Chapter 11 Dealing with competition PDF

Preview

Summary

important part Marketing Management. 15th Edition. Authors: Kotler and
Keller. Publisher: Pearson. ISBN: 9781292092621...

Description

Chapter 11: Dealing with competition Competitive Forces Porter’s 5 Competitive Forces: (1) threat of intense segment competition, (2) threat of new entrants, (3) threat of substitute products, (4) threat of buyers’ growing bargaining power, (5) threat of supplier’s growing bargaining power. Identifying Competitors A company is more likely to be hurt by an emerging competitor than a current competitor. E.g. Barnes & Noble  amazon.com Competition can be seen from different perspectives: a. Industries – Competitors are characterized by similarities in: (1) Degree of differentiation and number of sellers . (leads to: pure monopoly, oligopoly, monopolistic competition, pure competition) (2) Mobility, entry, and exit barriers (high capital requirements, economies of scale, patents, creditors, government restrictions, high vertical integration…). (3) Cost Structure. (4) Degree of Vertical Integration. (5) Degree of Globalization - local vs. global industries. b. Market – Competitors are firms that satisfy the same customer need. This view specifies both an indirect and a direct view on competitors, and therefore has a broader range. Analyzing Competitors It is not enough to only identify competitors, companies must also understand their: Strategies: by identifying their strategic group (determined by levels of quality and vertical integration, firms following same strategy in a given target market). Objectives: these could be to increase market share, maximize profits, cash flow, service leadership, or technological leadership. Expansion plans are also important to monitor. Strengths and Weaknesses

Competitive positions: favorable, tenable, dominant, strong, weak, or nonviable. Monitor share of market, share of mind (most recognizable), and share of heart (preferred company) variables of competitor companies. The goal is to make stead gains in mind share and heart share for gains in market share and profitability. Reaction Patterns: these may depend on the industry. Designing the Competitive Intelligence System 



Actionable recommendations for decision making arising from a systematic process, involving gathering,planning, analysing and disseminating information on the external environment (about potential competitors), for opportunities or developments that have the potential to affect a company or country’s competitive situation Leads to easier formulation of competitive strategies.

The information gathered through the competitive intelligence system allows for the creation of better strategies. In order to identify a company’s strengths and weaknesses relative to competitors, companies engage in Customer Value Analysis   

Where customer Value = Customer Benefits – Customer Costs Where customer costs = price, acquisition costs, usage costs, maintenance costs, ownership costs, disposal costs. Where customer benefits include service benefits, product benefits, personnel benefits, and image benefits.

They should also recognize the importance of competing in all different classes of competitors for their strategy: Strong vs. weak, close vs. distant, good vs. bad. Designing Competitive Strategies Market-leader strategies – Firms with largest market share. They must: 1. Expand the Total Market The dominant company will get the most gains and benefits through: finding new users, promoting new uses, convincing people to use more per use. Searching for new users: Market-penetration strategy; (those who might but not (yet) use the product), new-market segment strategy, (those who have never used it); geographical-expansion strategy, (those who live elsewhere).

2. Defend Market Share Through continuous innovation (– low costs, developing new product and customer services, distribution effectiveness.), increases in competitive strength and value to customer, defensive strategies which include:      

Position Defence – building on superior (and impregnable) brand power. Flank Defence Preemptive Defence – anticipating and acting before the competitor. Counteroffensive Defences Mobile Defence – stretching over new territories, through market broadness (focus shift from product to generic need) and market diversification into unrelated industries. Contraction Defence – giving up weaker territories and reassigning resources to stronger territories.

3. Expand Market Share  

Increasing your market share does not necessarily lead to increased profits. Beware:

1. of the possibility of provoking anti-trust action 2. of economic costs involved. 3. not to pursue the wrong marketing-mix strategy (e.g. lowering prices too much) Runner-up firms can use market follower or market challenger (attacking) strategies: Market-challenger strategies, firms must: 1. Decide on a strategic objective, and on who to attack  should they attack the market leader, firms of an equal size, or small local and regional firms? 2. Choose a general attack strategy: a. Frontal attack – Match/ Copy opponent’s product, advertising, price, and distribution. b. Flank attack – find gaps and fill them; Strategic Dimensions: geographic (entering cities where opponent is weak), and/or segmental (serve uncovered market needs) c. Encirclement attack – Quickly try to conquer a part of enemy’s territory d. Bypass attack – Ignore leader’s market position. Develop brands in related markets, attack undeveloped or undefended territories, leapfrog current technology. e. Guerilla attack – By launching small, intermittent hit-and-run attacks to destabilize and harass the leader. These attacks include price cuts, intense promotional blitzes, and occasional legal actions.

3. Develop more specific strategies and combine – lower priced goods, price discounts, product proliferation (larger product variety for more choice), offering prestige goods, product innovation, improved services, distribution innovation, manufacturing cost reduction, intensive advertising promotion. Market-follower strategies Each follower tries to deliver distinctive advantages to its target market--location, services, financing. Four broad follower strategies:    

Counterfeiter (which is illegal, e.g. through black market) Cloner e.g. the IBM PC clones Imitator e.g. car manufacturers imitate the style of eachother Adapter e.g. many Japanese firms are excellent adapters initially before developing into challengers and eventually leaders

Market-niches strategies      

Smaller firms can avoid competing with larger firms by targeting smaller markets or niches that are of little or no interest to the larger firms. Nichers roles are to create niches, expand the niches and protect them e.g. Nike constantly created new niches--cycling, walking, hiking, cheerleading, etc. Businesses that address the needs of niche markets are profitable because they know the target-customers very well, charging a substantial price over cost. E.g. Logitech’s mice for computers. Specialization is important, in for e.g.: end-user, vertical-level, customer-size, specificcustomer, geographic, product or product-line, product-feature, job-shop, quality-price, service, and channel specialization are all possible roles of nichers. What is the major risk faced by nichers? The market may be attacked by larger firms once they notice the niches are successful Multiple-niching – strengths in two or more niches, to avoid the problems of a weakened niche.

Balancing Customer and Competitor Orientations A balance between being competitor-centred and customer-centred is important. “Competitor centred companies”:  

moves are determined based on competitor’s actions. fighter orientation is developed.

“Customer-centred companies”:

 

promises to deliver long run profits. it’s easier to identify opportunities....