University of Washington EMBA ProgramRegional 20

Marketing Management

“Competitive Analysis”

Instructor: Elizabeth Stearns

Course Structure

The Marketing Framework/Concept

Analysis5C’s Opportunity Analysis

Marketing Strategy & Customer StrategyGoal Setting, Segmentation, Targeting, and Positioning

Implementation/Action PlansMarketing Mix (4 P’s)

MarketingResearch

“How Competitive Forces Shape Strategy”Industry Forces

Suppliers

New DirectlyCompetitive

Entrants

Direct

TheFirm

Competitors

Buyers

IndirectCompetitors

SubstituteProductsTechnologies

ForeignLow PricedDifferent Industries

Michael Porter

Competitor, Collaborator,and Company Analysis

Competitor:Competitor: Any organization whose goods and services could provide the same benefits to your customers

Collaborator:Collaborator: Any organization who assists your own in the delivery of benefits to your customers

Company:Company: Your organization

Competitor, Collaborator,and Company Analysis

Key QuestionsKey Questions– Who are they?

– What capabilities/skills/assets do they have?

– How can/will they go to market?• Past behavior• Strategic signals• Optimal behavior, both strategies and reactions• Mission and objectives

Might organize your thoughts in a SWOT analysis.

Competitors: Definition

• Any organization whose goods and services could satisfy the same needs or wants of your customers

– Define competition broadly

• Actual competitors (in the market now)• Potential competitors (may enter the market)• Direct competitors (offer similar products or

services)• Indirect competitors (offer substitute products or

services)• Business units within our firm

The Broad View of the Soft Beverage Market*

Bitter Tasting Sweet Tasting

FruitFlavor

StrongTaste

FruitJuices

NoncolaSoft Drinks

FruitDrinks

ColaSoft DrinksSports

DrinksBottled &MineralWaters

ClubSodas

Iced Tea& Coffee

*Roger Best

Competitors: Definition

– Anticipate future competition

– Consider not only product/market competition,

but also competition between organizations

Analyzing Competitors

CompetitorCompetitorActionsActions

ObjectivesObjectives

Strengths &Strengths &WeaknessesWeaknesses

ReactionReactionPatternsPatterns

StrategiesStrategies

©2000 Prentice Hall

Industry Competition

• Number of Sellers - Degree of Differentiation

• Entry, Mobility, Exit barriers

• Cost Structure

• Degree of Vertical Integration

• Degree of Globalization

©2000 Prentice Hall

Structural Determinants of Entry

• Economies of Scale and Scope

• Capital Requirements

• Government Regulations

• Technology & Patents

• Threat of Competitive Retaliation

• Other Market-oriented Characteristics

“A pictorial view of the Competitive Frame…

in the minds of the customer”

Ready-to-Eat Cereal

Apple Jacks

Trix

Cocoa Crispies

Special K

TotalProduct 19

Shredded Wheat

Frosted FlakesLucky Charms

Raisin Bran

Life

Corn Chex

Cheerios

Sun Country Granola

Fruit Loops

Hearty Granola

Wheaties

High Sugar Content

No Sugar

$$$$

USA: BEER CATEGORY MAP

Miller Lite

Coors Lite

Amstel Light

Light

Bass

Pete’s Wicked Ale Rolling Rock

Guinness

Foster’s

Becks

Corona Samuel Adams

Molson Ice

Budweiser Michelob

Red Dog

Busch

Specialty

Traditional

Source: Simmons SMM 1998

Positioning and Perceptual Maps

• Useful to provide pictorial view of competitive situation.

• Information revealed:– What are the major perceptual dimensions

underlying the map?

• e.g. When customers were judging the similarities

of ten brands, what were the most important

attributes underlying their perceptual decisions?

• Subjective/subject to argument

Positioning and Perceptual Maps

• What brands are perceived as similar to others?

– Deals with issue of substitutability.

– if customer’s brand is not available, what brand is

most likely to be purchased?

– Unique Position

» Or

– Easy switching

Positioning and Perceptual Maps

• What holes exist for repositioning an old, or new product introduction? (Point on map where no competitive brands exist)– Opportunity or not?

• Ideal points = Preference maps

– If customer could have any product they wished.

Brand Development Index & Category Development Index

(or using sales information that most companies have!)

