Presentation Transcript

1. Chapter 3:The Competitive Market

2. Day 1 - Response Journal What different businesses compete for your money in fast food? In music? In clothing? ***Save As March 3 in your Response Journal folder***
3. Competition in a Free Market As Canadians we live in a free market In a __________________, businesses can make a profit and keep the money Profit is what drives a business; the more successful a business becomes, the more profit the owner keeps Profits can also be reinvested in new technology, used to expand the business, pay off debt, etc. A free-market society allows individuals to hold ______________________; which allows you to buy things, keep them, sell them or give them away Some people use their personal property to make a profit Free Market Private Property
4. Competition in a free market Having a free market means that ______________ is allowed and encouraged Competition defines the market structure, and there are four major market structures that exist; __________________________; a large number of small companies exist, none with the opportunity for market control. Government legislation is needed to restrict growth in order to prevent market dominance E.g. agricultural goods – wheat, corn, soy beans, etc. Competition Perfect Competition
5. Competition in a free market _____________________________; a large number of companies exist, each with an opportunity for a some market control E.g. Restaurants, clothing stores, convenience stores, etc. _________________; a small number of large companies, each with a substantial amount of market control E.g. soft drink industry _________________; one company has complete market control, usually government regulated E.g. Waterloo North Hydro Monopolistic Competition Oligopoly Monopoly
6. The Benefits of Competition Competition … Encourages the creation of new business One company will start with an idea, and other businesses develop ways to improve upon that product and sell their version E.g. Recording device – read paragraph 1 on page 85 Wider selection of goods and services Consumers often have choice of style, features, price, quality, etc. E.g. Cars – use to be just the Ford Model T, now the options are abundant Increased level of service given to the consumer E.g. Hotels – read paragraph 4 on page 85
7. The Benefits of Competition In general, competition leads to … Better products at better prices New technology that improves our standard of living Increased productivity Improved selection and service
8. Competition & Productivity One of the best ways to compete is by charging less than your competition In order to charge less businesses must become … More efficient Use fewer resources Make better deals with suppliers The goal is to increase ___________________; use the same resources to produce more or better products or services Productivity
9. Competition & Productivity For a business to improve its productivity or product it may have to develop something new Most businesses have a ___________________________________ department whose job it is to come up with new ideas and ways to improve existing products and services Research & Development (R&D)
10. Direct Competition Companies with similar products are in ________________________, as they are competing for the same consumers E.g. if you have $30 and decide to spend it on taking a friend to a movie, each theatre and each movie is in direct competition for your money Other examples???? Direct Competition
11. Indirect Competition Companies with products that are NOT similar, but are in competition for a consumer’s income are in ____________________________ E.g. once you have spent $30 on the movie, that $30 is gone and you can’t spend it on anything else. Businesses that market CDs, pizza, clothes or any other products/services that you may buy are all in indirect competition for your money Every business is in competition with every other business for your discretionary income Indirect Competition
12. Day 1 – Assigned Work Describe the benefits of competition for you the consumer. Describe the benefits of competition for businesses. Complete questions 2b, 3a and 3b on page 88
13. Day 2 – Response Journal Pretend you own a hardware store in Waterloo. Who are you in direct competition with? Who are you in indirect competition with? ***Save As March 5 in your Response Journal folder***
14. Competitive Advantage Businesses are always looking for advantages over the competition Sometimes it’s temporary, but a true competitive advantage is one that can be sustained for a long period of time E.g. Coke and Pepsi – read paragraph 1 on page 89 Pepsi Vanilla Commercial
15. Sustainable Competitive Advantage A true competitive advantage however, is one that is lasts over a long period of time Abusiness has achieved a _______________________________________ when they are able to hold on to their customers despite the competition There are 4 different methods used to create a sustainable competitive advantage … Developing a unique selling position (USP) Lowering production costs Serving a niche market Creating customer loyalty Sustainable Competitive Advantage
16. Sustainable Competitive Advantage Developing a Unique Selling Position (USP) A company that has a USP is able to offer something that their competition cannot If a company has a USP they should advertise it heavily E.g. Apple Computers Inc. iPhone 5c Commercial
17. Sustainable Competitive Advantage Lowering Production Costs A company can lower its production costs by … Using less resources E.g. decreasing the amount of raw materials needed, increasing the amount of automation and computerization, etc. Producing their product in a foreign country Lower taxes, lower wages, etc.
