Creating Creating Competitive Competitive

AdvantageAdvantage

Chapter 18Chapter 18

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Objectives

Learn Major Goals of MarketingLearn Major Goals of MarketingLearn how to understand Learn how to understand competitors as well as customers competitors as well as customers via competitor analysis.via competitor analysis.Learn the fundamentals of Learn the fundamentals of competitive marketing strategies competitive marketing strategies based on creating value for based on creating value for customers.customers.

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Has dominated the Has dominated the chip industrychip industrySuccess is directly Success is directly related to Intel’s related to Intel’s competitive strategycompetitive strategyStrategy focuses on Strategy focuses on superior value and superior value and product leadershipproduct leadership

Heavy focus on product Heavy focus on product and advertising and advertising innovation and R&D innovation and R&D investmentsinvestmentsChanging market needs Changing market needs have challenged Intel to have challenged Intel to adaptadaptIntel is capitalizing on Intel is capitalizing on the Internet nowthe Internet now

cIntelIntel

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Two Major Goals of Marketing*

1. Design and Manage a Superior 1. Design and Manage a Superior Value-Delivery SystemValue-Delivery System to Reach to Reach and Satisfy Target Customer and Satisfy Target Customer Segments.Segments.

2. Gain and Sustain 2. Gain and Sustain Competitive Competitive AdvantageAdvantage..

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--

==

Total CustomerBenefit

Total CustomerBenefit

Total CustomerCost

Total CustomerCost

(Product, Service,Personnel, &

Image Values)

(Product, Service,Personnel, &

Image Values)

(Monetary, Time,Energy, &

Psychic Costs)

(Monetary, Time,Energy, &

Psychic Costs)

CustomerDelivered Value

CustomerDelivered Value

(Profit to theConsumer)

(Profit to theConsumer)

Defining Customer Value

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Value Chain Analysis**Value Chain Analysis**

Firm InfrastructureFirm InfrastructureHuman Resource ManagementHuman Resource Management

Technology DevelopmentTechnology DevelopmentProcurementProcurement

InboundLogistics

InboundLogistics OperationsOperations Outbound

Logistics

OutboundLogistics

Marketingand

Sales

Marketingand

SalesServiceService

Marg

in

Support Activities

Primary Activities

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Customer Value-Delivery Network*Customer Value-Delivery Network*

Customer (you)Customer (you)

Retailer (Sears)Retailer (Sears)

Producer (Levi)Producer (Levi)

Vendor (Milliken)Vendor (Milliken)

Raw MaterialSupplier (Du Pont)

Raw MaterialSupplier (Du Pont)

Del

iver

yOrd

erO

rder

Ord

erO

rder

Ord

erD

eliv

ery

Del

iver

yD

eliv

ery

Del

iver

y

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Definition

Competitive AdvantageCompetitive Advantage An advantage An advantage

over competitors over competitors gained by offering gained by offering consumers greater consumers greater value than value than competitors offer.competitors offer.

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Figure 18-1:

Steps in Analyzing Competitors*

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Competitor Analysis

Firms face a wide Firms face a wide range of competitionrange of competitionBe careful to avoid Be careful to avoid “competitor myopia”“competitor myopia”Methods of Methods of identifying identifying competitors:competitors: Industry point-of-viewIndustry point-of-view Market point-of-viewMarket point-of-view

Identifying Identifying CompetitorsCompetitorsAssessing Assessing CompetitorsCompetitorsSelecting Selecting Competitors to Competitors to Attack or AvoidAttack or Avoid

Steps in the Steps in the Process:Process:

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Levels of Competition

Diet lemon limes

Baseball cards

Fruit flavored colas

Coffee

DietCoke

DietPepsi

Diet-Rite cola

Bottled water

Lemon limes

Regularcolas

Beer

Juices

Wine

Fast food

Tea

Video rentals

Icecream

Product form competition: Diet colas

Product category competition: Soft drinks

Generic competition: Beverages

Budget competition: Food and entertainment

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230-year-old Encyclopedia Britannica viewed itself as competing with other publishers of printed encyclopedias. Big mistake! Its real competitors were software encyclopedias and the Internet.

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Create a levels of Create a levels of competition diagram competition diagram for one of the for one of the following: following:

• WalMartWalMart• McDonald’sMcDonald’s• NikeNike• StarbucksStarbucks• GoogleGoogle

Discussion Question

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Competitor Analysis

Determining Determining competitors’ objectivescompetitors’ objectivesIdentifying competitors’ Identifying competitors’ strategiesstrategies Strategic groupsStrategic groups

Assessing competitors’ Assessing competitors’ strengths and strengths and weaknessesweaknesses BenchmarkingBenchmarking

Estimating competitors’ Estimating competitors’ reactionsreactions

Identifying Identifying CompetitorsCompetitorsAssessing Assessing CompetitorsCompetitorsSelecting Selecting Competitors to Competitors to Attack or AvoidAttack or Avoid

Steps in the Steps in the Process:Process:

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Competitor Analysis

Strong or weak Strong or weak competitorscompetitors Customer value analysisCustomer value analysis

Close or distant Close or distant competitorscompetitors Most companies compete Most companies compete

against close competitorsagainst close competitors

““Good” or “Bad” Good” or “Bad” competitorscompetitors The existence of The existence of

competitors offers several competitors offers several strategic benefitsstrategic benefits

