SLIDE 1

First reporter (Opening)

Welcome you to this video. First, let me introduce myself and my team. I am Hannylet Ocate,
together with Napoleon Torres and Rhoie Agustin. Were here-on is about to tackle Creating
competitive advantage

SLIDE 2

Let's get started by giving you an overview of a sample competitive analysis of a company. The
Starbucks Corporation has been the most successful coffee chain in the past few decades using
their aggressive expansion strategies to push out much of its competition. Starbucks has
focused on creating a dense network of stores all around America, while also opening up new
locations all around the world. They currently leading the retail coffee market with selling their
coffee for a premium price to increase their profitability. So, how did Starbucks create its
competitive advantage? And Why was it so successful? Excellent customer service is one
source of Starbucks’ competitive advantage. Starbucks’ emphasis on ensuring a positive
customer experience has allowed it to become one of the leading firms in the coffee industry.
Also new products showed that Starbucks was dedicated to innovation. Howard and his team
thus, successfully reimagined the coffee experience. Instead of looking at competitors,
Starbucks always found a way to grow the market by targeting new non-customers and build a
massive competitive advantage.

SLIDE 3

By understanding Creating competitive advantage, we can have an idea why Starbucks and
other successful company became successful. Here are the objectives of this video
presentation.

Objective 1, discuss the need to understand competitors as well as customers through

competitor analysis.

Objective 2, explain the fundamentals of competitive marketing strategies that are based on
creating value for customers.

Objective 3, illustrate the need for balancing customer and competitor orientations in becoming
a truly market-centered organization.

SLIDE 4

Here on.

Competitive advantages require delivering more value and satisfaction to target consumers than
competitors.

Competitive marketing strategies are how companies analyze their competitors and develop
value-based strategies for profitable customer relationships
To succeed in today’s fiercely competitive marketplace, companies must move from a product
and selling philosophy to a customer and marketing philosophy. This chapter spells out more
detail how companies can go about outperforming competitors to win, keep and grow
customers. To win in today's marketplace, companies must become adept not only at managing
products but also a customer relationship in the face of determined competition in a difficult
economic environment. Understanding customers is crucial, but it's not enough.

SLIDE 5

In this chapter we examine competitive marketing strategies.

The first step is competitor analysis, the process of identifying, assessing and selecting key
competitors.

The second step is developing competitive marketing strategies that strongly position the
company against competitors and give it the greatest possible competitive advantage.

SLIDE 6

So, in competitor analysis. Fist, we need to Identify our competitors.

Competitors can include

• All firms making the same product or class of products

• All firms making products that supply the same service

• All firms competing for the same costumer dollar

Normally and pag identify sa competitors natin is seem to be a simple task as detailed on this
slide. Pero dapat natin iwasan dito is yong tinatawag na competitor myopia, na kung saan you
make the mistake of defining your competition too narrowly, when you acknowledge only the
competitors that are in your face, whose challenge is direct and immediate. A company is more
likely to be buried by its latent competitors than its current ones, companies can identify their
competitors from an industry point of view. A company must understand the competitive
patterns in its industry if it hopes to be an effective player in that industry. Companies can also
identify competitors from a market point of view, here they define competitors as companies
that are trying to satisfy the same customer need or build relationships with the same customer
group.

SLIDE 7

Assessing competitors. Having identified the main competitors marketing management now
asks what are the competitors’ objectives. Here are listed of some competitors’ objectives:
Profitable, Market share growth, Cash flow, Technological leadership, and Service leadership.
Each competitor has a mix of objectives, knowing a competitor's mix of objectives reveals
whether the competitor is satisfied with its current situation and how it might react to different
competitive actions. For example, a company that pursues low-cost leadership will react much
more strongly to a competitor's cost-reducing manufacturing breakthrough than to the same
competitors increase in advertising. A company also must monitor its competitors’ objectives for
various segments, if the company finds that a competitor has discovered a new segment this
might be an opportunity, if it finds the competitors plan new moves and the segments now
served by the company it will be forewarned and hopefully forearmed.

Identifying competitors’ strategies. A strategic group is a group of firms in an industry following

the same or similar strategy in a given target market, if a company enters a strategic group the
members of that group become its key competitors and the company can succeed only if it
develops strategic advantages over these two companies. The company needs to look at all the
dimensions that identify strategic groups within the industry. You must understand how each
competitor delivers value to its customers.

