11 Dealing with Competition Marketing Management 13 th

11 Dealing with Competition Marketing Management, 13 th ed

Chapter Questions • How do marketers identify primary competitors? • How should we analyze competitors’ strategies, objectives, strengths, and weaknesses? • How can market leaders expand the total market and defend market share? Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 11 -2

Chapter Questions (cont. ) • How should market challengers attack market leaders? • How can market followers or nichers compete effectively? Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 11 -3

Figure 1. 1 Five Forces Determining Segment Structural Attractiveness Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 11 -4

Industry Concept of Competition • Number of sellers and degree of differentiation • Entry, mobility, and exit barriers • Cost structure • Degree of vertical integration • Degree of globalization Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 11 -5

Figure 11. 2 Strategic Groups Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 11 -6

Competitive Markets Industries Can Be Classified By: • Number of sellers and degree of differentiation • Cost structure • Entry, mobility and exit barriers • Degree of vertical integration § Degree of globalization To accompany A Framework for Marketing Management, 2 nd Edition Slide 7 in Chapter 8

Competitive Markets Industry Structures • Pure Monopoly • Pure Oligopoly • Differentiated Oligopoly • Monopolistic Competition • Pure Competition • Only one firm offers an undifferentiated product or service in an area • Unregulated • Regulated • Example: Most utility companies To accompany A Framework for Marketing Management, 2 nd Edition Slide 8 in Chapter 8

Competitive Markets Industry Structures • Pure Monopoly • Pure Oligopoly • Differentiated Oligopoly • Monopolistic Competition • Pure Competition • A few firms produce essentially identical commodities and little differentiation exists • Lower costs are the key to higher profits • Example: oil To accompany A Framework for Marketing Management, 2 nd Edition Slide 9 in Chapter 8

Competitive Markets Industry Structures • Pure Monopoly • Pure Oligopoly • Differentiated Oligopoly • Monopolistic Competition • Pure Competition • A few firms produce partially differentiated items • Differentiation is by key attributes • Premium price may be charged • Example: Luxury autos To accompany A Framework for Marketing Management, 2 nd Edition Slide 10 in Chapter 8

Competitive Markets Industry Structures • Pure Monopoly • Pure Oligopoly • Differentiated Oligopoly • Monopolistic Competition • Pure Competition • Many firms differentiate items in whole or part • Appropriate market segmentation is key to success • Example: beer, restaurants To accompany A Framework for Marketing Management, 2 nd Edition Slide 11 in Chapter 8

Competitive Markets Industry Structures • Pure Monopoly • Pure Oligopoly • Differentiated Oligopoly • Monopolistic Competition • Pure Competition • Many competitors offer the same product • Price is the same due to lack of differentiation • Example: farmers selling milk, crops To accompany A Framework for Marketing Management, 2 nd Edition Slide 12 in Chapter 8

Competitive Markets • A broader group of competitors will be identified using the market approach • Competitor maps plot buying steps in purchasing and using the product, as well as direct and indirect competitors To accompany A Framework for Marketing Management, 2 nd Edition Slide 13 in Chapter 8

Competitor Analysis • Key characteristics of the competition must be identified: • Strategies • Objectives • Strengths and Weaknesses • Effect a firm’s competitive position in the target market • Reaction Patterns To accompany A Framework for Marketing Management, 2 nd Edition Slide 14 in Chapter 8

Competitor Analysis Competitive Positions in the Target Market • Dominant • Strong • Favorable • Tenable : defendable • Weak • Nonviable: not correct To accompany A Framework for Marketing Management, 2 nd Edition Slide 15 in Chapter 8

Table 11. 1 Customer Ratings of Competitors on Key Success Factors Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 11 -16

Strengths and Weaknesses Share of market; competitor market share Share of mind; first company in industry Share of heart; preferring to by from Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 11 -17

Table 11. 2 Market Share, Mind Share, and Heart Share Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 11 -18

