Principles of Marketing

Eighteenth Edition, Global Edition

Chapter 18
Creating Competitive Advantage

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NORDSTROM: Taking Care of
Customers No Matter What It Takes
• A competitive marketing strategy of “Taking care of
customers no matter what it takes” is deeply rooted in
Nordstrom’s DNA. “We have only one rule: Use good
judgment in all situations.”

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Learning Objectives
18.1 Discuss the need to understand competitors as well as
customers through competitor analysis.
18.2 Explain the fundamentals of competitive marketing
strategies based on creating value for customers.
18.3 Illustrate the need for balancing customer and
competitor orientations in becoming a truly market-
centered organization.

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Creating Competitive Advantage
Competitive advantages require delivering more value and
satisfaction to target consumers than competitors.
Competitor analysis is the process of identifying,
assessing, and selecting key competitors.
Competitive marketing strategies are how companies
analyze their competitors and develop value-based
strategies for profitable customer relationships.

Copyright © 2021 Pearson Education Ltd.

Learning Objective 1
Discuss the need to understand competitors as well as
customers through competitor analysis.

Copyright © 2021 Pearson Education Ltd.

Competitor Analysis (1 of 8)
Figure 18.1 Steps in Analyzing Competitors

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Competitor Analysis (2 of 8)
Identifying 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 consumer dollars

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Competitor Analysis (3 of 8)
Assessing Competitors
• Competitors’ objectives
– Profitability
– Market share growth
– Cash flow
– Technological leadership
– Service leadership
• Competitors’ strategies
– Strategic group offers the strongest competition

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Competitor Analysis (4 of 8)
Assessing Competitors
• Competitors’ strengths and weaknesses
– What can our competitors do?
– Benchmarking

• Estimating competitors’ reactions

– What will our competitors do?

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Competitor Analysis (5 of 8)
Selecting Competitors to Attack and Avoid
Customer 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

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Competitor Analysis (6 of 8)
Selecting Competitors to Attack
and Avoid
• Close or distant competitors
• Good or bad competitors
Market-based competitive definition: By
changing to a market concept of
competition—selling “irresistible
indulgence”—Cinnabon has grown into a
much broader competitive arena. While
the global brick and mortar bakery
business remains at its core, some 72
percent of total consumer sales now come
from licensed food service and consumer
packaged goods.
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Competitor Analysis (7 of 8)
Selecting Competitors to Attack and Avoid
Finding Uncontested Market Spaces
Blue-ocean strategy: Direct-to-consumer (DTC) brands like
Casper have staked out new competitive space by selling
and shipping directly to consumers through online and
mobile channels.

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Competitor Analysis (8 of 8)
Designing 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

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Learning Objective 2
Explain the fundamentals of competitive marketing strategies
based on creating value for customers.

Copyright © 2021 Pearson Education Ltd.

Competitor Strategies (1 of 18)
Approaches to Marketing Strategy
Entrepreneurial marketing involves visualizing an
opportunity and constructing and implementing flexible
strategies.
Formulated marketing involves developing formal
marketing strategies and following them closely.
Intrepreneurial marketing involves the attempt to
reestablish an internal entrepreneurial spirit and refresh
marketing strategies and approaches.

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Competitor Strategies (2 of 18)
Michael Porter’s Four Basic
Competitive Positioning Strategies
• Overall cost leadership
• Differentiation
• Focus
• Middle of the road

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Competitor Strategies (3 of 18)
Basic Competitive Strategies
Overall cost leadership strategy:
A company achieves the lowest production and distribution
costs and allows it to lower its prices and gain market share.

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Competitor Strategies (4 of 18)
Basic Competitive Strategies
Differentiation strategy:
A company concentrates on creating a highly differentiated
product line and marketing program so it comes across as
an industry class leader.
Focus strategy:
A company focuses its effort on serving few market
segments well rather than going after the whole market.

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Competitor Strategies (5 of 18)
Basic Competitive Strategies
A company that pursues a clear strategy will achieve
superior performance.
A company without a clear strategy, “a middle-of-the-
roader”, will not succeed.

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Competitor Strategies (6 of 18)
Basic Competitive Strategies
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

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Competitor Strategies (7 of 18)
Basic Competitive Strategies
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.

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Competitor Strategies (8 of 18)
Basic Competitive Strategies
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.

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Competitor Strategies (9 of 18)
Basic Competitive Strategies
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.

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Competitor Strategies (10 of 18)
Competitive Positions
• Market leader strategies
• Market challenger strategies
• Market follower strategies
• Market nicher strategies

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Competitor Strategies (11 of 18)
Figure 18.2 Competitive Market Positions and Roles

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Competitor Strategies (12 of 18)
Table 18.1 Strategies for Market Leaders, Challengers,
Followers, and Nichers

Market Leader Market Challenger Market Follower Market Nicher

Strategies Strategies Strategies Strategies
Expand total market Full frontal attack Follow closely By customer, market,
Protect market share Indirect attack Follow at a distance quality, price, service
Expand market share Multiple niching

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Competitor Strategies (13 of 18)
Market Leader Strategies
Expand total market demand by developing:
• New users
• New uses
• More usage

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Competitor Strategies (14 of 18)
Market Leader Strategies
Protect current market by:
• Fixing or preventing weaknesses that provide opportunities
to competitors
• Maintaining consistent prices that provide value
• Keeping strong customer relationships
• Promoting continuous innovation

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Competitor Strategies (15 of 18)
Market Leader Strategies
Expand market share by:
• Increasing profitability with increasing market share in
served markets
• Producing high-quality products
• Creating good service experiences
• Building close relationships

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Competitor Strategies (16 of 18)
Market Challenger Strategies
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.

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Competitor Strategies (17 of 18)
Market Follower Strategies
• 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 costs and prices low or quality and services high

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Competitor Strategies (18 of 18)
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

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

Copyright © 2021 Pearson Education Ltd.

Balancing Customer and Competitor
Orientations (1 of 5)
Companies need to continuously adapt strategies to
changes in the competitive environment.
• Competitor-centered company
• Customer-centered company
• Market-centered company

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Balancing Customer and Competitor
Orientations (2 of 5)
Figure 18.3 Evolving Company Orientations

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Balancing Customer and Competitor
Orientations (3 of 5)
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.
• A disadvantage is that the company is reactive.

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Balancing Customer and Competitor
Orientations (4 of 5)
A customer-centered company spends most of its time
focusing on customer developments in designing strategies.
Provides a better position than competitor-centered
company to identify opportunities and build customer
relationships.

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Balancing Customer and Competitor
Orientations (5 of 5)
A market-centered company spends most of its time
focusing on both competitor and customer developments in
designing strategies.

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