Dealing with Competition
(Reported by: Marjonel M. Buclatin)

Five Forces Determining Segment Structural Attractiveness 1. Industry competitors 2. Threat of Potential entrant 3. Bargaining power of Suppliers 4. Bargaining Power of Buyers 5. Threat of Substitutes

Industry Concept of Competition Marketers classify industry according: 1. Number of sellers and degree of differentiation 2. Entry, mobility, and exit barriers 3. Cost structure 4. Degree of vertical integration 5. Degree of globalization

An industry is a group of firms that offer a product or class of products that are close substitutes for one another * Once a company identifies its primary competitors, it must ascertain their strategies , objectives , strengths and weaknesses. * A group of firms following the same strategy in a given target market is a STRATEGIC GROUP * Once a company has identified its main competitors and their strategies , it must ask: 1. What is each competitor seeking in the market? 2. What drives each competitor’s behavior?

Strengths and Weaknesses of Competitors 1. Share of market- the competitor’s share of target market 2. Share of mind- the percentage of customers who named the competitor in responding to the statement, “Name the first company that comes to mind in this industry” 3. Share of heart- The percentage of customers who named the competitor in responding to the statement, “ Name the company from which you would prefer to buy the product”

Benchmarking
-to improve market share many companies benchmark their most successful competitors as well as other world class performers.

Steps in Benchmarking I. Determine which functions or processes to benchmark II. Identify the key performance variables to measure III. Identify the best-in-class companies IV. Measure the performance of best-in-class companies V. Measure the company’s performance VI. Specify programs and actions to close the gap VII. Implement and monitor results

Strategy to Remain No. 1
-Staying the number one firm calls for action on three fronts. 1. First, the firm must find ways to expand total market demand. 2. Second , the firm must protect its current market share through good defensive and offensive strategies. 3. Third the firm can try to increase its market share even if its market size remains constant.

Expanding the Total Market * New customers * More usage

Six Types of Defense Strategies 1. Position Defense 2. Flank Defense 3. Preemptive Defense (preannouncements/vaporware) 4. Counteroffensive Defense 5. Mobile Defense ( market broadening/ market diversification) 6. Contraction Defense ( strategic withdrawal)

Six Types of Defense Strategies
(6) Contraction

ATTACKER
(3) PREEMPTIVE
(4) COUNTEROFFENSIVE
POSITION

DEFENDER
(5) MOBILE
(2) FLANK

Factors Relevant to Pursuing Increased Market Share 1. Possibility of provoking antitrust action 2. Economic cost 3. Pursuing the wrong marketing-mix strategy 4. The effect of increased market share on actual and perceived quality

Other Competitive Strategies 1. Market challengers 2. Market followers 3. Market nichers

Market Challenger Strategies 1. Define the strategic objective and opponents * It can attack the market leader * It can attack firms of its own size that are not doing the job and are underfinanced * It can attack small local and regional firms 2. Choose a general attack strategy 3. Choose a specific attack strategy

General Attack Strategies 1. Frontal attack 2. Flank attack 3. Encirclement attack 4. Bypass attack ( pepsi used bypass strategy against coke) 5. Guerilla warfare

Specific Attack Strategies 1. Price discounts 2. Lower-priced goods 3. Value-priced goods 4. Prestige goods 5. Product proliferation 6. Product innovation 7. Improved services 8. Distribution innovation 9. Manufacturing-cost reduction 10. Intensive advertising promotion

Market Follower Strategies 1. Counterfeiter- the counterfeiter duplicates the leader’s products and packages and sells it on the black market or through disreputable dealers 2. Cloner- the cloner emulates the leader’s products , name and packaging with slight variations 3. Imitator- the imitator copies some things from the leader but maintains differentiation in terms of packaging, advertising, pricing or location. The leader doesn’t mind the imitator as long as imitator doesn’t attack the leader aggressively. 4. Adapter- the adaptor takes the leader’s products and adapts or improves them

Niche Specialist Roles 1. End-User Specialist 2. Vertical-Level Specialist 3. Customer-Size Specialist 4. Specific-Customer Specialist 5. Geographic Specialist 6. Product-Line Specialist 7. Product –feature specialist 8. Job-Shop Specialist 9. Quality-Price Specialist 10. Service-Specialist 11. Channel Specialist

Balancing Orientations 1. Competitor-centered-this kind of planning has some pluses and minuses. On the positive side , the company develops a fighter orientation. It trains its marketers to be on constant alert , to watch for weaknesses in its competitors and its own position. On the negative side , the company is too reactive. Rather than formulating and executing a consistent , customer oriented strategy , it determines its moves based on its competitors moves. It does not move towards its own goals. It does not know where it will end up, because so much depends on what its competitors do. 2. Customer-centered- customer centered company is in a better position to identify new opportunities and set a course that promises to deliver long run profits. By monitoring customer needs it can decide which customer groups and emerging needs are the most important to serve, given its resources and objective