Objectives Identifying Competitors Evaluating Competitors Competitive Intelligence Systems

Objectives ä Identifying Competitors ä Evaluating Competitors ä Competitive Intelligence Systems ä Competitive Strategies ä Customer vs. Competitor Orientation © 2000 Prentice Hall

Induce your competitors not to invest in those products, markets and services where you expect to invest the most … that is the fundamental rule of strategy. Bruce Henderson, Founder of BCG There is nothing more exhilarating than to be shot at without result. Winston Churchill © 2000 Prentice Hall

Five Forces Determining Segment Structural Attractiveness Potential Entrants (Threat of Mobility) Suppliers (Supplier power) © 2000 Prentice Hall Industry Competitors (Segment rivalry) Substitutes (Threats of substitutes) Buyers (Buyer power)

Barriers and Profitability Exit barriers Entry Barriers Low High Low, stable returns Low, risky returns High, stable returns High, risky returns © 2000 Prentice Hall

Industry Competition ä Number of Sellers - Degree of Differentiation ä Entry, Mobility, Exit barriers ä Cost Structure ä Degree of Vertical Integration ä Degree of Globalization © 2000 Prentice Hall

Strategic Groups in the Major Appliance Industry Quality A High Group • Narrow line • Lower mfg. cost • Very high service • High price Group B • Full line • Low mfg. cost • Good service • Medium price Low Group C • Moderate line • Medium mfg. cost • Medium service • Medium price Group D • Broad line • Medium mfg. cost • Low service • Low price High © 2000 Prentice Hall Low Vertical Integration

Analyzing Competitors Objectives Strategies Competitor Actions Reaction Patterns © 2000 Prentice Hall Strengths & Weaknesses

Competitor’s Expansion Plans Products Individual Users Personal Computers Hardware Accessories Software © 2000 Prentice Hall Dell Markets Commercial & Industrial Educational

Hypothetical Market Structure & Strategies Market leader 40% Expand Market Defend Market Share Expand Market Share © 2000 Prentice Hall Market challenger 30% Attack leader Status quo Market nicher Market follower 20% Imitate 10% Specialize

Defense Strategies (2) Flank defense Attacker (3) Preemptive defense (4) Counteroffensive defense (1) Position (6) Contraction defense Defender (5) Mobile defense © 2000 Prentice Hall

Optimal Market Share Profitability Optimal market share 0% © 2000 Prentice Hall 25% 50% 75% Market share 100%

Attack Strategies (4) Bypass attack (2) Flank attack (1) Frontal attack Attacker Defender (3) Encirclement attack (5) Guerilla attack © 2000 Prentice Hall

Specific Attack Strategies ä Price-discount ä Cheaper goods ä Prestige goods ä Product proliferation ä Product innovation ä Improved services ä Distribution innovation ä Manufacturing cost reduction ä Intensive advertising promotion © 2000 Prentice Hall

“Nichemanship” ä ä ä End-user specialist Vertical-level specialist Customer-size specialist Specific-customer specialist Geographic specialist Product or product-line specialist Product-feature specialist Job-shop specialist Quality-price specialist Service specialist Channel specialist © 2000 Prentice Hall

Balance Customer + ID opportunities + Long-run profit + Emerging needs & groups © 2000 Prentice Hall Competition + Fighter orientation + Alert + Exploit weaknesses - Reactive

Review ä Identifying Competitors ä Evaluating Competitors ä Competitive Intelligence Systems ä Competitive Strategies ä Customer vs. Competitor Orientation © 2000 Prentice Hall