Ch09a

Copyright © 2003 Prentice-Hall, Inc.

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Chapter 9Chapter 9Dealing with the Dealing with the CompetitionCompetitionbyby

PowerPoint byPowerPoint byMilton M. PressleyMilton M. Pressley

University of New OrleansUniversity of New Orleans


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Kotler on Marketing Poor firms ignore Poor firms ignore

their competitors; their competitors; average firms copy average firms copy their competitors; their competitors; winning firms lead winning firms lead their competitors.their competitors.


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In this chapter, we focus on five things In this chapter, we focus on five things companies need to know about their companies need to know about their competition:competition: Who the primary competitors areWho the primary competitors are How to ascertain their strategies, objectives, How to ascertain their strategies, objectives,

strengths and weaknesses, and reaction strengths and weaknesses, and reaction patternspatterns

How to design a competitive intelligence systemHow to design a competitive intelligence system Whether to position as market leader, Whether to position as market leader,

challenger, follower, or nicherchallenger, follower, or nicher How to balance a customer versus How to balance a customer versus

competitor orientationcompetitor orientation

Chapter Objectives


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Figure 9-1: Five Forces Determining Segment Structural Attractiveness

Competitive Forces

Threat of:Threat of:1.1. intense segment intense segment

rivalryrivalry

2.2. new entrantsnew entrants

3.3. substitute productssubstitute products buyers’ growing buyers’ growing

bargaining powerbargaining power suppliers’ growing suppliers’ growing

bargaining bargaining powerpower


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Figure 9-2: Barriers and Profitability


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Identifying Competitors Industry Concept of CompetitionIndustry Concept of Competition

IndustryIndustry

Number of Sellers and Number of Sellers and Degree of DifferentiationDegree of Differentiation Pure monopolyPure monopoly OligopolyOligopoly

Pure oligopolyPure oligopoly Differentiated oligopolyDifferentiated oligopoly

Monopolistic competitionMonopolistic competition Pure competitionPure competition


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Identifying Competitors Entry, Mobility, Exit BarriersEntry, Mobility, Exit Barriers

Entry barriersEntry barriers Mobility barriersMobility barriers Exit barriersExit barriers

Cost StructureCost Structure Degree of Vertical IntegrationDegree of Vertical Integration

Vertical integrationVertical integration

Degree of GlobalizationDegree of Globalization

Market Concept of CompetitionMarket Concept of Competition


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Figure 9-3: Competitor Map – Eastman Kodak


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ObjectivesObjectivesFigure 9-5: A Competitor’s Expansion Plans

Analyzing Competitors


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Table 9-1: Customer’s Ratings of Competitors on Key Success Factors

Customer Customer AwarenessAwareness

Product Product QualityQuality

Product Product AvailabilityAvailability

Technical Technical AssistanceAssistance

Selling Selling StaffStaff

Competitor ACompetitor A EE EE PP PP GG

Competitor BCompetitor B GG GG EE GG EE

Competitor CCompetitor C FF PP GG FF FF

Note: E = excellent, G = good, F = fair, P = poor.Note: E = excellent, G = good, F = fair, P = poor.


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Three Variables to Monitor Three Variables to Monitor When Analyzing Competitors:When Analyzing Competitors: Share of marketShare of market Share of mindShare of mind Share of heartShare of heart


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Table 9-2: Market Share, Mind Share, and Heart Share

Market ShareMarket Share Mind ShareMind Share Heart ShareHeart Share

20002000 20012001 20022002 20002000 20012001 20022002 20002000 20012001 20022002

Competitor ACompetitor A 50%50% 47%47% 44%44% 60%60% 58%58% 54%54% 45%45% 42%42% 39%39%

Competitor BCompetitor B 3030 3434 3737 3030 3131 3535 4444 4747 5353

Competitor CCompetitor C 2020 1919 1919 1010 1111 1111 1111 1111 88


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Reaction PatternsReaction Patterns1. If competitors are nearly identical and make their living the 1. If competitors are nearly identical and make their living the

same way, then their competitive equilibrium is unstable.same way, then their competitive equilibrium is unstable.2. If a single major factor is the critical factor, then the 2. If a single major factor is the critical factor, then the

competitive equilibrium is unstable.competitive equilibrium is unstable.3. If multiple factors may be critical factors, then it is possible 3. If multiple factors may be critical factors, then it is possible

for each competitor to have some advantage and be for each competitor to have some advantage and be differentially attractive to some customers. The more factors differentially attractive to some customers. The more factors that may provide an advantage, the more competitors who that may provide an advantage, the more competitors who can coexist. Competitors all have their segment, defined by can coexist. Competitors all have their segment, defined by the preference for the factor trade-offs they offer.the preference for the factor trade-offs they offer.

4. The fewer the number of critical competitive variables, the 4. The fewer the number of critical competitive variables, the fewer the number of competitors.fewer the number of competitors.

5. A ratio of 2 to 1 in market share between any two 5. A ratio of 2 to 1 in market share between any two competitors seems to be the equilibrium point at which it is competitors seems to be the equilibrium point at which it is neither practical nor advantageous for either competitor to neither practical nor advantageous for either competitor to increase or decrease share.increase or decrease share.



