Dealing with Competition. To deal with competition, we must first Dealing with Competition. To deal with competition, we must first

identify who they are, analyze and compare them against ourselves,

then strategize ways in handling them. Today I will step through the

Kotler and Keller methods for identifying, analyzing and strategizing

when it comes to competition.

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There are two frameworks for identifying competitors. We can use the There are two frameworks for identifying competitors. We can use the

Industry or Market frameworks. To use the Industry framework, we

ask ourselves, who else differentiates like me? Who has entry and exit

barriers like me? Who has vertical integration like me? Who is as

global or as local as me? And who has cost structures like me? Notice

that “Like me” is a key component to look for.

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If we use the Market framework, then we simply ask ourselves: Who If we use the Market framework, then we simply ask ourselves: Who

else can satisfy the same customer need? This opens up the playing

field to both direct and very indirect competitors. Pepsi Co’s bottled

water division doesn’t just identify CocaCola as their competitor. Tap

water is in fact their largest competitor because it is after the same

customer need.

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Both techniques are valid ways of coming up with competitors, the Both techniques are valid ways of coming up with competitors, the

idea is to make as long a list as possible of direct, and indirect

competitors. Then we can move on to the analysis phase.

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Now that you have a list of competitors, we want to analyze them. Now that you have a list of competitors, we want to analyze them.

There are three techniques here, using strategy groups, understanding

the competitor’s objectives, and understanding their strengths &

weaknesses. These techniques guide your research into understanding

of your competitors.

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The Strategy Group technique allows you to rank competitors on two The Strategy Group technique allows you to rank competitors on two

scales simultaneously. By graphing various attributes on axis, such as

quality versus vertical integration, or price versus service, you can

bucket your competitors into similar groups. This gives you a

framework for viewing the various groups. The idea is to look for

patterns and groupings.

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Then we look at your competitor’s objectives. Are they after profits? Then we look at your competitor’s objectives. Are they after profits?

Market share? Cash flow? Or do they want to be a technology or

service leader in that sector? The important thing here is to get inside

their heads. What is motivating them? Knowing their motives makes

you more agile in your response. Treating a competitor who is after

profits is very different than one who is after market share.

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Then you want to gauge your strengths and weaknesses relative to Then you want to gauge your strengths and weaknesses relative to

your competitors. How’s your quality perceived? How about the

customer experience? Do they know or recognize your brand? And

are you too expensive? Or too cheap? You must find this information

through research.

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Set a survey and ask your customers, your suppliers and distributors. Set a survey and ask your customers, your suppliers and distributors.

How well does your company perform against your competitors.

Understand where you stand against your competitors in share of

market, share of mind and share of heart. And finally, figure out the

metrics that your best competitors are using to gauge success, and set

those metrics up for yourself as benchmarks.

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Now that you have studied the competition and how you compare Now that you have studied the competition and how you compare

against them, it is time to set a strategy. If your firm wants to be

number one on the market, there are three ways to do it. By

expanding total market, by protecting market share, or by increasing

market share.

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To expand the total market, or to make the pie bigger, your only To expand the total market, or to make the pie bigger, your only

options are to attract more customers, or create more usage with the

existing customers. You might start adapting your products and

advertising towards a new segment of customers. Or you might, like

Brita, put a expiry indicator on your product to encourage more

frequent replacement, more purchases of your product.

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Of course, to stay #1, you don’t want to lose your current market Of course, to stay #1, you don’t want to lose your current market

share. You must stay ahead of your competitors to do so. Which

means innovate innovate innovate. This means innovation not just in

products, but also in services, delivery and product line coverage. You

might add higher end and lower end into a product line to capture the

flank businesses. You might tighten the logistics to deliver lower cost

or faster delivery. When it comes to innovation, look beyond your

base product and at the entire package solution.

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Finally, you may want to increase your market share to become Finally, you may want to increase your market share to become

number 1. But this will come at a cost. To get more of the same

existing pie, you must offer a lower cost or more at the same price to

steal customers away from your competitors. So you must decide

where your optimal profitability vs Market share lies. You certainly

don’t want to enter a price war situation, driving down profits for the

entire market.

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How you pair these three strategies is guided by who you are in the How you pair these three strategies is guided by who you are in the

market. There are four groups in every field. Leaders, followers,

challengers and nichers. Understand where your company fits is

important in choosing what strategy to use.

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If you are a leader, you may want to simply protect market share and If you are a leader, you may want to simply protect market share and

work to expand the total market. If you are Nokia, you own so much

of the market that stealing market share becomes less appealing than

expanding the total market.

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If you are a follower, then you are after the coat tails of existing giants. If you are a follower, then you are after the coat tails of existing giants.

Retaining market share and undercutting the leader is your technique.

You’re not there first, but you’re cheaper and sometimes better. Cell

phone manufacturer HTC started out as a follower.

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A challenger is most definitely after the competitor’s pie. They can do A challenger is most definitely after the competitor’s pie. They can do

this by pecking on their rival’s weaknesses. They can buying out some

competitors to expand their customer list and product lines. They can

undercut by hosting sales and blitzes. They can even leapfrog by

acquiring next generation technologies to out-innovate a competitor.

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Finally, a nicher is most interested in peripheral pies. By becoming a Finally, a nicher is most interested in peripheral pies. By becoming a

specialist, they capture specific customer segments so thoroughly that

no one can touch them. Profit margins are high, but volume will

remain low. Think of your local favorite family owned restaurant,

that’s a location specialist. A customer prototype shop would be both

a job-shop and location specialist. Your local bike store might be a

service specialist.

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No matter who you, who your competitors are or what strategies you No matter who you, who your competitors are or what strategies you

undertake, you must remember always, to keep an eye on the

competitors, but to focus on customers. No matter the tactics used

against your competitors, at the end of the day you are striving to win

customers. Therefore, focusing on customers is the only way to truly

win.

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