Competitor Analysis and Sources of

AdvantageChapter SixChapter Six

MMarket-Basedarket-Based Management, 4Management, 4thth editionedition

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Competitor Analysis and Competitor Analysis and Sources of AdvantageSources of Advantage

Chapter Six

– Competitive Strategy– Knowledge as a Competitive Advantage

– Competitive Forces that Shape Competitive Position and Profitability

Industrial Analysis

Competitor Analysis

Sources of Competitive Advantage

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Competitive Advantage and Competitive Advantage and KnowledgeKnowledge

• What is a Competitive Strategies?

• How does a firm establish

a competitive advantage?Knowledge advantage

• How does a firm leverage knowledge as a competitive advantage?

• How does a competitive advantage relate to profit potential? figure 6-3

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Competition and Competitive Competition and Competitive PositionPosition

• How does a firm maintain a competitive advantage?

• What forces affect a firm’s competitive position and profitability?

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Industrial AnalysisIndustrial Analysis

1. Barriers to Entry2. Barriers to Exit3. Customer Buying

Power4. Supplier Selling

Power5. Substitutes6. Competitive Rivalry

• Why should a firm conduct an Industry Analysis?to see if the environment attractive or not

• What are the Industry Forces?

• How are they (the industry forces) related to profit potential? see the text details

• What is the Prisoner’s Dilemma?

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Competitive PositionCompetitive Position

• How does a firm determine its direct competitors? use perceptual mapping

• How does a firm acquire knowledge about its competitors (competitor intelligence)? everyone in the firm, search

• Why is this knowledge important? 知己知彼 百戰百勝

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Competitor AnalysisCompetitor Analysis

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Sources of Competitive Sources of Competitive AdvantageAdvantage

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Cost AdvantagesCost Advantages

Three Types of Cost Advantage:

1. Variable Cost Advantage

2. Marketing Cost Advantage

3. Operating Cost Advantage

How do firms achieve these advantages?

– Scale effects– Scope effects– Learning effects

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Profit Impact of Cost Profit Impact of Cost AdvantageAdvantage

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Differentiation AdvantagesDifferentiation Advantages

Three Types of Differentiation Advantage

1. Product Advantage

2. Service Advantage

3. Reputation Advantage

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Profit Impact of Differentiation Profit Impact of Differentiation AdvantageAdvantage

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The reputation of a consumer product( 左 1) or service( 左 2) can

have a bigger impact on price premium than a product advantage

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Marketing AdvantagesMarketing Advantages

Three Types of Marketing Advantage

1. Channel Advantage

2. Sales Force Advantage

3. Brand Awareness

How do firms achieve these advantages?

– Marketing Expertise, Training, and Knowledge

– Strong Distribution System

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TakeawaysTakeaways//ReviewReview

• Competitive Advantage

• Competitive and Industrial Analysis

• Profit Impact of Competitive Advantages

• Sources of Competitive Advantages

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Marketing Performance ToolsMarketing Performance Tools

Industry Analysis

Industry Forces -100 -50 0 50 100 Index

Barriers to Entry None Low Some Mod. High 50

Barriers to Exit High Mod. Some Low None 50

Customer's Buyer Pow er High Mod. Some Low None -50

Seller's Selling Pow er High Mod. Some Low None 50

Product Substitutes Many Mod. Some Few None 0

Price Rivalry Intense Mod. Some Low None 50

Industry Structure Metric 25

Unfavorable to Favorable

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Marketing Performance ToolsMarketing Performance Tools

Cost Advantage

Leading Relative Competitive

Cost Advantage Company Competitor Position Advantage

Cost of Goods Sold (% sales) 48.0% 50.0% 96 4.0%

Sales, General & Adm Exp.(% sales) 16.0% 17.0% 94 5.9%

Overhead Expenses (% sales) 10.0% 12.0% 83 16.7%

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Marketing Performance ToolsMarketing Performance Tools

Differentiation Advantage

Company Compared to Competitor Comeptitive

Differentiation Advantage % Behind % Equal % Ahead Advantage

Product Differentiation 0% 85% 15% 15%

Service Differentiation 20% 80% 0% -20%

Brand/Company Reputation 10% 80% 10% 0%

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Marketing Performance ToolsMarketing Performance Tools

Marketing Advantage

Leading Relative Competitive

Marketing Advantage Company Competitor Position Advantage

Market Share 6% 17% 0.35 -65%

Aw areness (% target market) 57% 84% 0.68 -32%

Distribution (% market coverage) 43% 67% 0.64 -36%