Figure 11. 5 Hypothetical Market Structure 10% 20% Market Nichers Follower 30% Market Challenger Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 40% Market Leader 11 -19

Other Competitive Strategies Market Challengers Market Followers Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Market Nichers 11 -20

Designing Competitive Strategies Major Strategies • • Market-Leader Market-Challenger Market-Follower Market-Nicher • Expanding the total market • Defending market share • Expanding market share To accompany A Framework for Marketing Management, 2 nd Edition Slide 21 in Chapter 8

Designing Competitive Strategies • Expanding the Total Market: • Targeting Product to New Users • Market-penetration strategy • New-market strategy • Geographical-expansion strategy • Promoting New Uses of Product • Encouraging Greater Product Use To accompany A Framework for Marketing Management, 2 nd Edition Slide 22 in Chapter 8

Figure 11. 4 A Competitor’s Expansion Plans Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 11 -23

Figure 11. 6 Six Types of Defense Strategies Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 11 -24

Designing Competitive Strategies Defending Market Share • Position defense • Flank defense • Preemptive defense • Counteroffensive defense • Mobile defense • Contraction defense To accompany A Framework for Marketing Management, 2 nd Edition Slide 25 in Chapter 8

Designing Competitive Strategies • Before Attempting to Expand Market Share, Consider: • Probability of invoking antitrust action • Economic costs involved • Likelihood that marketing mix decisions will increase profits To accompany A Framework for Marketing Management, 2 nd Edition Slide 26 in Chapter 8

Figure 11. 7 Optimal Market Share Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 11 -27

Designing Competitive Strategies Major Strategies • • Market-Leader Market-Challenger Market-Follower Market-Nicher • First define the strategic goals and opponent(s) • Choose general attack strategy • Choose specific attack strategy To accompany A Framework for Marketing Management, 2 nd Edition Slide 28 in Chapter 8

General Attack Strategies Frontal Attack Flank Attack Encirclement Attack Bypass Attack Guerrilla Warfare Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 11 -29

Designing Competitive Strategies • General Attack Strategies: • Frontal attacks match competition • Flank attacks serve unmet market needs or underserved areas • Encirclement “blitzes” opponent • Bypassing opponent and attacking easier markets is also an option To accompany A Framework for Marketing Management, 2 nd Edition Slide 30 in Chapter 8

Competitive Markets Specific Attack Strategies Include: • • • Price-discount Lower-price goods Prestige goods Improved services Product proliferation • Product innovation • Distribution innovation • Manufacturing cost reduction § Intensive advertising promotion To accompany A Framework for Marketing Management, 2 nd Edition Slide 31 in Chapter 8

Designing Competitive Strategies Major Strategies • • Market-Leader Market-Challenger Market-Follower Market-Nicher • Imitation may be more profitable than innovation • Four broad strategies: • • Counterfeiter Cloner Imitator Adapter To accompany A Framework for Marketing Management, 2 nd Edition Slide 32 in Chapter 8

Market Follower Strategies Counterfeiter Cloner Imitator Adapter Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 11 -33

Designing Competitive Strategies Major Strategies • • Market-Leader Market-Challenger Market-Follower Market-Nicher • Niche specialties: • • • End-user Vertical-level Customer-size Specific customer Geographic Product/product line Product feature Job-shop Quality-price Service Channel To accompany A Framework for Marketing Management, 2 nd Edition Slide 34 in Chapter 8

Niche Specialist Roles • End-User Specialist • Vertical-Level Specialist • Customer-Size Specialist • Specific-Customer Specialist • Geographic Specialist • Product-Line Specialist • Job-Shop Specialist • Quality-Price Specialist • Service-Specialist • Channel Specialist Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 11 -35

Balancing Customer and Competitor Orientations • Competitor-centered companies evaluate what competitors are doing, then formulate competitive reactions • Customer-centered companies focus on customer developments when formulating strategy To accompany A Framework for Marketing Management, 2 nd Edition Slide 36 in Chapter 8