marketing management mktg 420 week 8 october 20, 2003

Marketing ManagementMKTG 420

Week 8

October 20, 2003

Competitor Analysis

• Best, Chapter 6 – Competitor Analysis

• Marketing Warfare

• (Wednesday) – Cima Case

• (Friday) – Andy Hedden-Nicely (President, HNA Impression Management)

• (Monday) – Best, chapter 7 – Product Strategy

Competitive Position

• Industry Forces – Market Entry/Exit

– Buyer/Supplier Power

– Substitutes/Rivalry

• Competitor Benchmarking

• Competitive Position– Cost Advantage

– Differentiation Advantage

– Marketing Advantage

Industry Forces

• Market Entry/Exit

• Buyer/Supplier Power

• Substitutes/Rivalry

Effect on Competition?

Industry Force Example Counter Strategy

Easy to Enter Market

Hard to Exit Market

Powerful Buyers

Powerful Suppliers

Many Substitutes

Intense Rivalry (excess capacity)




Espresso stands

Hard to Exit Market

Bankrupt airlines

Effect on Competition?Industry Force Example Counter Strategy

Easy to Enter Market Espresso stand Starbucks Branding

Hard to Exit Market Bankrupt airlines

Low cost – Southwest

Service - Alaska



Powerful Buyers Dell, Gateway

Powerful Suppliers

Intel

Microsoft



Powerful Buyers Dell, Gateway Ingredient Branding – Intel

Powerful Suppliers

Intel

Microsoft

Promote Windows-compatibility

Promote Linux


Many Substitutes Automobiles


Dell – Compaq – HP – Gateway – Sony


Many Substitutes Automobiles Differentiation


Dell – Compaq – HP – Gateway – Sony

Promotions

Mergers

Focus on Addons(printer & ink cartridge)

Initial State Competitor

Self

Hold Price

Cut Price 5%

Hold Price

Share – 10%Volume – 1,000,000

Price - $100

Margin - $40

Net Contr. - $40 million

Share – 8%

Volume – 800,000

Price - $100

Margin - $40


Cut Price 5%

Share – 12%

Volume – 1,200,000

Price - $95

Margin - $35


Share – 10%

Volume – 1,000,000

Price - $95

Margin - $35


Hold or Cut 5%? Competitor

Self

Hold Price

Cut Price 5%

Hold Price

Share – 10%Volume – 1,000,000

Price - $100

Margin - $40


Share – 8%

Volume – 800,000

Price - $100

Margin - $40


Cut Price 5%

Share – 12%

Volume – 1,200,000

Price - $95

Margin - $35


Share – 10%

Volume – 1,000,000

Price - $95

Margin - $35


Cut 5% Competitor

Self

Hold Price

Cut Price 5%

Hold Price

Share – 10%Volume – 1,000,000

Price - $100

Margin - $40


Share – 8%

Volume – 800,000

Price - $100

Margin - $40


Cut Price 5%

Share – 12%

Volume – 1,200,000

Price - $95

Margin - $35


Share – 10%

Volume – 1,000,000

Price - $95

Margin - $35


Competitor Cuts Price 5% Competitor

Self

Hold Price

Cut Price 5%

Hold Price

Share – 10%Volume – 1,000,000

Price - $100

Margin - $40


Share – 8%

Volume – 800,000

Price - $100

Margin - $40


Cut Price 5%

Share – 12%

Volume – 1,200,000

Price - $95

Margin - $35


Share – 10%

Volume – 1,000,000

Price - $95

Margin - $35


Hold or Cut 5%? Competitor

Self

Hold Price

Cut Price 5%

Hold Price

Share – 10%Volume – 1,000,000

Price - $100

Margin - $40


Share – 8%

Volume – 800,000

Price - $100

Margin - $40


Cut Price 5%

Share – 12%

Volume – 1,200,000

Price - $95

Margin - $35


Share – 10%

Volume – 1,000,000

Price - $95

Margin - $35


Match 5% Cut Competitor

Self

Hold Price

Cut Price 5%

Hold Price

Share – 10%Volume – 1,000,000

Price - $100

Margin - $40


Share – 8%

Volume – 800,000

Price - $100

Margin - $40


Cut Price 5%

Share – 12%

Volume – 1,200,000

Price - $95

Margin - $35


Share – 10%

Volume – 1,000,000

Price - $95

Margin - $35





Hard to Exit Market

Powerful Buyers

Powerful Suppliers

Many Substitutes


Supplier Power

Best Buy shares hit on Microsoft pact worry

October 16, 2002 11:37:00 AM ET

CHICAGO, Oct 16 (Reuters) - Best Buy Co. Inc. (BBY) shares tumbled as much as 13 percent on Wednesday morning after the electronics retailer said software giant Microsoft Corp. (MSFT) may not renew an alliance that expires in March. In a quarterly filing with the U.S. Securities and Exchange Commission on Tuesday, Best Buy said it was still negotiating with Microsoft, which had told the company it would let the alliance expire. The pact provides advertising money and profit sharing to Best Buy, a major retailer of Microsoft products. "If we are unable to extend our alliance with Microsoft or to replace it with a comparable strategic marketing relationship, future operating results could be affected," Best Buy said in the filing.

