Knowing how to define the competition,Using a methodological analysis tool,

Knowing how to identify the type of competitive environment,

Being familiar with the tools for monitoring the competition

The competitive field

Laurence Chérel Catherine MadridUniversity Institute of Technology, Bordeaux - Marketing Techniques

The strategic advantages of having competitorsMarket developmentDeterrent effect on the entry of new

firmsExpansion of the differential

advantage by offering the consumer a reference standard; in this way certain competitors can strengthen the company’s competitiveness, if the company is seeking to distinguish itself in other areas

(the advent of Free has allowed Orange to emphasise the differentiation in their quality of service)

Laurence Chérel Catherine MadridUniversity Institute of Technology, Bordeaux - Marketing Techniques

Defining the competition means taking into considerationAll of the solutions offered to the consumer to meet the same expectation

But definitely not…all of the companies in the same economic sector

This approach is taken with a view to so-called “intensified rivalry” regarding the focus need (as in the definition of the market)

Laurence Chérel Catherine MadridUniversity Institute of Technology, Bordeaux - Marketing Techniques

For exampleOn a student campus, the competitors for

lunch in the local university restaurant may be:

The other moderately-priced local restaurants:

AS WELL AS:Sandwiches or personally prepared food

brought by students to eat on campusEating at home by students not living very

far awayA superstore near the campus offering

sandwiches and pre-cooked take-away meals= anything that provides lunch for the

student

Laurence ChérelCatherine MadridIUT Tech de Co

A methodological tool for analysing the competitionWhen looking towards intensified rivalry, it

is necessary to take into consideration all of the players with the potential to meet the focus need,

Michael Porter has consequently identified 5 forces:

Laurence Chérel Catherine MadridUniversity Institute of Technology, Bordeaux - Marketing Techniques

The forces that build competition, according to M. Porter

Rivalry between the firms operating in

the sector.

Threat of new entrants

Threat ofsubstitute products

Customer position of strengthSupplier

position of strength

Analysing the competition meansDetermining whether or not each of these

forces represents a significant threatTo do so, the factors influencing these

forces must be taken into consideration

Laurence Chérel Catherine MadridUniversity Institute of Technology, Bordeaux - Marketing Techniques

What increases rivalryThe number of competitorsLow rate of market growthLittle differentiation

between products, thus the importance of price as a key factor for success

Existing rivalry in the sector

Laurence Chérel Catherine MadridUniversity Institute of Technology, Bordeaux - Marketing Techniques

For exampleIn the motor fuel market rivalry is high because of a price war between the distributors and little product differentiation in the opinion of consumers

Laurence Chérel Catherine MadridTech de Co Bordeaux

A few question to consider in analysing the strength of the forceWho are the present players and

how many of them are there?What distinguishes them and their

share of the market?How have they changed within

recent years?

Laurence Chérel Catherine MadridUniversity Institute of Technology, Bordeaux - Marketing Techniques

The threat of new entrantsWhat increases the

threat of new entrantsThe attractiveness of

the sector Easy access to

distribution channelsEasy access to raw

materialsThe lack of experience

effect in the sectorA low degree rivalry in

the sector

Laurence Chérel Catherine MadridUniversity Institute of Technology, Bordeaux - Marketing Techniques

For example: In the tablet market, which is now very

attractive (up 60% in value in the second quarter of 2013) the threat from new entrants is high, especially the threat from products with Windows 8 http://pro.clubic.com/actualite-e-business/actualite-576628-tablettes-idc-apple-ipad-samsung-surface.html http://www.zone-numerique.com/lipad-perd-du-terrain-avec-396-de-parts-de-marche.html

In the telephone service providers market, the advent of new players is regulated by the regulatory authority for electronic communications and phone systems) ARCEP; the threat from new entrants is therefore low

Laurence Chérel Catherine MadridTech de Co Bordeaux

A few questions to consider:Is substantial investment required for

entry into the market?Who are the potential new players in

terms of direct competition?Is it a long-standing establishment for a

famous brand?

Laurence Chérel Catherine MadridUniversity Institute of Technology, Bordeaux - Marketing Techniques

The threat of substitute productsWhat is it?

What increases the threat from substitute products

different technological products that cater to the same need

The improvement in the performance/price ratioThe speed of

technological changes

The ease of use of the substitute product (no change in behaviour)

Laurence Chérel Catherine MadridUniversity Institute of Technology, Bordeaux - Marketing Techniques

For example…Mobile phones are substitute products

with cameras; they are a serious threat because using them does not require any radical change in consumer behaviour

Car-sharing can be a substitute solution to owning one’s own vehicle; in this case there is less of a threat because some consumers may be constrained by their reservations

Laurence Chérel Catherine MadridTech de Co Bordeaux

A few questions to consider:

How is the technology evolving?What are the possible substitute

products?What will be their differential

advantages?Who will be the potential new

players in terms of products

Laurence Chérel Catherine MadridUniversity Institute of Technology, Bordeaux - Marketing Techniques

