Mm.07.10 (not studied)

04/10/23 12:16 Prof. U.M. Amin, CMS, JMI University, New Delhi

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Marketing ManagementMBA CP 205


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Dealing with Competition


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Learning Objectives:

• Know how marketers identify primary competitors. • Know how should we analyze competitors’ strategies, objectives, strengths, and weaknesses.• Know how market leaders can expand the total market and defend market share.• Know how market challengers should attack market leaders.• Know how market followers or nichers can compete effectively.



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Buyers(Buyer power)

Potential entrants(Threat ofMobility)

Suppliers(Supplier power)

Substitutes(Threat of

Substitutes)

IndustryCompetitors

(Segment rivalry)

Competitive analysis-Five forces model


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• Competitive rivals are organizations with similar products and services aimed at the same customer group.

• Factors affecting competitive rivalry are:

Market growth rate. High fixed costs. Extent to which competitors are in balance. High exit barriers.

• Intensity of competition increases with decreased entry barriers. Entry barriers may include:

Lack of experience.



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Strong customer loyalty. Strong brand preference. Large capital requirements. Lack of adequate distribution channels.

• Competitive pressures from substitute products increase as the relative price of substitute products declines and as the consumers’ switching costs decrease.

• Supplier power is high when:

There is concentration of suppliers, rather than fragmented source of supply.



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The switching costs from one supplier to another are high. There is a possibility of the supplier integrating forwards. The brand of the supplier is powerful. The suppliers customers are highly fragmented.

• Buyer power is likely to be high when:

There is concentration of buyers particularly if the volume purchases of the buyers are high. The supplier industry consists of a large number of small players. The cost of switching a supplier is low or involves little risk.



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Identifying Competitors

• Industry concept of competition• Market concept of competition

Industry concept of competition

• Industries are classified according to:

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



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Industry concept of competition

Pure MonopolyPure Monopoly

OligopolyOligopoly

Monopolistic CompetitionMonopolistic Competition

Pure CompetitionPure Competition


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• Pure monopoly: Only one firm provides a product/service.

• Oligopoly: A small number of usually large firms produce products that range from highly differentiated to standardized.

• It can be pure or differentiated oligopoly.

• Monopolistic competition: Many competitors are able to differentiate their offers.

• Pure competition: Many competitors offer the same product/service.



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Entry, mobility and exit barriers

• Entry barriers include:

High capital requirements. Economies of scale. Patents and licensing requirements. Scarce locations, raw materials and distributors.

• A company may face mobility barriers when it tries to enter more attractive market segments.



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• Firms face exit barriers such as:

Legal obligations to customers, creditors and employees. Government restrictions. Low asset salvage value due to over-specialization. High vertical integration.

• Cost structure: Some industry sectors involve high cost structure.

• Degree of vertical integration: Companies have advantage in going for vertical integration.



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Market concept of competition

• Competitors are firms that satisfy the same customer need.

• The market concept of competition reveals a broader set of actual and potential competition.

• Companies can profile their direct and indirect competitors by mapping the buyer’s steps in obtaining and using a product.

• Competitor mapping highlights both opportunities and challenges faced by the company.



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Analyzing Competitors


StrategiesStrategies

ObjectivesObjectives

Strengths and weaknesses

Strengths and weaknesses


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• Firms must analyze which strategic group does it belong to in the market. It helps in identifying its key competitors.

• A group of companies following the same strategy in a given target market is called a strategic group.

• What are the short and long term objectives of the competitors i.e. growth, profitability or cash generation.

• Company must monitor competitors’ expansion plans by mapping product-market battlefield map.



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A competitor’s expansion plans


Dell

Individual Users Individual & commercial

Educational

Personal Computers

Hardwareaccessories

Software


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• Finally, firms must study strengths and weaknesses of competitors’ on product attributes, quality, availability and service. In general, Firms must analyze three variables when analyzing competitors:

Share of market.

Share of mind: Percentage customers who named the competitor when asked: Name the first company that comes to mind in an industry.

