COMPETITIVE ADVANTAGE

Report by: Bryce C. Oliveros

Principles of Marketing

OBJECTIVES OF PRESENTATION

1. Discuss the need to understand competitors as well as customers through competitor analysis.

2. Explain the fundamentals of competitive marketing strategies based on creating value for customers

3. Illustrate the need for balancing customer and competitor orientations in becoming truly market-centered organization.

WHAT IS COMPETITIVE ADVANTAGE?

– An advantage over competitors gained by offering consumers greater value than competitors do

How?

• Through Competitive Marketing Strategies where a prerequisite is a Competitor Analysis.

COMPETITOR ANALYSIS

• The Process of Identifying key competitors; assessing their objectives, strategies, strengths and weaknesses and reaction patterns; and selecting which competitors to attack or avoid

Identifying Competitors

• Companies face wider range of competitors

• Marketing Myopia – it is the mistake of paying more attention to the specific products a company offers than to the benefits and experiences produced by these products.

• Competitor Myopia – is paying too much attention in competitor.

• Companies can identify their competitors form the industry point of view

• Companies can identify competitors from market point of view where they define competition as companies trying to satisfy the same customer need of build relationships with the same customer group.

Examples: Industry POVPepsi might see its competition as Coca-Cola, 7UP and other soda

makersMarketing POVCustomers want ‘thirst quenching” where it can be satisfied by bottled

water or Gatorade.

Identifying Competitors

• The market concept of competition opens the company’s eyes to a broader set of actual and potential competitors.

• One of the Approaches:– Profile the company’s direct and indirect

competitors by mapping the steps buyers take in obtaining and using the product

– Direct Competitors as to customer activities– Indirect Competitors as to companies who

may become direct competitors.

Identifying Competitors

Identifying Competitors

Competitor Map

Assessing Competitors

Determining Competitor’s Objectives

• The company wants to know the relative importance that a competitor places on current profitability, market share growth, cash flow, technological leadership, service leadership and other goals.

• A company should also monitor its competitors’ objectives for various segments.

Identifying Competitor’s Strategies

• The more that one firm’s strategy resembles another firm’s strategy, the more the two firms compete.

• Strategic Groups – is a croup of firms in an industry following the same or similar strategy in a given target market.

Example: GE and Whirlpool belong to the same group both are manufacturers of

appliances• The company needs to look at the entire

dimensions that identify strategic groups with in the industry.

• It must understand how each competitor delivers value to its customers

• Therefore there is a need to know the competitor’s product quality, features, and mix; customer series; pricing policy; distribution coverage, sales force strategy, and advertising and sales promotions programs.

• Other considerations are the competitor’s R&D, manufacturing, purchasing, financial, and other strategies.

Identifying Competitor’s Strategies

Assessing Competitors’ Strengths and Weakness

• Marketers need to asses the S&W of competitors and answer the question ‘what can our competitors do?

• Companies normally get information through secondary data, personal experience, and word of mouth.

• Another way is through benchmarking – the process of comparing the company’s products and processes to those of competitors or leading firms in other industries to find ways to improve quality and performance.

Estimating Competitors’ Reaction

• Next question to answer after getting all necessary data about the competitor is ‘what will our competitor do?’

• Each competitor reacts differently

Selecting Competitors to Attack and Avoid

Strong or Weak Competitors

• A useful tool for assessing competitor strengths and weaknesses is Customer Value Analysis which is done to determine what benefits target customers value and how they rate the relative value of various competitors’ offers

• The key to gaining competitive advantage is to take each customer segment and examine how the company’s offer compares to that of its major competitor.

• Once the strengths and weaknesses are identified then it will be easier to strengthen weak attributes and polish strong propositions.

“Good” or “Bad” Competitors

• Good Competitors play by the rules of the industry while bad competitors in contrast, break the rules.

• Example:

• Intel needs Rival AMD

Selecting Competitors to Attack and Avoid

Designing a Competitive Intelligence System

• The competitive intelligence system first identifies the vital types of competitive information and the best sources information. Then the system continuously collects information from the field:– Sales Force– Channels– Suppliers– Market Research Firms– Trade associations– Websites– Government Publications, speeches and/or articles

• With such system it is for managers to get all information about competitors

• For smaller companies they can delegate the task to research about the competitor, outsource the service or the managers themselves do it.

