11Competitive Dynamics

1

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Chapter Questions How do marketers identify primary competitors? How should we analyze competitors’ strategies,

objectives, strengths, and weaknesses? How can market leaders expand the total market

and defend market share? How should market challengers attack market

leaders? How can market followers or nichers compete

effectively?

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Figure 1.1 Five Forces Determining Segment Structural Attractiveness (Michael Porter’s)

Industry Competitors

(Segment rivalry)

Potential Entrants (Threat

of Mobility

Buyers (Buyer

power)

Substitutes (Threat of

substitutes)

Suppliers (Supplier power)

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Industry Concept of Competition

Number of sellers and degree of differentiation

Entry, mobility, and exit barriers

Cost structure Degree of vertical

integration Degree of globalization

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Industry Concept of Competition

Pure monopoly Oligopoly Monopolistic competition Pure competition

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Market Concept of Competition

The product (and its value proposition)

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Analyzing Competitors

Share of market Share of mind Share of heart

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Selecting Competitors

Strong versus Weak Close versus Distant “Good” versus “Bad”

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Competitive Strategies for Market Leaders: Expanding the Total Market

New customers More usage

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Figure 11.6 Six Types of Defense Strategies

Defender Flank Preemptive Counteroffensive Mobile Contraction

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Factors Relevant to Pursuing Increased Market Share

Possibility of provoking antitrust action Economic cost Pursuing the wrong marketing-mix

strategy The effect of increased market share on

actual and perceived quality

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Other Competitive Strategies

Market challengers Market followers Market nichers

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Market Challenger Strategies

Define the strategic objective and opponents

Choose a general attack strategy

Choose a specific attack strategy

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General Attack Strategies (1)

Frontal attack

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Flank attack: an enemy’s weak spots are natural targets.

General Attack Strategies (2)

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Encirclement attack: a grand offensive attack on several fronts.

General Attack Strategies (3)

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Bypass attack: bypassing the enemy and attacking easier markets to broaden one’s resource base (by diversifying into unrelated products/ geographical markets, and leapfrogging into new technologies)

General Attack Strategies (4)

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Guerrilla warfare: consists of small, intermittent attacks to harass and demoralize the opponent and eventually secure permanent footholds.

Suitable for smaller firms against a larger one.

General Attack Strategies (5)

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Specific Attack Strategies

Price discounts Lower-priced goods Value-priced goods Prestige goods Product proliferation

Product innovation Improved services Distribution innovation Manufacturing-cost

reduction Intensive advertising

promotion

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Market Follower Strategies

Counterfeiter Cloner Imitator Adaptor

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Market Nicher Strategies A leader in small market- End-user specialist- Vertical-level specialist- Customer-size specialist- Specific-customer specialist- Geographic specialist- Product or product-line specialist- Product-feature specialist- Job-shop specialist- Quality-price specialist- Service specialist- Channel specialist

Marketing in an Economic Downturn

Invest Get close to

customers Review budgets Use a compelling

value proposition Fine-tune offerings

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Balancing Orientations Competitor-centered Customer-centered

We were going to obsess over our customers and not our competitors. We watch our competitors, learn from them, see the things that

they were doing for customers and copy those things as much as we can. But we were never going to

obsess over them.