Chapter 8

Dealing with the

Competition

PowerPoint by Karen E. James

Louisiana State University - Shreveport

©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 1 in Chapter 8
 Objectives

 Understand how a company

identifies its primary competitors
and ascertains their strategies.
 Review how companies design
competitive intelligence systems.

©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 2 in Chapter 8
 Objectives

 Learn how a company decides

whether to position itself as a
market leader, a challenger, a
follower, or a nicher.
 Identify how a company can
balance a customer vs. competitor
orientation.
©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 3 in Chapter 8
 Competitive Markets

 Porter’s Five Forces that Determine

Market Attractiveness:
– Threat of intense segment rivalry
– Threat of new entrants
– Threat of substitute products
– Threat of buyers’ growing bargaining
power
– Threat of suppliers’ growing bargaining
power
©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 4 in Chapter 8
 Competitive Markets

 Failing to identify competitors

can lead to extinction
 Internet businesses have led to
disintermediation of middlemen
 Competition can be identified
using the industry or market
approach
©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 5 in Chapter 8
 Competitive Markets

Industries Can Be Classified By:

 Number of sellers  Entry, mobility and
and degree of exit barriers
differentiation  Degree of vertical
 Cost structure integration
 Degree of globalization

©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 6 in Chapter 8
 Competitive Markets

Industry Structures  Only one firm offers

an undifferentiated
 Pure Monopoly product or service
 Pure Oligopoly in an area
– Unregulated
 Differentiated
Oligopoly – Regulated

 Monopolistic  Example: Most

Competition utility companies
 Pure Competition
©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 7 in Chapter 8
 Competitive Markets

Industry Structures  A few firms produce

essentially identical
 Pure Monopoly commodities and
 Pure Oligopoly little differentiation
exists
 Differentiated
Oligopoly  Lower costs are the
 Monopolistic key to higher profits
Competition  Example: oil
 Pure Competition
©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 8 in Chapter 8
 Competitive Markets

Industry Structures  A few firms produce

partially
 Pure Monopoly differentiated items
 Pure Oligopoly  Differentiation is by
key attributes
 Differentiated
Oligopoly  Premium price may
be charged
 Monopolistic
Competition  Example: Luxury
autos
 Pure Competition
©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 9 in Chapter 8
 Competitive Markets

Industry Structures  Many firms

differentiate items
 Pure Monopoly in whole or part
 Pure Oligopoly  Appropriate market
 Differentiated segmentation is key
Oligopoly to success
 Monopolistic  Example: beer,
Competition restaurants
 Pure Competition
©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 10 in Chapter 8
 Competitive Markets

Industry Structures  Many competitors

offer the same
 Pure Monopoly product
 Pure Oligopoly  Price is the same
 Differentiated due to lack of
Oligopoly differentiation
 Monopolistic  Example: farmers
Competition selling milk, crops
 Pure Competition
©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 11 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
©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 12 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
©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 13 in Chapter 8
 Competitor Analysis

Competitive Positions in
the Target Market

 Dominant  Tenable
 Strong  Weak
 Favorable  Nonviable

©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 14 in Chapter 8
Competitive Intelligence Systems

 Designing the system involves:

– Setting up the system
– Collecting the data
– Evaluating and analyzing the data
– Disseminating information and
responding to queries

©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 15 in Chapter 8
Competitive Intelligence Systems

 Value analysis helps firms to select

competitors to attack and to avoid
– Customers identify and rate attributes
important in the purchase decision for
the company and competition
 Attacking strong, close, and bad
competitors will be most beneficial

©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 16 in Chapter 8
Designing Competitive Strategies

Major Strategies  Expanding the

total market
 Market-Leader  Defending
 Market- market share
Challenger  Expanding
 Market-Follower market share
 Market-Nicher
©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 17 in Chapter 8
Designing Competitive Strategies

 Expanding the Total Market:

– Targeting Product to New Users
 Market-penetrationstrategy
 New-market strategy

 Geographical-expansion strategy

– Promoting New Uses of Product

– Encouraging Greater Product Use
©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 18 in Chapter 8
Designing Competitive Strategies

Defending Market Share

 Position  Counteroffensive
defense defense
 Flank defense  Mobile defense
 Preemptive  Contraction
defense defense
©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 19 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
©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 20 in Chapter 8
Designing Competitive Strategies

Major Strategies  First define the

strategic goals
 Market-Leader and opponent(s)
 Market-  Choose general
Challenger attack strategy
 Market-Follower  Choose specific
 Market-Nicher attack strategy
©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 21 in Chapter 8
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
©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 22 in Chapter 8
 Competitive Markets

Specific Attack Strategies Include:

 Price-discount  Product
innovation
 Lower-price goods
 Distribution
 Prestige goods
innovation
 Improved services  Manufacturing
 Product proliferation cost reduction
 Intensive advertising promotion
©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 23 in Chapter 8
Designing Competitive Strategies

Major Strategies  Imitation may be

more profitable
than innovation
 Market-Leader  Four broad
 Market- strategies:
Challenger – Counterfeiter
– Cloner
 Market-Follower – Imitator
 Market-Nicher – Adapter

©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 24 in Chapter 8
Designing Competitive Strategies

 Niche specialties:
Major Strategies – End-user
– Vertical-level
 Market-Leader – Customer-size
– Specific customer
 Market- – Geographic
– Product/product line
Challenger – Product feature
 Market-Follower – Job-shop
– Quality-price
 Market-Nicher – Service
– Channel
©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 25 in Chapter 8
 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
©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 26 in Chapter 8