Designing a Competitive Intelligence System

COMPETITIVE STRATEGIES

Approaches to Marketing Strategy

• No one strategy (strat) is best for a company.

• Companies differ in how they approach the strategy planning process.

Example: P&G and IBM’s strat is Different from Harley Davidson, BMWs MINI unit.

• Approaches to marketing strategy pass through the following stages:– Entrepreneurial Marketing

• Companies can do better with less advertising, less marketing research, more guerilla marketing.

– Formulated Marketing• As small companies achieve success, they inevitable move

toward more-formulated marketing

– Intrepreneurial Marketing• Many large companies get stuck in the formulated marketing

and sometimes lose marketing creativity and passion• When this happens then analysts say that it is time to go

back to the Entrepreneurial Marketing approach.

Approaches to Marketing Strategy

Basic Competitive Strategies

• Three decades Michael Porter suggested four basic competitive positioning strategies that companies can follow – three winning and one losing one. The three winning ones include:– Overall cost leadership – the company works hard to

achieve the lowest production and distribution costs that allows it to price lower that its competitors and win large market share.

– Differentiation – the company concentrates on a creating a highly differentiated product line and marketing program so that it comes across as the class leader of the industry.

– Focus – the company focuses its effort on serving few market segments well rather than going after the whole market.

– Operational Excellence – Company provides superior value by leading its industry in price and convenience. It serves customers who want reliable, good quality products and services, but who want them cheaply and easily.

– Customer Intimacy – Company provides superior value by precisely segmenting its markets and tailoring its products or services to match exactly the needs of the target customers.

• Customer intimate companies serve customers who are willing to pay a premium to get precisely what they want.

Basic Competitive Strategies

– Product Leadership – company provides superior value by offering a continuous stream of leading-edge products or services aiming to make its own and competing products obsolete.

• Product leaders are open to new ideas continuously innovating.

• They serve customers who want state-of-the-art products and services, regardless of the cost in terms of price or inconvenience.

Basic Competitive Strategies

Competitive Positions

Four Competitive Positions:1. Market Leader – The firm in an industry with the largest

market share2. Market Challenger – A runner-up firm that is fighting

hard to increase its market share in an industry.3. Market Follower – A runner up firm that wants to hold

its share in an industry with out rocking the boat.4. Market Nicher – A firm that serves small segments that

the other firms in an industry overlook or ignore

Competitive Positions

Market Leader Strategies

• Firms leading the industry such as: McDonald’s (fast food), SM Malls (retail), Microsoft (Computer Software), Nike (Athletic Footwear) and Google (Internet Search Engine)

• Leader should maintain a constant watch as other firms keep challenging the firm’s strengths and taking advantage of its weaknesses.

To remain on the top:1. Find ways to expand total demand

• Developing new users, uses and more usage of its products.2. Protect their current Market Share through good and offensive action

• Work on weakness and create opportunities from them• The best defense is a good offense and the best response is

often CONTINUOUS INNOVATION.• A leader refuses to be content with the way things are and

should lead the industry3. Try to expand their market share further even if market size remains

constant.• The cost of buying higher market share may far exceed the

returns • Higher shares tend to produce higher profits only when unit

costs fall with increased market share or when the company offers high-quality products with a premium price that covers all costs and creates revenue.

Market Leader Strategies

Market Challenger Strategies

• A market challenger must first define which competitors to challenge and its strategic objective

• The challenger can attack the market leader and other competitors in an aggressive bid for more market share. Or they can play along with competitors (market challenger) and not rock the boat (market followers)

• Alternatively, the challenger can avoid the leader and instead challenge the firms its own size, or smaller local and regional firms.

Market Follower Strategies

• Not all runner-up companies want to challenge the market leader since most often they are never taken lightly by the leader.

• Sometimes it is more strategic to just be a follower.

Market Nicher Strategies

• There is always a small share in the market called the ‘nichers’ where these segments are the ones vulnerable to something new.

• It can be an effective way to start small and grow from there rather than going against big players in the industry.

THE END