The power to negotiate with customers

What is it?What increases

The ability of customers to negotiate the selling price and conditions

The customers’ power of choice, based on the number of companies able to satisfy their needsThe importance of

customer purchases to the company’s sales

The part price plays in their choice if there is little differentiation between products

The ease with which customers can switch to other suppliers

Laurence Chérel Catherine MadridUniversity Institute of Technology, Bordeaux - Marketing Techniques

For example:It is sometimes difficult for customers to

change mobile phone operators; this reduces customers’ power to negotiate with these operators,

In theory, consumers do not have the power to negotiate price with MacDonald’s; that being said, it is the customers who choose where they will eat, so the power of negotiation is balanced in this case

SMEs that sell to distribution chains are subject to fixed conditions for the purchase of their products; customer negotiating power (in this case, the distribution chains) is very high in this case

Laurence Chérel, Catherine MadridUniversity Institute of Technology, Bordeaux - Marketing Techniques

How many customers – actual and potential – are there?

What do they know about the market?

Which players are offering equivalent or substitute products?

A few questions to consider:

Laurence Chérel Catherine MadridUniversity Institute of Technology, Bordeaux - Marketing Techniques

The power to negotiate with suppliers

What is it?What increases

The ability of suppliers to impose their conditions on the company in terms of cost or the type of product

The scarcity of suppliersLow purchasing

by the company compared with the supplier’s sales turnover

The part played by price if there is little differentiation between products

The company’s difficulty in changing suppliers

Laurence Chérel Catherine MadridUniversity Institute of Technology, Bordeaux - Marketing Techniques

For example …In the computer-building market,

Windows makes its pre-loaded software indispensable; for computer manufacturers, the power to negotiate with their supplier is very limited

On contrast, in the dairy industry it is the manufacturers who impose their buying price on the milk producers http://monde-rural.blog.lemonde.fr/2010/08/13/combien-

coute-vraiment-un-litre-de-lait/

Laurence ChérelCatherine MadridUniversity Institute of Technology, Bordeaux - Marketing Techniques

A few questions to consider:How many suppliers are there in

the market?Do they operate independently or

in conjunction?Do you have a choice of suppliers?

Laurence Chérel Catherine MadridUniversity Institute of Technology, Bordeaux - Marketing Techniques

The type of competitive environment

There are three types of competitive environments

Identifying the type of competitive environment is useful for a better understanding of the strategies to implement

Laurence Chérel Catherine MadridUniversity Institute of Technology, Bordeaux - Marketing Techniques

Fragmented sectorsNone of the firms has a large

market share and cannot significantly influence the sector, since

There are few obstacles to market entry

There is no advantage of size when dealing with customers or suppliers

The needs of the market are diverse Laurence Chérel Catherine Madrid

University Institute of Technology, Bordeaux - Marketing Techniques

2 possible strategic responses

SpecialisationExpansion by absorbing the competition

Laurence Chérel Catherine MadridUniversity Institute of Technology, Bordeaux - Marketing Techniques

Fragmented sectors and competitive forcesThere are few obstacles to market entry,

There are no market leaders,

These are the factors that can add to the threat of new entrants Laurence Chérel

Catherine MadridUniversity Institute of Technology, Bordeaux - Marketing Techniques

Sectors coming to maturity

A slow-down in growth,A replacement market rather than one

originally setupEscalation in the fight for market share

Laurence Chérel Catherine MadridUniversity Institute of Technology, Bordeaux - Marketing Techniques

Possible strategic responsesCombat marketing Increased differentiation in prices and services

The competition goes global

Laurence Chérel Catherine MadridUniversity Institute of Technology, Bordeaux - Marketing Techniques

A maturing sector and competitive forcesAn escalation in the fight for

market share promotes intense rivalry between the companies in the sector

As a result the threat of new entrants is likely to be low

Laurence ChérelCatherine MadridUniversity Institute of Technology, Bordeaux - Marketing Techniques

Budding sectors:Two features:

technological innovation, the development of new consumer needs

Three impacts: the absence of rules in the

competitive arena, technological uncertainty difficulty analysing the marketsfirst-time customers >>unfamiliar

behaviourDifficulty evaluating the markets

Laurence Chérel Catherine MadridUniversity Institute of Technology, Bordeaux - Marketing Techniques

3 possible strategiesTrend-maker

The most high-risk, the highest-performing

Trend-trackerMore cautious but a focal point of differentiation must be found

Trend-spotterFinancially cautious but complex in competitive terms

Laurence Chérel Catherine MadridUniversity Institute of Technology, Bordeaux - Marketing Techniques

Budding sectors and competitive forcesThe growth rate in this type of

sector will be high; the threat of new entrants is likely to be high and the rivalry between the current companies in the sector quite low-key so long as there is only one trend-maker, or even one trend-tracker.

Laurence ChérelCatherine MadridUniversity Institute of Technology, Bordeaux - Marketing Techniques