attack Guerrilla attack
Frontal Attack
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
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
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???
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
Guerrilla attack
By launching small, intermittent hit-andrun 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
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
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 leaders 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
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
Nichers must create niches, expand the niches and protect them
e.g. Nike constantly creates new niches-cycling, walking, hiking, cheerleading, etc Market niche may be attacked by larger firms once they notice the niches are successful
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
Balancing Orientations
CompetitorCentered
CustomerCentered