Chapter Two

Markets and
Competitive
Space
 MARKETS AND COMPETITIVE
SPACE
 Markets and Strategies
 Product-Market Scope and
Structure
 Describing and Analyzing End-
Users
 Analyzing Competition
 Developing a Strategic Vision
about the Future
 MARKETS AND COMPETITIVE SPACE
The Challenges ―
Markets are increasingly complex, turbulent, and
interrelated.
Importance of a broad view of the market.
Essential to develop a vision about how the market is likely
to change in the future.
Continuous Monitoring is Necessary to:
Find promising opportunities
Identify shifts in value requirements
Understand competitors’ positioning
Guide targeting and positioning
decisions
 MARKETS AND STRATEGIES

Markets and
Strategies are
Interlinked
Forming Value Migration
a Shared Vision Challenges
 Markets Impact Strategies

• Market changes often require altering

strategies
• Forces of change create both market
opportunities and threats
• Inherent danger in faulty market sensing
 Value Migrations
• Customers shift purchasing to new
business designs with enhanced value
offering
• Beware of disruptive technologies
• Market sensing and organizational
learning are essential
 PRODUCT-MARKET SCOPE AND
STRUCTURE

Matching Needs with Product Benefits

Product-Market Boundaries and Structure
Forming Product-Markets for Analysis
The Changing Composition of Markets
 Matching Needs with Product Benefits

• A product – market matches people with

needs to the product benefits that satisfy
those needs

“A product – market is the set of products

judged to be substitutes within those usage
situations in which similar patterns of benefits
are sought by groups of customers.”*

*Srivastava, et al. (1984) Journal of Marketing, Spring, 32.

 INNOVATION FEATURE
Progressive Insurance:
Customer Needs at the Center of Strategy

• In the period 1994 to 2004, Progressive Insurance increased sales from $1.3 billion to
$9.5 billion, and ranks high in the Business Week Top 50 U.S. companies for
shareholder value creation.
• The company invents new ways of providing services to save customers time, money
and irritation, while often lowering costs at the same time.
• Loss adjusters are sent to the road accidents rather than working at head office, and
they have the power to write checks on the spot.
• Progressive reduced the time needed to see a damaged automobile from seven days to
nine hours.
• Policy holders’ cars are repaired quicker, and the focus on this central customer need
has won much automobile insurance business for Progressive.
• These initiatives also enable Progressive to reduce its own costs – the cost of storing a
damaged automobile for a day is $28, about the same as the profit from a six-month
policy.
Source: Adapted from Mitchell, Adrian (2004)”Heart of the Matter,” The Marketer, June 12, 14.
Product – Market Boundaries and Structure

• Determining Product-Market Structure

1. Start with the generic need satisfied by the

product category of interest to management
2. Identify the product categories (types) that
can satisfy the generic need
3. Form the specific product – markets within
the generic product – market
 Illustrative Fast-Food
Product-Market Structure

SUPER MICROWAVE
MARKETS OVENS
FAST-FOOD
MARKET

CONVENIENCE TRADITIONAL
STORES RESTAURANTS
Forming Product – Markets for
Analysis
Factors influencing product – market
boundaries:

 Purpose of analysis

 Changing composition of markets

 Extent of market complexity

The Changing Composition of Markets

• Change due to new technologies and emerging

competition
• Consider existing and emerging markets
• Identify alternative ways to meet needs
• Extend product-market analysis beyond
industry boundaries (e.g. Fast-foods)
 Extent of Market Complexity

• Three characteristics of markets:

– 1. Functions or uses of the product

– 2. The enabling technology of the product

– 3. Customer segments in the product-

market
 Illustrative Product – Market
Structure
Food and beverages •Generic Product
for breakfast meal Class