SLIDE 8

Assisting competitors’ strengths and weaknesses. Marketers need to carefully assess each
competitor's strengths and weaknesses. As a first step companies can gather data on each
competitor's goals strategies and performance over the past few years. Admittedly some of this
information will be hard to get.

Estimating competitor reactions, a competitor’s objectives strategies strengths and weaknesses

go a long way toward explaining its likely actions. They also suggest it's likely reactions to
company moves such as price cuts, promotion increases or new product introductions. Each
competitor has a certain philosophy of doing business and marketing managers need a deep
understanding of a competitor's mentality, if they want to anticipate how that competitor will act.

SLIDE 9

Selecting Competitors to Attack and Avoid

Costumer value analysis determines the benefits that target customers’ value and how
customers rate the relative value of various competitors’ offers.

• Identification of major attributes that customers value and the importance of these values

• Assessment of the company’s and competitors’ performance on the valued attributes

A company has already largely selected its major competitors through prior decisions on
customer targets positioning and its marketing mix strategy. Management now must decide
which competitors to compete against more vigorously. A company can focus on one of several
classes of competitors, most companies prefer to compete against weak competitors. A useful
tool for assessing competitors’ strengths and weaknesses is called a customer value analysis.
The key to competitive advantage is to examine how a company's offer compares to that of its
major competitors in each customer segment.
SLIDE 10

Close or distant competitors. Most companies will compete with close competitors rather than
distant competitors, at the same time the company may need to avoid trying to destroy a close
competitor.

Good or bad competitors. A company really needs and benefits from competitors. The existence
of competitors results in several strategic benefits. Competitors may share the cost of market
and product development legitimize new technologies.

SLIDE 11

Companies have long engaged in head-to-head competition in search of profitable growth. They
have fought for competitive advantage, battled over market share and struggled for
differentiation. Yet in today's overcrowded industries competing head on results in nothing but a
bloody red ocean of rivals, fighting over a shrinking profit pool rather than competing head-to-
head with established competitors. Many companies seek out unoccupied positions in
uncontested market spaces.

Blue ocean strategy. (Korig) Keurig reinvented the home coffee brewing process with innovative
cup at a time pod-based coffee maker. “Choose, brew and enjoy” says Keurig. A blue ocean
strategy is a goal to make competition irrelevant.

SLIDE 12

We've described the main types of information the companies need about their competitors.
This information must be collected, interpreted, distributed and used gathering competitive
intelligence can cost much money and time. So, the company must design a cost-effective
competitive intelligence system. This slide details the functions of a competitive intelligence
system:

 Identifies competitive information and the best sources of this information

• Continually collects information

• Checks information for validity and reliability

• Interprets information

• Organizes information

• Sends key information to relevant decision makers

• Responds to inquiries about competitors

With this system, company managers receive timely intelligence about competitors in the form
of reports phone calls, email alerts, bulletins and newsletters. Managers can also connect with
the system when they need to interpret a customer's sudden move, know their weakness and
strengths or assess how a competitor will respond.
SLIDE 13

Learning objective 1 summary. To prepare an effective marketing strategy, a company must

consider its competitors as well as his customers. Building profitable customer relationships
requires satisfying consumer needs better than the competitors do. A company must continually
analyze competitors and develop competitive marketing strategies that will positively position it
against competitors and give it an advantage.

SLIDE 14

Learning objective 2

Explain the fundamentals of competitive marketing strategies based on creating value for
costumer.

SLIDE 15

Having identified and evaluated major competitors, the company now must design broad
marketing strategies by which it can gain competitive advantage.

Approaches to marketing strategy and practice often pass through three stages. Entrepreneurial
marketing, formulated marketing and intrapreneurial marketing. Entrepreneurial marketing -
involves visualizing an opportunity and constructing and implementing flexible strategies. It is
when most companies are started by individuals who live by their wits. Formulated marketing -
involves developing formal marketing strategies and following them closely. For a small
company can achieve success as they inevitably move towards more on formulated marketing.
Intrapreneurial marketing - involves the attempt to reestablish an internal entrepreneurial spirit
and refresh marketing strategies and approaches. And intrapreneurial marketing would be
where many large and mature companies get stuck in formulated marketing. They pour over the
latest Nielsen numbers, scan market research reports and try to fine-tune their competitive
strategies for their own competitive advantage.

