Analysing Competition

Analyzing Competition

Lesson objectives

Understand and analyze competitionMichael Porter’s Five forces modelBook Review Corporate examples – Hero Honda , P&G ,

Reliance,Maruti True Value outlets, Kodak ………….

Competition

An Industry is a group of firms that offer a product or class of products that are close substitutes for each other

Competitors are companies that satisfy the same customer need

It opens up a broader vista of actual and potential competitors

Classes of competitors

Generic: companies competing for the same disposable income of the consumer e.g. Hero Honda and LG

Form competition: same kind of benefit e.g. cars ,buses Vs Hero Honda

Industry Competition: similar kind of products e.g. Two wheeler mfgg-Hero Honda ,Bajaj, Kinetic

Brand competition: similar products targeting same consumer segments

e.g. Splendor Vs Caliber, CD Dawn Vs CT100

Classification of Industry

On the basis of the following parametersNo of sellers and degree of differentiationEntry , exit and mobility barriers Cost structure Degree of vertical integration

No of sellers and degree of differentiation

Monopoly Oligopoly Monopolistic Pure competition

Entry ,exit ,mobility barriers

Entry barriers : high capital reqt ,scarce raw material,economiesof scale, reputation

Mobility barriers: when business tries to enter more attractive segments ,e.g : coke to Diet coke

Exit barriers : legal , moral obligations, law of the land,Govt policies

Cost structure

Total Manufacturing ,distribution, and promotional costs

Firms will strategize to reduce these costs

Degree of vertical integration

Backward :HPCL has its own oil exploration , drilling , refining facilities. Integrating backwards helps an organization eliminate suppliers , control quality very closely.

Forward integration : own petrol pumps to get closer to the end consumer .

Vertical integration lowers costs

Degree of globalisation

‘Glocal’ firms: think global ,act localRate of change of technology ,catering to the

global customer

Analyzing Competition

On the basis of Strategies of the competitorsObjectivesStrengths and weaknessesReaction patterns

Analyzing competition …..

Strategies A company must monitor its competitor’s

strategiesResourceful competitors revise their

strategies with timeA group of firms that follow the same strategy

– strategic group e.g. : Sinhgad , Aditya Birla Group

Analyzing Competition….strategies

Japanese automobile firms compete on sensory quality like the speed of power window, turn signal that doesn't wobble


On the basis of objectives1. What is each competitor seeking in the

market place?2. What drives a competitor’s behaviour ?-

current profitability ,service leadership, technical leadership, market share growth

3. Objectives are shaped by –history, resource capability and management of the competitor


On the basis of strengths and weaknessesWhether competitors can pursue their strategies and reach their goals depends on resources and capabilitiesWhile analyzing competitor’s share of market , it is important to study share of mind & share of heart


Share of mind : % of customers who named competitor in response to : “name the first company that comes to your mind in the industry?”

Share of heart: % of customers who named competitor in response to : “name the company from whom you would prefer to buy the product or service ? ”

Reaction patterns

Laid back/slow competitorDoes not react quickly or stronglyLacks funds to react Thinks customers are loyalMust be milking its businessE.g. . Iodex green pain reliever was a late

move against ‘Moov’

Reaction patterns

Selective competitorOnly reacts to certain type of strategies E.g. may only react to price cuts not ad

expenditures

Reaction patterns

Tiger competitorReacts swiftly and strongly to any assault P&G does not allow any new detergent to

enter into the market easily in the ultra segment Vs Surf

Pepsi and Coke

Reaction patterns

Stochastic /unpredictable competitorNo predictable reaction patternSmall firms exhibit such reaction patternReaction is determined by history ,economic

situation or anything

Porter’s five forces model

Barriers to entry : high capital costs, govt policies, economies of scale, access to distribution channels

Eg: Reliance –Jamnagar Plant -27MTpa-economies of scale and high capital costThreat of Substitutes: Coke faces threat from Coffee , tea, juices ,soft drinks

Porter’s five forces model

Rivalry among firms: price wars, advertising wars, differentiation,

use of innovative distribution channels, slotting allowances to get shelf space HLL & P&G, Ambush Marketing (Pepsi 1996 World cup)

Porter’s Five Force Model

Bargaining power of buyersFew buyers but large, buy in bulkBuyers may integrate backwardE.g. Automobile mfgg may integrate

backwards to mfgg subassemblies and components.

Bargaining power of suppliers

Few suppliers, few sst for productsExpensive to switch suppliersThreat of forward integrationIf Buying companies cannot go backwardIntel –powerful supplier-microprocessors

Porter’s generic competitive strategies

Cost leadership: offering products at lower prices by keeping cost of production low.

It envisages higher profits as margins increase due to lowered costs

Economies of scale , and increasing production efficiency would help

Arvind eye hospital ,performs cataract surgery at $10 vis –a –vis $1650 in US, Given the fact that 70%patients pay close to nothing .It enjoys 40% margin.


Differentiation strategiesDifferentiation on the basis of design ,brand

image Coca Cola), features (Santro) ,technology (Intel), customer service (Oberoi), quality

HLL –Modern Brand to Biscuits –differentiated on the basis of ingredients-Soya –health conscious customers


Focus strategyOnly a specific segment Special group of customers or a geographical

areaCustomers are loyalCan price products higherEntry of competitor- difficultE.g: Dosa Diners

Competitive strategies(VVIP que)

Market leader:A market leader has a considerable market share .It is acknowledged as a leader by other firmsStrategies: enter new markets or introduce new

productsIncrease usage of its products :Colgate –brush

twice daily Hero Honda-continuously innovates adds new

features and introduces new modelsIt has made tie ups with Chinese like quigqui and

jialing

Market Challenger :strategies

2nd ,3rd or 4th positionAttacks weak spots of the leaderAttacks firms of its own capacityEnter into markets where competitors do not

have presenceAgainst HLL ,Nirma low cost washing powder

has deep penetration

Market follower strategies

Prefer to follow the leader than to attack it Manufacturing products leveraging on

product innovations of leadersUnless market follower has strong armour it

will not dare to attack the leader

Market Nicher

Operates in small niches, where leader is not interested

Win customer loyaltyIncreased focus and attention

Book Review: Al Ries,Trout,Marketing Warfare, Plume publishers,U.S.A

DEFENSIVE WARA market leader engages in defensive

warIt strengthens its position by

introducing new products or services that obsolete the existing one

E.g.: Splendor Standard , NXG …,super blue blade replaced by its Twin trac II blade

Marketing warfare

OFFENSIVE WARFor the no 2 or no .3 ,Trout and Ries

advocate ‘offensive warfare’What a no 2 or no 3 should do is position

itself with reference to the leader“find a weakness in the leader’s strength

and attack at that point ,launching the attack on as narrow front as possible

Marketing warfare

Flanking warfareOccupy a segment or category that the leader

has neglectedE.g. Complan :health proposition, Complete

planned food

Marketing warfareGuerilla Warfare Smaller companiesGo for vacant positions in market too

small to attract the Market leader’s attention

Dog Biscuits neglected by major bakery and confectionary mfgg

E.g. regional pocketsNiches or specific positions where

their Brands will hold competitive advantage

Documents

Analysing Competition