Identifying Identifying CompetitorsCompetitorsAssessing Assessing CompetitorsCompetitorsSelecting Selecting Competitors to Competitors to Attack or AvoidAttack or Avoid

Steps in the Steps in the Process:Process:

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Customer Value Analysis (for Competition)

Identify Attributes Customers ValueIdentify Attributes Customers ValueAssess Attribute ImportanceAssess Attribute ImportanceAssess Company and Competitor Assess Company and Competitor PerformancePerformanceExamine Segments on Attribute-by-Examine Segments on Attribute-by-Attribute BasisAttribute BasisMonitor Customer Values Over Time Monitor Customer Values Over Time

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Basic Winning Competitive Basic Winning Competitive Strategies: Michael PorterStrategies: Michael Porter Overall cost leadershipOverall cost leadership

Lowest production and Lowest production and distribution costs distribution costs

DifferentiationDifferentiation Creating a highly Creating a highly

differentiated product line differentiated product line and marketing program and marketing program

FocusFocus Effort is focused on serving Effort is focused on serving

a few market segments a few market segments

Competitive Strategies*

Attractiveness of an Industry

ExistingRivalry

Threat of Potential Entrants

Threat of Substitutes

BargainingPower ofSuppliers

BargainingPower ofBuyers

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Hohner has successfully implemented a focus strategy to capture an 85% share of the harmonica market.

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Basic Competitive Strategies: Basic Competitive Strategies: Value Disciplines*Value Disciplines* Operational excellenceOperational excellence

Superior value via price and convenienceSuperior value via price and convenience Customer intimacyCustomer intimacy

Superior value by means of building strong Superior value by means of building strong relationships with buyers and satisfying relationships with buyers and satisfying needs needs

Product leadershipProduct leadership Superior value via product innovationSuperior value via product innovation

Competitive Strategies

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Firms that follow a Firms that follow a customer intimacy customer intimacy strategy are willing to strategy are willing to do almost anything for do almost anything for their customers. their customers.

Does such a strategy Does such a strategy make sense for local make sense for local businesses, or only for businesses, or only for national / global national / global corporations?corporations?

Discussion Question

British Airways practices customer intimacy British Airways practices customer intimacy with select frequent flyerswith select frequent flyers

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Figure 18-3:

Hypothetical Market Structure

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Competitive Strategy

Expanding the total Expanding the total demanddemand Finding new usersFinding new users Discovering and Discovering and

promoting new product promoting new product usesuses

Encouraging greater Encouraging greater product usageproduct usage

Protecting market shareProtecting market share Many considerationsMany considerations Continuous innovationContinuous innovation

Expanding market shareExpanding market share Profitability rises with Profitability rises with

market sharemarket share

Market LeaderMarket LeaderMarket Market ChallengerChallengerMarket Market FollowerFollowerMarket NicherMarket Nicher

Competitive Competitive PositionsPositions

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Competitive Strategy

WD-40 has a knack for developing new uses for its product.

What other brands have adopted a similar strategy?

WD40

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Competitive Strategy

Option 1:Option 1: challenge the challenge the market leadermarket leader High-risk but high-gainHigh-risk but high-gain Sustainable competitive Sustainable competitive

advantage over the leader advantage over the leader is key to successis key to success

Option 2:Option 2: challenge firms challenge firms of the same size, smaller of the same size, smaller size or challenge size or challenge regional or local firmsregional or local firmsFull frontal vs. indirect Full frontal vs. indirect attacksattacks

Market LeaderMarket LeaderMarket Market ChallengerChallengerMarket Market FollowerFollowerMarket NicherMarket Nicher

Competitive Competitive PositionsPositions

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Pepsi is an example of market challenger that has chosen to use a full frontal attack

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Competitive Strategy

Follow the market Follow the market leaderleader Focus is on improving Focus is on improving

profit instead of profit instead of market sharemarket share

Many advantages:Many advantages: Learn from the Learn from the

market leader’s market leader’s experienceexperience

Copy or improve on Copy or improve on the leader’s offeringsthe leader’s offerings

Strong profitabilityStrong profitability

Market LeaderMarket LeaderMarket Market ChallengerChallengerMarket Market FollowerFollowerMarket NicherMarket Nicher

Competitive Competitive PositionsPositions

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Dial Corporation successfully uses a market follower strategy

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Competitive Strategy

Serving market Serving market niches means niches means targeting targeting subsegmentssubsegmentsGood strategy for Good strategy for small firms with small firms with limited resourceslimited resourcesOffers high marginsOffers high marginsSpecialization is keySpecialization is key By market, customer, By market, customer,

product, or marketing product, or marketing mix linesmix lines

Market LeaderMarket LeaderMarket Market ChallengerChallengerMarket Market FollowerFollowerMarket NicherMarket Nicher

Competitive Competitive PositionsPositions

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FedEx and UPS are two competitors in the package delivery business. What competitive strategy seems to describe each company?

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Companies can become so Companies can become so competitor centered that they competitor centered that they lose their customer focus.lose their customer focus.Types of companies:Types of companies: Competitor-centered companiesCompetitor-centered companies Customer-centered companiesCustomer-centered companies Market-centered companiesMarket-centered companies

Balancing Customer and Competitor

Orientations

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Figure 18-4:

Evolving Company Orientations

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MonopolistMonopolist

Cooperative Approach

Cooperative Approach

CompetitiveApproach

CompetitiveApproach

Co-opetitionCo-opetition

Latest thinking on Competition