SLIDE 16

The Basic Competitive Strategies

Three decades ago, Michael Porter suggested four basic competitive positioning strategies that
companies can follow. Three winning strategies and one losing one. This includes overall cost
leadership, differentiation, focus and middle of the road.

SLIDE 17

Overall cost leadership strategy:

Refers to the absolute lowest cost of manufacturer in the industry. The reference is to cost, not
price, leadership!

There are number of reasons why a cost leadership strategy can be attractive:
  Having a low-cost position ay nagbubunga ng above-average returns sa industry ng
Kompanya na kanyang kinabibilangan.

 Maaari nitong maging advantage ng kompanya laban sa kanyang competitors dahil

mahirap talaga para sa ibang kompanya na paliitin ang presyo ng kanilang product.

 A low-cost position can defend the firm against powerful buyer. ‘Yong mahihilig tumawad
na mga buyers kasi ang humihila pababa ng presyo. Ikinukumpara nila ang presyo ng
bilihin sa kung saan may mas mababa at sa mas mataas.

SLIDE 18

Another competitive strategy is the Differentiation Strategy.

Differentiation strategy:

• A company concentrates on creating a highly differentiated product line and marketing

program so it comes across as an industry class leader.

Most customers would prefer to own this brand if its price is not too high. Like Nike and
Caterpillar follow this strategy in sports products and heavy construction equipment. Mas gusto
ng ibang costumer ung mga product na walang kaparehas or yong mga may class or banded
products. Even if its pricey talaga pero kung different naman ung product from other company,
mas ginagrab ito ng mga costumer.

Next is the Focus strategy:

• A company focuses its effort on serving few market segments well rather than going
after the whole market.

This strategy is ‘yong paghahanap ng company ng kanyang target buyer. Also this would center
on the expansion ng marketing tactics ng kompanya while aiming to establish a new relationship
with your target audience.

SLIDE 19

Companies that pursue a clear strategy like those described on the previous slide will likely
perform well. The firm that carries out that strategy best will make the most profits.

• A company without a clear strategy, “a middle-of-the-roader”, will not succeed.

This is a conservative approach kung saan iniiwasan ng maraming company on taking extreme
decisions and mas nagfofocus sila on niche segments. Ita-target nito ang mga customer in the
median range of income or spending tendencies. The main aim is to target the market as
broadly as possible. Company who uses this strategy, they encounter difficult times because
they did not stand out as the lowest in cost, highest in perceived value or best in serving in
some market segment. Middle-of-the-roaders try to be good on all strategic accounts but end
up being not very good at anything.
SLIDE 20

Michael Treacy and Fred Wiersema Suggest companies can gain leadership positions by
delivering superior value to their customers in three strategies or “value disciplines”.

• Operational excellence

• Customer intimacy

• Product leadership

They found that leading companies focus on and excel at a single value discipline while
meeting industry standards on the other two. Such companies design their entire value delivery
network to single-mindedly support the chosen discipline.

SLIDE 21

Operational excellence refers to a company providing value by leading its industry in price and
convenience by reducing costs and creating a lean and efficient value delivery system.

Operational excellence means a company serves customers who want reliable good quality
products or services, but they want them cheap and easy. Examples include Walmart, costco
and southwest airlines. They suggest that companies gain leadership positions by delivering
superior value to their customers. Companies can pursue any of three strategies called value
disciplines for delivering superior customer value.

SLIDE 22

Customer intimacy refers to a company providing superior value by segmenting markets and
tailoring products or services to match the needs of the targeted customers.

With a customer intimacy strategy, a company specializes in satisfying unique customer needs
through a close connection with an intimate knowledge of the customer. It empowers its people
to respond quickly to customer needs. Customer intimate companies serve customers who are
willing to pay a premium to get precisely what they want. They will do almost anything to build
long-term customer loyalty and capture lifetime value.

SLIDE 23

Product leadership refers to a company providing superior value by offering a continuous

stream of leading-edge products or services. Product leaders are open to new ideas and
solutions and bring them quickly to the market.

On Product leadership, these companies serve customers who want state-of-the-art products
and services regardless of the cost in terms of price or inconvenience. Examples include
samsung and apple. Some companies successfully pursue more than one value discipline at
the same time. For example fedex, excels at both operational excellence and customer
intimacy. However such companies are rare, few firms can be the best at more than one of
these disciplines.