Cereals •Product Type

Ready to eat •Variant A

Regular
Natural •Variant B
Nutritional Pre-sweetened

Life Product 19 Special K •Brands

DEFINING AND ANALYZING MARKETS
Define Product-Market Boundaries and
Structures

Identify and Describe End-Users

Analyze Industry and Value Added

Chain

Evaluate Key Competitors

Forecast Market Size

and Growth Trends
 Identifying and
Describing Buyers

Building DESCRIBING How

Customer Buyers
AND Make
Profiles
ANALYZING Choices
END-USERS

Environmental
Influences
 Identifying and Describing End-Users

• Illustrative buyer characteristics in

consumer markets:
 Family size, age, income,
geographical location, sex, and
occupation
• Illustrative factors in organizational
markets:
 Type of industry
 Company size
 Location
 How Buyers Make Choices

 BUYING DECISION PROCESS:

1. Problem recognition

2. Information search

3. Alternative evaluation

4. Purchase decision

5. Post-purchase behavior
 Environmental
Influences
• External factors influencing buyers’
needs and wants:
 Government, social change,
economic shifts, technology etc.
• These factors are often non-
controllable but can have a major
impact on purchasing decisions
 Building Customer Profiles

• Start with generic product – market

• Move next to product- type and variant

profiles >> increasingly more
specific

• Customer profiles guide decision making

(e.g. targeting, positioning, market
segmentation etc.)
 ANALYZING COMPETITION
1. Define Industry
Structure and
Characteristics

5. Identify 2. Identify and

New PRODUCT- Describe Key
Competitors MARKET Competitors
STRUCTURE
AND
4. Anticipate MARKET
Actions by SEGMENTS 3. Evaluate
Competitors Key
Competitors
Examples of Levels of Competition
Baseball
cards

Bottle Video
Fast water Games
Food
Regular Diet lemon Ice
Beer colas limes Cream
Diet-Rite
Cola
Fruit
Diet Diet Pepsi
flavored Wine
Coke
colas Product from
competition:
Lemon
diet colas limes
Juices Product category
competition: Coffee
soft drinks
Generic competition:
beverages
Budget competition:
food & entertainment
 Industry Analysis
• Industry size, growth, and composition
• Typical marketing practices
• Industry changes that are anticipated
(e.g. consolidation trends)
• Industry strengths and weaknesses
• Strategic alliances among competitors
 Defining Industry Structure &
Characteristics
SUPPLIERS

Industry Form
PRODUCERS
Industry
Environment
Competitive WHOLESALERS/ DISTRIBUTORS
Forces Value
Added
RETAILERS/DEALERS Chain

CONSUMER/ ORGANIZATIONAL END

USERS
 Competitive Forces

1. Rivalry among existing firms.

2. Threat of new entrants.

3. Threat of substitute products.

4. Bargaining power of suppliers.

5. Bargaining power of buyers.

Source: Michael E. Porter, Competitive Advantage, Free Press, 1985, 5.

 Key Competitor Analysis

• Business scope and objectives

• Management experience, capabilities, and
weaknesses
• Market position and trends
• Market target(s) and customer base
• Marketing program positioning strategy
• Financial, technical, and operating
capabilities
• Key competitive advantages (e.g., access to
resources, patents)
 Extent of
Market Coverage

Current Competitor Customer

Capabilities Satisfaction
Evaluation

Past
Performance
DEVELOPING A STRATEGIC VISION ABOUT
THE FUTURE
 Industry Boundaries Blurring and Evolving

 Competitive Structure and Players Changing

 Value Migration Paths

 Product Versus Business Design Competition

 Firms are Collaborating to Influence Industry

Standards
Source: C. K. Prahalad, Journal of Marketing, Aug. 1995, vi.
 MARKET SIZE ESTIMATION
Product-Market Forecast
Relationships
(area denotes sales in $’s)
Market Potential
Estimate

Unrealized
Potential

Company Industry
Sales Sales
Forecast Forecast
 Product-Market Forecast
Relationships for Industrial
Painting Units
Sales (in 1000s
of units)
900
800
Market
700 Potential
600 Sales Forecast

500
400
300
200 Company XYZ
Sales Forecast
100
0
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