Brand Development Index (BDI)

Market (1) % U.S. Population

(2) % Brand Sales

BDI (2 ÷ 1) * 100

A 10 11

B 15 15

C 20 18

D 25 30

E 30 26

Total 100 100 100 (Average)

Brand Development Index (BDI)

Market (1) % U.S. Population

(2) % Brand Sales

BDI (2 ÷ 1) * 100

A 10 11 110

B 15 15 100

C 20 18 90

D 25 30 120

E 30 26 87

Total 100 100 100 (Average)

Brand Development Index (BDI)

Market (1) % U.S. Population

(2) % Brand Sales

BDI (2 ÷ 1) * 100

A 10 11 110

B 15 15 100

C 20 18 90

D 25 30 120

E 30 26 87

Total 100 100 100 (Average)

Markets “C” & “E need support, “A”, “B”, and “D” seem OK

BDI Compared to CDI% Sales Index

(% Sales / % Population)

Index (BDI/CDI)

Market % Population

Category Brand Category Brand

A 10 12 11

B 15 15 15

C 20 16 18

D 25 30 30

E 30 27 26

Total 100 100 100

BDI Compared to CDI% Sales Index

(% Sales / % Population)

Index (BDI/CDI)

Market % Population

Category Brand Category Brand

A 10 12 11 120 110 92

B 15 15 15 100 100 100

C 20 16 18 80 90 113

D 25 30 30 120 120 100

E 30 27 26 90 87 96

Total 100 100 100

BDI Compared to CDI% Sales Index

(% Sales / % Population)

Index (BDI/CDI)

Market % Population

Category Brand Category Brand

A 10 12 11 120 110 92

B 15 15 15 100 100 100

C 20 16 18 80 90 113

D 25 30 30 120 120 100

E 30 27 26 90 87 96

Total 100 100 100

Consider possible different conclusions: Market “D” is only average,“C” & “E” probably don’t need support, “A” probably does.

Differential Advantage

Differential Advantage: Definition

• A Differential Advantage is a benefit or cluster of benefits that customers value and believe they cannot obtain elsewhere

• (Acid test: they are willing to pay more for your product or service)

Designing Offers for Customers

Offer

CostValue

PriceTimeEffortRisk

TechnicalInnovation

SalesRelation-ship

BrandEquity

Delivery Services

Product

Differential Advantage: Shift Over Time

• Differential advantage sustained by focusing on functional or psychological values

• Tends to erode over time in the direction of economic advantages

• Competition drives offers from specialty to commodity

Psychological

EconomicFunctional

Differential Advantage: Discussion

• The question that is answered is “do we deliver that which

our customer/prospect values”, “by what means”, and

“how well” (is it superior to our competition).

it is NOT

• “what do we do well” as a stand alone question. This

concept is difficult for companies to integrate into the

selling mode especially when they pride themselves in what

they do well and/or are considered the gold standard.

Differential Advantage: Discussion

• While a company may have excellent strengths and assets, these are only important if they satisfy a customer need. (this is the Marketing concept)

• Differential Advantage analysis raises the bar for understanding what a customer needs and the priority/importance of that need to his/her organization.

– If a company does not know this, they proceed to sell what they do well, and not what the customer values.

Sources of Differential Advantage

Business strengths, often defined as assets and skills, provide the basis for differential advantage.

• An asset is something a firm possesses such as a brand name, a retail location, human capital, a philosophy, etc., which is superior to that of competition.

• A skill is something that a firm does better than its competitors, such as advertising, merchandising, efficient manufacturing, etc.

Differential Advantage Matrix

• Tool for matching a segment’s required benefits with our organization’s ability to deliver those benefits more effectively than competitors

1. Identify the segment for which this matrix will apply

2. List the priority-ordered benefit requirements for this segment as the row headings in the matrix

3. List the relevant business strengths that a “generic” organization would require to deliver these benefits as the column headings of the matrix

Differential Advantage Matrix

• Assessment Diagnostics (presuming that this business strength is relevant to providing this benefit—if not leave blank or use NA)– Do we have the capability to deliver the required

customer benefit? (1 or Y)– Do we have significantly greater capabilities than

competitors? (1 or Y)– Would it be difficult for competitors to match us?

(1or Y)– (if you get to 0, or No, you stop)

Differential Advantage Matrix

• Implications– Do we have a differential advantage, i.e.,

(1,1,1) or (Y,Y,Y)?• If so, where, and through what strengths?

Our organization has a differential advantage in delivering benefit X to segment Y because of business strengths A, B, and C.

Differential Advantage Matrix

Segment ID/Description

Dem

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Relevant Business Strengths

Hig

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Opportunistic, solo, weekend leisure

travelers

BenefitPriority Ranking

Low out-of-pocket Price allows add ons 1

1,1,1 1,0

2

3

4

5

6

Dem

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Thank you!