Creating Competitive Advantage

1. Creating Competitive Advantage Chapter 18

2. Objectives • Learn how to understand competitors as well as customers via competitor analysis. • Learn the fundamentals of competitive marketing strategies based on creating value for customers. • Realize the need for balancing customer and competitor organizations in order to become a truly market-centered organization.

3. Has dominated the chip industry Success is directly related to Intel’s competitive strategy Strategy focuses on superior value and product leadership Heavy focus on product and advertising innovation and R&D investments Changing market needs have challenged Intel to adapt Intel is capitalizing on the Internet now c Intel

4. Definition • Competitive Advantage • An advantage over competitors gained by offering consumers greater value than competitors offer.

5. Definition • Competitive 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.

6. Figure 18-1: Steps in Analyzing Competitors

7. Firms face a wide range of competition Be careful to avoid “competitor myopia” Methods of identifying competitors: Industry point-of-view Market point-of-view Competitor maps can help Competitor Analysis Steps in the Process: • Identifying Competitors • Assessing Competitors • Selecting Competitors to Attack or Avoid

8. 230-year-old Encyclopedia Britannica viewed itself as competing with your publishers of printed encyclopedias. Big mistake! Its real competitors were software encyclopedias and the Internet.

9. Figure 18-2: Competitor Map

10. Discussion Question • Create a competitor map for one of the following: • WalMart • McDonald’s • Nike • Starbucks • Google

11. Determining competitors’ objectives Identifying competitors’ strategies Strategic groups Assessing competitors’ strengths and weaknesses Benchmarking Estimating competitors’ reactions Competitor Analysis Steps in the Process: • Identifying Competitors • Assessing Competitors • Selecting Competitors to Attack or Avoid

12. Types of Benchmarking: Process – searching for the best way to perform a process Internal – enables users to compare similar activities within their own organization. BenchmarkingIn-Depth • Types of Benchmarking: • Competitive – organization is compared to direct competitors or those who are selling to the same customer base. • Functional or generic –enables users to compare themselves to organizations that are recognized as the best, whether they are in the same industry or not.

13. Sources of Information: Competitive intelligence Relevant industry publications Electronic databases Internal company experts BenchmarkingIn-Depth • Sources of Information: • Industry observers such as professors or consultants • Industry participants, such as suppliers and customers • Competition itself

14. Strong or weak competitors Customer value analysis Close or distant competitors Most companies compete against close competitors “Good” or “Bad” competitors The existence of competitors offers several strategic benefits Competitor Analysis Steps in the Process: • Identifying Competitors • Assessing Competitors • Selecting Competitors to Attack or Avoid

15. Competitor Analysis • Designing Competitive Intelligence Systems • A Well-Designed CI System: • Identifies types and sources of competitive information • Continuously collects information • Checks reliability and validity of information • Interprets and organizes information • Distributes information to decision makers and responds to queries

16. Competitive Strategies • Approaches to Marketing Strategy • No single strategy is best for all companies • Marketing strategy and practice often passes through three stages: • Entrepreneurial marketing • Formulated marketing • Intrepreneurial marketing

17. Competitive Strategies • Basic Winning Competitive Strategies: Porter • Overall cost leadership • Lowest production and distribution costs • Differentiation • Creating a highly differentiated product line and marketing program • Focus • Effort is focused on serving a few market segments

18. Hohner has successfully implemented a focus strategy to capture an 85% share of the harmonica market.

19. Competitive Strategies • Basic Competitive Strategies: Value Disciplines • Operational excellence • Superior value via price and convenience • Customer intimacy • Superior value by means of building strong relationships with buyers and satisfying needs • Product leadership • Superior value via product innovation

20. Discussion Question Firms that follow a customer intimacy strategy are willing to do almost anything for their customers. Does such a strategy make sense for local businesses, or only for national / global corporations? British Airways practices customer intimacy with select frequent flyers

21. Figure 18-3: Hypothetical Market Structure

22. Expanding the total demand Finding new users Discovering and promoting new product uses Encouraging greater product usage Protecting market share Many considerations Continuous innovation Expanding market share Profitability rises with market share Competitive Strategy Competitive Positions • Market Leader • Market Challenger • Market Follower • Market Nicher

23. Competitive Strategy WD-40 has a knack for developing new uses for its product. What other brands have adopted a similar strategy? WD40

24. Option 1: challenge the market leader High-risk but high-gain Sustainable competitive advantage over the leader is key to success Option 2: challenge firms of the same size, smaller size or challenge regional or local firms Full frontal vs. indirect attacks Competitive Strategy Competitive Positions • Market Leader • Market Challenger • Market Follower • Market Nicher

25. Pepsi is an example of market challenger that has chosen to use a full frontal attack

26. Follow the market leader Focus is on improving profit instead of market share Many advantages: Learn from the market leader’s experience Copy or improve on the leader’s offerings Strong profitability Competitive Strategy Competitive Positions • Market Leader • Market Challenger • Market Follower • Market Nicher

27. Dial Corporation successfully uses a market follower strategy

28. Serving market niches means targeting subsegments Good strategy for small firms with limited resources Offers high margins Specialization is key By market, customer, product, or marketing mix lines Competitive Strategy Competitive Positions • Market Leader • Market Challenger • Market Follower • Market Nicher

29. FedEx and UPS are two competitors in the package delivery business. What competitive strategy seems to describe each company?

30. Balancing Customer and Competitor Orientations • Companies can become so competitor centered that they lose their customer focus. • Types of companies: • Competitor-centered companies • Customer-centered companies • Market-centered companies

31. Figure 18-4: Evolving Company Orientations