7/31/2019 UNit 5- Dealing With Competition

1/12

Meaning of competition1. The act of competing, as for profit or prize.

2. A test of skill or ability, contest

3. Rivalry between two or more business starving for

the same customer or market.

4. Many companies try to provide goods and services

to the same customer or market.

7/31/2019 UNit 5- Dealing With Competition

2/12

Compels the company to revise product portfolio

( BPL)

Motivates the firms to make their product more rich

and versatile( modern financial institutions)

It is great leveler of the product prices.(VSNL)

It help firms to eliminate market inefficiency.

Innovation in products (IT) Development of rural market

7/31/2019 UNit 5- Dealing With Competition

3/12

Government policy- (Protection of local industry, culture,)

Cost( high tariff and taxation)

Presence of strong brands

Customer-( strong nationalist feeling)

Technology( Microsoft)

Lack of credible competition

7/31/2019 UNit 5- Dealing With Competition

4/12

Strategies- ( product line,mfg.cost,service,price)

Objectives( maximize of profit, sales growth, market share

technological leadership, service leadership, expansion planor mix of these)

Strength and weaknesses ( table)

Share of market

Share of mind

Share of heart

7/31/2019 UNit 5- Dealing With Competition

5/12

Market leader 40%

Market challenger- 30%

Market follower- 20%

Market nichers- 10%

7/31/2019 UNit 5- Dealing With Competition

6/12

Strong versus weak

Close versus distant

Good versus bad

7/31/2019 UNit 5- Dealing With Competition

7/12

Innovative Solutions to Customers' Problem

New entrants with innovative ideas

Market leader can be removed

Innovation should help the customer It should be simple

Should be connected with existing need of customer

7/31/2019 UNit 5- Dealing With Competition

8/12

Offering identical product at a lower price

Price is sensitive aspect in India

Product should be identical

Price difference should be substantial Comparison should be possible between two products

Switch Channels of Distribution

Development of new channel of distribution

Reduction of cost of distribution

7/31/2019 UNit 5- Dealing With Competition

9/12

Service based Competition

Service is important for customer

Experience based Competition

Firms are giving more than just a purchase

7/31/2019 UNit 5- Dealing With Competition

10/12

Potentialentrants

( Threat ofmobility)

Substitutes

( Threat ofSubstitutes)

Buyers

( BuyerPower)

Suppliers

( SupplierPower)

IndustryCompetitor( Segment

Rivalry)

Porters Five forces of Competition

7/31/2019 UNit 5- Dealing With Competition

11/12

1. Threats of intense segment rivalry(cell phone) Numerous ,strong, aggressive competitors

Exit barriers are high

Price wars, advertising battles, new product introductions

2. Threats of new entrants Entry barriers are high, exit barriers are low- few new firms enter

Entry and exit barriers high- profit potential high

Entry and exit barriers low- firms easily enter and go, return slowand stable

Entry barriers low ,exit barriers high- depressed earning

7/31/2019 UNit 5- Dealing With Competition

12/12

3. Threats of substitute products Place a limit on price and profit

4. Threats of buyers growing bargainingpower More concentrated and organized

Buyers switching cost low, buyers are price sensitive

5. Threats of suppliers growing bargainingpower ( petroleum products)