Competition

Decide-Dominate-And-Destroy
Fight competition

The shopkeeper was dismayed when a brand new

business much like his own opened up next door and
erected a huge sign which read BEST DEALS.

He was horrified when another competitor opened up

on his right, and announced its arrival with an even
larger sign, reading LOWEST PRICES.

The shopkeeper was panicked, until he got an idea.

He put the biggest sign of all over his own shop-it
read... MAIN ENTRANCE
Step 1 : Competitor Map – Eastman Kodak
Analyzing Competitors
Step 2 - Five Variables to Monitor
When Analyzing Competitors:
• Share of market
• Share of mind
• Share of heart
• Share of Voice
• Share of Shop
Market Share, Mind Share, and Heart Share
Market Share Mind Share Heart Share
2002 2003 2004 2002 2003 2004 2002 2003 2004
Brand A 50% 47% 44% 60% 58% 54% 45% 42% 39%
Brand B 30 34 37 30 31 35 44 47 53
Brand C 20 19 19 10 11 11 11 11 8
Market Share, Mind Share, and Heart Share
Share of Voice Share of Shop
2002 2003 2004 2002 2003 2004
Brand A 50% 47% 44% 60% 58% 54%
Brand B 30 34 37 30 31 35
Brand C 20 19 19 10 11 11
 Step 3: Customer’s Ratings of Competitors on Key Success
Factors
Customer Product Product Technical Selling
Awareness Quality Availability Assistance Staff

Brand A E E P P G

Brand B G G E G E

Brand C F P G F F

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

 Kotler on
Marketing
Poor firms ignore
their competitors;
average firms copy
their competitors;
winning firms lead
their competitors.

Eg. Dell with IBM / HP, Nirma with Surf,

Pepsi with Coke in India and so on…
Step 4 : Business Strength
Matrix
Step 6: Porter’s Five
Forces
 Porters Five Forces …
* Threat of Entry
* Bargaining Power of Suppliers
* Bargaining Power of Buyers
* Development of Substitute
Products or Services
* Rivalry among Competitors
 Barriers to Entry …
… large capital requirements or the need
to gain economies of scale quickly.
… strong customer loyalty or strong
brand preferences.
… lack of adequate distribution channels or
access to raw materials.
materials
 Power of Suppliers …
… high when
* A small number of dominant, highly
concentrated suppliers exists.
* Few good substitute raw materials or
suppliers are available.
* The cost of switching raw materials or
suppliers is high.
 Power of Buyers …
… high when
* Customers are concentrated,
concentrated large or buy in
volume .
* The products being purchased are
standard or undifferentiated making it easy to
switch to other suppliers.
* Customers’ purchases represent a major
portion of the sellers’ total revenue.
 Substitute products …
… competitive strength high when
* The relative price of substitute products
declines .
* Consumers’ switching costs decline.
decline
* Competitors plan to increase market
penetration or production capacity.
capacity
 Rivalry among competitors
… intensity increases as
* The number of competitors increases or
they become equal in size.
size
* Demand for the industry’s products
declines or industry growth slows.
slows
* Fixed costs or barriers to leaving the
industry are high.
high
Porter’s Competitive Strategy

Low-cost leadership Differentiation based

Focus - Market niche on:
High end Quality
Low end Service
Geographic Technological superiority
Special needs buyers Breadth of product line
Other Image and reputation
Value
Other attributes
Designing Competitive Strategies

Hypothetical
Market Structure
 Brand Leaders - Defending Market Share
When Aristocrat attacked VIP,
VIP raised price and launched
International Tourister to fight Aristocrat

Attack before offense.

Eg: Lower prices before
2. Flank
Strategic
lowered by competition
withdrawal

3. Preemptive 6. Contraction
Attacker 4. Counteroffensive
1.Position

Invade attackers main Occupy desirable

territory so that attacker Market space
Eg. Liril - freshness
pulls back. Eg Fedex ,
when UPS invaded its
5. Mobile
airborne delivery systems
attacked its ground delivery
systems.
Market broadening
and diversification.
Brand challenger Strategies
.z.
z.z.z
Bypass Attack

Diversifying into related or

Unrelated products or through
Technology leapfrogging

Flank Attack – in weak spots

Geographical, segmental or
Frontal Attack – unmet market needs Encirclement Attack
Match the opponent’s Encircle enemy’s territory
Marketing mix strengths through a ‘blitz’. Eg: Sun
challenged Microsoft by
licensing Java to many software
developers.
Theodore Levitt
‘A strategy of
product imitation
might be as
profitable as a
strategy of product
innovation’
Brands that are Market Followers

Counterfeiter . Eg. Lal Label

Cloner – look-alike

Imitator – copies from

leader but differentiates

Adapts or improves
leader’s products.
Nicher Strategies
Specialization is
the name of the
game
-End-user specialist
- Vertical level specialist

-Customer size specialist

-Specific customer specialist
-Geographic specialist

-Product or product line specialist

-Product feature specialist

-Service specialist
-Channel specialist
Drivers of Change
Internet
Globalization
Long-term industry growth rate
Who buys the product and how it is used
Product innovation
Technological change
Marketing innovation
Drivers of Change
Entry or exit of major firms
Diffusion of technology
Increasing globalization of industry
Changes in cost and efficiency
Emerging buyer preferences
Regulatory, social and political influences
Reduction in uncertainty and risk
Mergers and Acquisitions
Provides more permanent ties than an
alliance
Dramatic strengthening of:
Market position
Ability to exploit opportunities
Competitive advantage
May achieve cost savings
Vertical Integration:
Advantages
Reduces costs
Adds to technological or competitive
strengths
Helps differentiate products
Vertical Integration:
Disadvantages
High capital requirements
Reduces flexibility in accommodating
demand
Need to balance capacity at each stage
Reduces manufacturing flexibility
Different skills are needed to manage
different businesses
Outsourcing:
When to Unbundle
Supplier has lower cost and/or higher quality
Activities are not crucial to sustaining a
competitive advantage
Reduces risk of exposure to changing
environment
Streamlines operations
Increases flexibility
Reduces costs
Reduces time
Allows company to focus on core businesses
Outsourcing:
Advantages
Higher quality and/or lower cost
Improves ability to innovate
Enhances strategic flexibility
Access to diverse expertise
Firm can concentrate on core
competencies
Strengthen supplier commitment
First-mover Strategies
Advantages
Build image and reputation
New technology reduces overall cost
Build customer loyalty
Preemptive strike
Long-term profits are enhanced
Disadvantages
Pioneering is costly
Products may be easily reengineered by followers
Competitors may be able to leapfrog