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9. Dealing with Competition. Marketing Management, 13 th ed- A South Asian Perspective. Chapter Questions. How do marketers identify primary competitors? How should we analyze competitors’ strategies, objectives, strengths, and weaknesses?

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dealing with competition

9

Dealing with Competition

Marketing Management, 13th ed-

A South Asian Perspective

chapter questions
Chapter Questions
  • How do marketers identify primary competitors?
  • How should we analyze competitors’ strategies, objectives, strengths, and weaknesses?
  • How can market leaders expand the total market and defend market share?
  • How should market challengers attack market leaders?
  • How can market followers or nichers compete effectively?
five forces determining segment structural attractiveness
Five Forces Determining Segment Structural Attractiveness
  • Number of sellers and degree of differentiation
  • Entry, mobility, and exit barriers
  • Cost structure
  • Degree of vertical integration
  • Degree of globalization
barriers and profitability

Exit barriers

Low

High

Low, stable

returns

Low

Entry Barriers

High, stable

returns

High, risky

returns

High

Barriers and Profitability

Low, risky

returns

analyzing competitors

Objectives

Competitor

Actions

Strategies

Reaction

Patterns

Strengths &

Weaknesses

Analyzing Competitors
a competitor s expansion plans
A Competitor’s Expansion Plans

Customers’ ratings of competition on Key Success Factors: An example

strengths and weaknesses
Strengths and Weaknesses

Share of market

(The competitor’s share of the target market)

Share of mind

(The first company that comes to mind)

Share of heart

(The company from which you would prefer to buy)

selecting competitor
Selecting Competitor

Strong Vs Weak (Fewer Resources required)Close Vs Distant (Resemblance)Good Vs Bad

competitive strategies for market leaders

Market

nicher

Market

leader

Market

challenger

Market

follower

40%

30%

20%

10%

Competitive Strategies for Market Leaders

Expand Market

Attack leader

Special-

ize

Imitate

Defend Market Share

Status quo

Expand Market Share

expanding the total market
Expanding the Total Market

New customers

(Penetration/new market segmentation/geographical-expansion)

More usage

(Consumption Amount/Frequency)

defense strategy creative anticipative responsive
Defense Strategy- Creative/Anticipative/Responsive
  • A market leader should generally adopt a defense strategy
  • Six commonly used defense strategies
    • Position Defense
      • e.g. Mercedes was using a position defense strategy until Toyota launched a frontal attack with its Lexus.
    • Mobile Defense
      • By market broadening and diversification (Dialog Telekom Srilanka)
    • Flanking Defense
      • Secondary markets (flanks) are the weaker areas and prone to being attacked
    • Contraction Defense
      • Withdraw from the most vulnerable segments and redirect resources to those that are more defendable
    • Pre-emptive Defense
      • Detect potential attacks and attack the enemies first
    • Counter-Offensive Defense
      • Responding to competitors’ head-on attack by identifying the attacker’s weakness and then launch a counter attack
      • e.g. Toyota launched the Lexus to respond to Mercedes attack
market challenger strategies
Market Challenger Strategies

The market challengers’ strategic objective is to gain market share and to become the leader eventually

How?

  • By attacking the market leader
  • By attacking other firms of the same size
  • By attacking smaller firms
market challenger strategies cont d
Market Challenger Strategies (cont’d)

Types of Attack Strategies

  • Frontal attack
  • Flank attack
  • Encirclement attack
  • Bypass attack
  • Guerrilla attack
frontal attack
Frontal Attack
  • Seldom work unless
    • The challenger has sufficient fire-power (a 3:1 advantage) and staying power, and
    • The challenger has clear distinctive advantage(s)
  • e.g. Japanese and Korean firms launched frontal attacks in various ASPAC countries through quality, price and low cost
  • Surf Vs Ariel
flank attack
Flank attack
  • Attack the enemy at its weak points or blind spots i.e. its flanks
  • Ideal for challenger who does not have sufficient resources
  • e.g. Google Vs ChaCha and or Wikipedia
encirclement attack
Encirclement attack
  • Attack the enemy at many fronts at the same time
  • Ideal for challenger having superior resources
  • e.g. Seiko attacked on fashion, features, user preferences and anything that might interest the consumer
  • Zong???
bypass attack
Bypass attack
  • By diversifying into unrelated products or markets neglected by the leader
  • Could overtake the leader by using new technologies
    • e.g. Pepsi used a bypass attack strategy against Coke by acquiring Tropicana Vs. Minute Maid
    • Telenor in Pakistan
    • Instead of launching carbonated drinks Nestle brought pure jiuces vs. the carbonated drinks
guerrilla attack
Guerrilla attack
  • By launching small, intermittent hit-and-run attacks to harass and destabilize the leader
  • Usually use to precede a stronger attack
    • e.g. airlines use short promotions to attack the national carriers especially when passenger loads in certain routes are low
    • local water brands vs. multinational water brands
which attack strategy should a challenger choose
Which Attack Strategy should a Challenger Choose?

Use a combination of several strategies to improve market share over time

market follower strategies
Market-Follower Strategies
  • Theodore Levitt in his article, “Innovative Imitation” argued that a product imitation strategy might be just as profitable as a product innovation strategy

e.g. Product innovation--Sony

Product-imitation--Panasonic

market follower strategies cont d
Market-Follower Strategies (cont’d)
  • Each follower tries to bring distinctive advantages to its target market--location, services, financing
  • Four broad follower strategies:
    • Counterfeiter (which is illegal)
    • Cloner (emulation of leader’s product, name & package)
      • e.g. New Joshanda Brand Vs Qarshi
      • S&S Cycle Vs. Harley
    • Imitator e.g. car manufacturers imitate the style of one another
    • Adapter e.g. many Japanese firms are excellent adapters initially before developing into challengers and eventually leaders
market nicher strategies
Market-Nicher Strategies
  • Smaller firms can avoid larger firms by targeting smaller markets or niches that are of little or no interest to the larger firms

e.g. Zippo

Digicel

Bullet-Proof Cars

market nicher strategies cont d
Market-Nicher Strategies (cont’d)
  • Nichers must create niches, expand the niches and protect them
    • e.g. Nike constantly creates new niches--cycling, walking, hiking, cheerleading, etc
  • What is the major risk faced by nichers?
    • Market niche may be attacked by larger firms once they notice the niches are successful
multiple niching
Multiple Niching

“[A] firm should `stick to its niching’ but not necessarily to its niche. That is why multiple niching is preferable to single niching. By developing strength in two or more niches the company increases its chances for survival.”

Philip Kotler

balancing orientations
Balancing Orientations

Competitor-

Centered

Customer-

Centered