Share of heart: Percentage customer who named the company while responding to statement: name the company from whom you would prefer to buy the product.



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Hypothetical Market Structure


10% 30% 40%20%

Market Nichers

Market follower

Marketchallenger

Marketleader


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Competitive strategies for market leaders

• To remain a market leader, a firm must act in three ways.

• It must find ways to expand the total market demand.

• The firm must protect its current market share through defensive and offensive actions.

• Finally, it can try to increase its market share even when it is constant.



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Expanding the Total Market

MoreUsage

NewCustomers



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Defending the market share

• The leader can defend its position through continuous innovation.

• In addition, it can defend its terrain through:

• Premium performance.

• Extensive and efficient distribution system.

• Superior service.

• Full line strategy.

• Good financial terms.



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Defending the market share

• Six types of defense strategies are possible.

• Position defense: It involves building superior brand power.

• Flank defense: Market leader must construct outposts to protect a weak front that may also serve as a base for counter attack.

• Pre-emptive defense: It involves attacking the competitor before it starts its offense.

• This can be done by waging a guerilla action, achieving great market envelopment and/or sending market signals to dissuade competition from attacking.



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• Counter-offensive defense: In counter-offensive, the leader can meet the attacker frontally or hit its flank.

• Mobile defense: The market leader stretches its domain over new territories that can serve as future centers for defense and offense through market broadening and market diversification.

• Contraction defense: Market leader, sometimes resorts to planned contraction giving up weaker territories and reassigning resources to stronger territories.



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Six Types of Defense Strategies


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Factors Relevant to Pursuing Increased Market Share

• Cost of buying market share may exceed its revenue value, hence, the firm should consider following factors:

Possibility of provoking MRTP provisions.

Economic cost.

Pursuing the wrong marketing-mix strategy.

The effect of increased market share on actual and perceived quality.

Too many customers put a strain on firm’s resources, hurting product value and service delivery.



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Optimal Market Share



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Other Competitive Strategies


Market Challengers

Market Nichers

Market Followers


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Market Challenger Strategies

• Define the strategic objective and opponents; involves increasing market share and deciding whom to attack.Firm can choose to attack market leader; high risk but potentially high pay-off strategy. Firm decides to attack firm of its size; the firms have ageing products, charging excessive prices & not satisfying customers.Firm decides to attack small, local firms.• Choose a general attack strategy.• Choose a specific attack strategy.



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Market Challenger Strategies

• Choose a general attack strategy. These include:


Frontal Attack

Encirclement Attack

Bypass Attack

Flank Attack

Guerrilla Warfare


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• In frontal attack, the attacker matches the opponent’s product, advertising, price and distribution.

• Competitors weak spots are natural targets. A flank attack can be geographical or segmental.

• The encirclement maneuver is an attempt to capture a wide slice of the enemy’s territory through a ‘blitz’, involves launching a grand offensive on several fronts.

• In bypass attack, the firm ignores the enemy and attack easier markets to broaden one’s resource base.



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Specific Attack Strategies


• Price discounts• Lower-priced goods• Value-priced goods• Prestige goods• Product proliferation

• Product innovation• Improved services• Distribution innovation• Manufacturing-cost reduction• Intensive advertising promotion


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Market Follower Strategies


Counterfeiter

Cloner

Imitator

Adapter


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• Counterfeiter duplicates the leader’s product and package and sells in the black market through disreputable firms.

• Cloner emulates the leader’s products, name and packaging with slight variations.

• Imitator copies some things from the leader but maintains differentiation in terms of packaging, advertising, pricing or location.

• Adapter takes leader’s products and improves them.



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Balancing Orientations


Competitor-Centered

Customer-Centered


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Recap:

• How marketers identify primary competitors. • How should we analyze competitors’ strategies, objectives, strengths, and weaknesses.• How market leaders can expand the total market and defend market share.• How market challengers should attack market leaders.• How market followers or nichers can compete effectively.


Business

Mm.07.10 (not studied)