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Designing The Competitive Intelligence System

Selecting CompetitorsSelecting Competitors Customer Value Analysis (CVA)Customer Value Analysis (CVA)

Customer Value = Customer Benefits – Customer Value = Customer Benefits – Customer CostsCustomer Costs

Customer Benefits = product benefits, service Customer Benefits = product benefits, service benefits, personnel benefits, image benefitsbenefits, personnel benefits, image benefits

Customer Costs = purchase price, acquisition Customer Costs = purchase price, acquisition costs, usage costs, maintenance costs, ownership costs, usage costs, maintenance costs, ownership costs, disposal costscosts, disposal costs


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Table 9-3: Customer Cost of Three Brands

AA BB CC

PricePrice $100$100 $ 90$ 90 $ 80$ 80

Acquisition costsAcquisition costs 1515 2525 3030

Usage costsUsage costs 44 77 1010

Maintenance Maintenance costscosts

22 33 77

Ownership costsOwnership costs 33 33 55

Disposal costsDisposal costs 66 55 88

Total costsTotal costs $130$130 $135$135 $140$140


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Figure 9-6: Hypothetical Market Structure

Designing Competitive Strategies


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Market-Leader StrategiesMarket-Leader Strategies Expanding the Total MarketExpanding the Total Market

New UsersNew Users Market-penetration strategyMarket-penetration strategy New-market segment strategyNew-market segment strategy Geographical-expansion strategyGeographical-expansion strategy

New UsesNew Uses More UsageMore Usage

Defending Market ShareDefending Market Share


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Figure 9-7: Six Types of Defense Strategies



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Defense StrategiesDefense Strategies Position DefensePosition Defense Flank DefenseFlank Defense Preemptive DefensePreemptive Defense Counteroffensive DefenseCounteroffensive Defense Mobile DefenseMobile Defense

Market broadeningMarket broadening Principle of the objectivePrinciple of the objective Principle of massPrinciple of mass Market diversificationMarket diversification

Contraction DefenseContraction Defense Planned contraction Planned contraction

(Strategic withdrawal)(Strategic withdrawal)



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Figure 9-8: Relationship Between Market Share and Profitability

Expanding Market ShareExpanding Market Share



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Designing Competitive StrategiesFigure 9-9: The Concept of

Optimal Market Share


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Two Case Studies: Two Case Studies: Procter & Gamble Procter & Gamble and Caterpillarand Caterpillar Proctor & GambleProctor & Gamble

Customer knowledgeCustomer knowledge Long-term outlookLong-term outlook Product innovationProduct innovation Quality strategyQuality strategy Line-extension strategyLine-extension strategy


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Brand-extension strategyBrand-extension strategy Multibrand strategyMultibrand strategy Heavy advertising and Heavy advertising and

media pioneermedia pioneer Aggressive sales forceAggressive sales force Effective sales promotionEffective sales promotion Competitive toughnessCompetitive toughness Manufacturing efficiency Manufacturing efficiency

and cost cuttingand cost cutting Brand-management systemBrand-management system


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Market-Challenger StrategiesMarket-Challenger Strategies Defining the Strategic Objective and Defining the Strategic Objective and

Opponent(s)Opponent(s) It can attack the market leaderIt can attack the market leader It can attack firms of its own size that are not It can attack firms of its own size that are not

doing the job and are underfinanceddoing the job and are underfinanced It can attack small local and regional firmsIt can attack small local and regional firms

Choosing a General Attack StrategyChoosing a General Attack Strategy


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Figure 9-10: Attack Strategies


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Choosing a Specific Attack Choosing a Specific Attack StrategyStrategy Price-discountPrice-discount Lower price goodsLower price goods Prestige goodsPrestige goods Product proliferationProduct proliferation Product innovationProduct innovation Improved servicesImproved services Distribution innovationDistribution innovation Manufacturing cost reductionManufacturing cost reduction Intensive advertising promotionIntensive advertising promotion


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Market-Follower StrategiesMarket-Follower Strategies Innovative imitation Innovative imitation

(Product imitation)(Product imitation) Product innovationProduct innovation Four Broad Strategies:Four Broad Strategies:

CounterfeiterCounterfeiter ClonerCloner ImitatorImitator AdapterAdapter


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Market-Nicher StrategiesMarket-Nicher Strategies High margin versus high High margin versus high

volumevolume Nicher Specialist RolesNicher Specialist Roles

End-user specialistEnd-user specialist Value-added resellerValue-added reseller

Vertical-level specialistVertical-level specialist Customer-size specialistCustomer-size specialist Specific-customer specialistSpecific-customer specialist Geographic specialistGeographic specialist Product or product-line Product or product-line

specialistspecialist

Product-feature Product-feature specialistspecialist

Job-shop specialistJob-shop specialist Quality-price specialistQuality-price specialist Service specialistService specialist Channel specialistChannel specialist


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Balancing Customer and Competitor OrientationsCompetitor-centered companyCompetitor-centered companyCustomer-centered companyCustomer-centered companyRetreat is often the best (niche) Retreat is often the best (niche)

strategy!strategy!

Education

Ch09a