SLIDE 24

Here's a list of competitive positions and descriptions of each.

Market leader strategies. This includes expand total market protect market share and expand
market share.

Market challenger strategies. This would include a full-frontal attack or an indirect attack.

Market follower strategies you can either follow closely or follow at a distance.

And finally market nicher strategies this is usually by customer, market, quality, price and
service, and there's often multiple niching going on.

40% of the market is in the hands of the market leader. The firm with the largest market share.

Another 30% is in the hands of market challengers. Runner-up firms that are fighting hard to
increase their market share.

Another 20% is in the hands of market followers. Other runner-up firms will want to hold their
share without rocking the boat.

And the remaining 10% is in the hands of market nichers. Firms that serve small segments not
being pursued by other firms.

SLIDE 25

Market Leader Strategies are the following:

• Expand total demand

• Protect their current market

• Expand market share

Most industries contain an acknowledged market leader. The leader has the largest market
share and usually leads the other firms in price changes, new product intros, distribution
coverage and promotion spending. The leader may or may not be admired or respected, but
other firms concede its dominance .

Competitors focus on the leader as a company to challenge, imitate or avoid. A leader's life is
not easy, it must maintain a constant watch. Other firms keep challenging its strengths are
trying to take advantage of its weaknesses.

SLIDE 26
Expand total demand by developing

• New users

• New uses

• More usage

The leading firm normally gains the most when the total market expands. They usually can find
new users or untapped market segments in many places. Marketers can expand markets by
discovering and promoting new uses for the product. And finally, market leaders can encourage
more usage by convincing people to use the product more often.

SLIDE 27

While trying to expand total market size, the leading firm also must protect its current business
against competitors attacks.

They can protect current market by:

• Fixing or preventing weaknesses that provide opportunities to competitors,

• Maintaining consistent prices that provide value,

• Keeping strong customer relationships and

• Promoting continuous innovation.

Like Walmart must constantly guard against target and Costco caterpillar against komatsu and
McDonald’s against Wendy's and burger king.

What can the market leader do to protect its position? First it must prevent or fix weaknesses
that provide opportunities for competitors. It must also fulfill its value promise and work
tirelessly to keep strong relationships with valued customers. But the best defense is a good
offense, and the best response is continuous innovation. The market leader refuses to be
content with the way things are and leads the industry in new products, customer service,
distribution effectiveness, promotion and cost cutting.

SLIDE 28

They can Expand market Share by:

• Increasing profitability with increasing market share in served markets

• Producing high-quality products

• Crating good service experiences

• Building close relationships

Market leaders can also grow by increasing their market shares further. In many markets small
market share increases mean very large sales increases. It appears that profitability increases
as a business gains share relative to competitors in its served market. Companies must not
think however that gaining increased market share will automatically improve profitability. Much
is going to depend on their strategy for gaining the increased share. There are many high
share companies with low profitability and many low share companies with high profitability.

SLIDE 29

Challenge the leader with an aggressive bid for more market share.

Second mover advantage: Challenger observes what has made the leader successful and
improves on it.

A market challenger is a firm striving to increase its market share and replace the market leader.
Usually, they are the second-largest dominant company in the market. They have sufficient
resources and capabilities to aggressively challenge market leaders and undermine their
dominance. Pepsi is an example of a market challenger trying to steal Coca-Cola’s market
share in the soft drinks business. And, in general, you can find examples of market challengers
at the second-largest companies in the industry. They may also be a third or fourth company, if
the difference in dominance or market share is small relative to the market leader.

When looking for a new business opportunity, instead of trying to find a new problem to solve,
looking for a problem that you know, because of the data of other companies in the market,
customer have, and providing the same, a similar/differentiated, or a new solution, could be a
great option. Examples of successful movers include Amazon, Facebook, and countless non-
market leaders that may not be billion dollars IPOs, but are still extremely valuable companies.
Think about how many big financial services companies there are providing the same services.
Despite popular belief, being second to market, or even replicating an existing product, can
make for a great business. While it may mean limited potential because of competition, it can
also mean lower risk, and history has shown it can still have massive upside.