The stock was down $1.94, or 8.9 percent, at $19.85, in late morning New York Stock Exchange trading, giving back Tuesday's strong gains racked up in a sectorwide rally. The shares had traded as low as $19.01 earlier in the session. A Best Buy spokeswoman said the company had no further comment about the Microsoft alliance. REUTERS

Counter Strategy• Gateway to offer Corel software over

MicrosoftOctober 15, 2002 8:06:00 PM ET

• SEATTLE, Oct 15 (Reuters) - Canadian software maker Corel Corp. (CORL) said on Tuesday that Gateway Inc. (GTW) became the latest PC maker to begin offering its WordPerfect Office software instead of Microsoft Corp.'s (MSFT) dominant Office software.

• With computer prices falling, the cost of adding Microsoft's Office word processing, spreadsheet and presentation software in some cases makes up more than half the original cost of a $600 PC, analysts have said.

Competitive AdvantageAdvantage Examples Methods

Cost Dell vs. Compaq

Southwest Airlines

Wal Mart, Office Depot

NBC vs. CBS

Quality HP Printers

Intel, Microsoft

Sony, Toyota

Marketing Coca Cola

McDonalds

Competitive AdvantageAdvantage Examples Methods

Cost Dell vs. Compaq

Southwest Airlines

Wal Mart, Office Depot

NBC vs. CBS, AOL

Outsourcing

Low Labor

Economies of Scale

Economies of Scope

Quality HP Printers

Intel, Microsoft

Sony, Toyota

R&D

Mktg Research

Marketing Coca Cola

McDonalds

Distribution

Promotion

Marketing Warfare

Basic Assumptions

• Markets are competitive• Competitors are rarely of equal strength• Competitive strategy is dictated by one’s

relative strength• Proper deployment of assets is key to

success– I.e., what you do with your assets is as

important as the strength of your assets.

How Markets Divide Themselves

• Leader - > 30% share

• Challenger - 15-30% share

• Flanker - 5 - 15% share

• Nichers - 1% or less

Leader Strategy

Leader – Defend Position

Approach Examples

Adopt an Aggressive Offense against the competition

Package Delivery Market

UPS Strategy

UPS Strategy

• Wanted to expand share in Ground Deliveries

• Purchased Mailboxes Etc.

• A key point of contact for FedEx

Leader – Defend Position

Approach Examples

Adopt an Aggressive Offense against the competition

UPS

Use resources to increase the cost of competition

Microsoft

Leader Defending by Attacking

GM - Avalanche

The Versatile Car Category

Challenger Strategy

Challenger – Focus on Leader

Approach Examples

Attack Leader’s strengthbut narrowly

Pepsi

Consider turning leader’sstrength into weakness

Netscape

Flanker Strategy

Flanker – Focus on Overlooked Areas

Approach Examples

Segment market to identify unmet needs

Chrysler

Avoid direct competition with leader and challenger

Jack in the Box

Nicher Strategy

Nichers/Guerillas – Find areas not attractive to Others

Approach Examples

Think small Jolt

Subaru

Be prepared to quit when competition hits up

HummerMicrobrewsSnapple

A Succesful Nicher

• Casual Male Retail Group (CMRG)

• 475 stores in the U.S. & Puerto Rico

• Target big and tall men

• $340 million in annual sales (2002) vs$195 million in 2001

• No one else seems interested in this low cost, high margin business

• Outsized males are not fashion leaders but trend followers

Battle Field

Humble Beginnings

1st Wendy’s (1969)

1st Jack in the Box

Constant Combat

A Battle of Words as Well as Food

Fast Food AttitudesFAST FOODCHAIN

MENUVARIETY

POPULARITY w/ Child

FOOD

TASTE

PRICE OVERALLPREFER

BURGER KING 3.1 3.4 3.4 3.8 3.4

JACK IN THE BOX

2.9 4.0 2.3 3.4 3.2

McDONALDS' 3.3 4.4 3.6 4.0 3.8

WENDY’S 3.0 3.5 4.1 2.6 3.3

RELATIVE

IMPORTANCE

WEIGHTS.22 .23 .30 .25

marketing management mktg 420 week 8 october 20, 2003

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