SLIDE 30

On a Market follower strategy not all runner-up companies want to challenge the market
leader. Here are the following that the market followers may do: they can

• Play along with competitors and not rock the boat

• Copy or improve on leader’s products and programs with less investment

• Bring distinctive advantages

• Keep cost and prices low or quality and services high

The leader never takes challenges lightly. If the challenger's lure is lower prices, improve
service or additional features, the market leader can quickly match these to diffuse the attack,
but many firms prefer to follow rather than challenge the market leader, by using strategies
shown in this slide.

SLIDE 31

On a Market Nicher Strategies

An ideal market niche is big enough to be profitable with high growth potential and has little
interest from competitors.

The key to market niching is specialization:

• Market

• Customer

• Product

• Marketing mix

Almost every industry includes firms that specialize in serving market niches. Instead of
pursuing the whole market or even large segments, these firms target sub-segments. Nichers
are often smaller firms with limited resources. The smaller divisions of larger firms also may
pursue niching strategies. Firms with low shares of the total market can be highly successful
and profitable through smart niching. Niching carries some major risks.

For example the market niche may dry up, or it might grow to the point that it attracts larger
competitors. That is why many companies practice multiple niching, by developing two or more
niches a company increases its chances for survival.

SLIDE 32

Learning objective 2 summary to prepare an effective marketing strategy, a company must

consider its competitors as well as its customers. Building profitable customer relationships
requires satisfying the target consumer. A company must continually analyze their competitors
and develop competitive marketing strategies to position it well against competitors and give it
the strongest possible competitive advantage. Competitor analysis first involves identifying the
company's major competitors using both an industry-based and market-based analysis.

SLIDE 33

learning objective 3 illustrate the need for balancing customer and competitor orientations in
becoming a truly market-centered organization.

SLIDE 34
Balancing Customer and Competitor Orientations

• Companies need to continuously adapt strategies to changes in the competitive

environment.

• Competitor-centered company

• Customer-centered company

• Market-centered company

Whether a company is a market leader, challenger, follower or nicher, it must watch its
competitors closely and find the competitive marketing strategy that positions it most
effectively. And it must continually adapt its strategies to the fast-changing competitive
environment. This question now arises. Can the company spend too much time and energy
tracking competitors, damaging its customer orientation? The answer, is YES. A company can
become so competitive centered that it loses its even more important focus on maintaining
profitable customer relationships.

SLIDE 35

A competitor-centered company spends most of its time tracking competitors’ moves and
market shares and trying to find ways to counter them.

• An advantage is that the company is a fighter. And

• A disadvantage is that the company is reactive.

On the positive side the company develops a fighter orientation, watches for weaknesses in its
own position and searches out competitor weaknesses. On the negative side, the company
becomes too reactive, rather than carrying out its own customer relationship strategy, it bases
its own moves on competitors moves. As a result it might end up simply matching or extending
industry practices, rather than seeking innovative new ways to create value.

SLIDE 36

Also

In a Customer-centered company, they

• Spends most of its time focusing on costumer developments in designing strategies. And

• Provides a better position than competitor-centered company to identify opportunities

and build customer relationships.

The customer centered company is in a better position to identify new opportunities and set
long run strategies that make sense. By watching customer needs evolve, it can decide what
customer groups and what emerging needs are the most important. Then it can concentrate its
resources on developing value to target customers.

SLIDE 37

On the other hand, A market-centered company spends most of its time focusing on both
competitor and customer developments in designing strategies.

In practice today's companies must be market-centered companies. They must not let
competitor watching blind them to customer focusing.

SLIDE 38

Companies might have any of four orientations.

First, they might be product oriented. Paying little attention to either customers or competitors.

Next, they might be customer oriented. Paying attention to just the customers.

In the third orientation, when a company starts to pay attention to competitors, it becomes
competitor oriented.

Today however, companies need to be market oriented. Paying balanced attention to both
customers and competitors.

SLIDE 39

Learning objective 3 summary. A competitive orientation is important in today's markets, but

companies should not overdo their focus on competitors. Companies are more likely to be hurt
by emerging consumer needs and new competitors than by existing competitors. Market-
centered companies to balance customer and competitor considerations, are practicing a true
market orientation.

END

Remember, “Good marketing makes the company look smart, Great marketing makes the
costumer feel smart!” by Joe Chernov. And “Success is not the key to happiness. Happiness is
the key to success. If you love what you are doing, you will be successful!” Says Albert
Schweitzer.

Thank you for watching!