18. Sustainable Competitive Advantage Serving a Niche Market When one company is providing a great product or service to a small group of people it becomes very difficult for competitors to enter the market E.g. Natsiq Productions – read paragraph 3 on page 90 E.g. Billing software for dentists – read paragraph 4 on page 90
19. Sustainable Competitive Advantage Creating Customer Loyalty Why does a customer drive past 3 bakeries to shop at one several km away from their home? Why does a customer rent a DVD from a local store rather than at a Rogers store? The answer is because the bakery and local video store have developed ______________________ that goes beyond simple price comparisons and convenient locations Customer loyalty can also be called ___________________________ and involves developing long lasting relationships with customers When a consumer develops a strong relationship with a product or retailer, they will not consider another brand or store, unless a big mistake is made E.g. Van – read paragraph 2 on page 91 Customer Loyalty Relationship Marketing Pepsi Commercial
20. Day 2 – Assigned work Read In the News … on page 91 List 3 products that you are loyal to. Why are you loyal to these products? Complete the Competitive Advantage Worksheet #1 provided
21. Day 3 – Response Journal Why is it important to have a competitive advantage over your competition? What do you think happens to businesses that don’t have a competitive advantage? ***Save As March 17 in your Response Journal folder***
22. Non –Sustainable Competitive Advantage _____________________________________________ are those methods used by competitors to shift sales in their direction temporarily Non-sustainable competitive advantages include; Promotion Placement Quality Benefits of use Price Design features Non-Sustainable Competitive Advantage
23. Non –Sustainable Competitive Advantage Promotion Companies that advertise their products want to place their brands in the minds of consumers Companies often use slogans or jingles to make their products or services recognizable, in an effort to have consumers remember them Companies like McDonald’s work hard to achieve _____________________________ for their product, which means that the consumer is most likely to think about one brand of product or service before they think of any other Increasing sales and consumer loyalty are the major goals of promotion To increase sales directly, businesses will often use sales promotions, such as coupons or contests E.g. what company asks you to “roll up the rim to win”? Read Tim Hortons example in paragraph 2 on page 92 Top-of-Mind Awareness
24. Non –Sustainable Competitive Advantage 2. Placement To compete, a product must have a placement in the market; it must be there The more ________________ a product/service has, the more _______________ it is Read the Chai Tea example in paragraph 2 on page 93 Products must be located in convenient locations for consumer to see and buy If a product has ___________________________ in a market, it has a competitive edge, because no other similar product has a placement there E.g. only Coca-Cola products are sold at McDonalds, so if you want to drink a pop while eating at McDonalds it has to be a Coke product – the consumer doesn’t have a choice Placements Competitive Exclusive Distribution
25. Non –Sustainable Competitive Advantage 3. Quality A product can compete with other products in its category by being the ____________ of its type E.g. Michael Kors handbags, Godiva Chocolates, Lamborghini automobiles, etc. Everyday businesses try to make their products better: stronger, faster, lighter, easier to open, etc. Businesses often add features that will improve the product and take away features that consumers no longer see as beneficial “Best”
26. Non –Sustainable Competitive Advantage 4. Benefits of Use People buy products for what they _____,not for what they _______ A product that can do more or perform better than its competition has a competitive advantage For this reason, businesses add _____________ to their products to distinguish themselves from their competitors, and then they need to highlight their benefits to potential consumers E.g. Automobiles – read paragraph 1 on page 96 Do Are Benefits
27. Non –Sustainable Competitive Advantage 5. Price Price is only a competitive advantage if products are ______________, and your price is ___________ than the competition E.g. if a consumer believes that one product is equal to another, the cheaper product has the competitive advantage If two products are different, then price is NOT the main competitive advantage For most high end products it’s the ____________ and not the product value that affects pricing Identical Lower Image
28. Non –Sustainable Competitive Advantage 6. Design Features What a product looks like may give it an advantage over the competition E.g. all cars will get you from point A to point B, but not all cars “look as nice” Often, consumers will buy one product over another because they like the style and design of that product, or in the case of the fashion industry, consumers like the way the product makes them look ________________ is used to grab consumer attention The shape of the bottle, the label, the way a can opens, the picture on the box and the jar with a built in handle are all examples of design choices that can give a product an advantage Packaging
29. Day 3 – Assigned Work In pairs, complete … Competitive Advantage – Slogans and Jingles Worksheet Individually, complete … Question 1a on page 107 Competitive Advantage Worksheet #2
30. Day 4 – Response Journal What is an important service that you provide for your family or friends? Why is the service you provide important? ***Save As March 18 in your Response Journal folder***
31. Service Competition Some businesses are set up solely to perform specific services for customers E.g. A business, like Purolator, that charges money to deliver a parcel is a service business Other businesses offer ___________________________, which are activities performed to support the sale of another product E.g. A business, like The Brick, that delivers the furniture a customer bought to their home, free of charge, is performing a value added service Both service businesses and businesses that offer value-added services market __________________; things that cannot be touched E.g. the delivery of a letter from a person in one city to a friend in another is a service. One cannot physically touch a deliver ; it is intangible Value Added Service Intangibles
32. Service Competition Services are usually consumed as they are purchased E.g. as Purolator performs its service, the consumer is using up that service. Once the parcel is given to the recipient, the service has been totally consumed Service businesses are in competition with other businesses that perform the same service E.g. dentists compete with other dentists, tanning salons compete with other tanning salons, etc. Service businesses do not look for the same competitive advantages as manufacturing businesses
33. Service Competition Service businesses compete with one another by attempting to gain a competitive advantage using; Convenience Degree of service Selection Reputation Price
34. 1. Convenience Convenience means making some activity _________ or more _____________ for the customer E.g. online shopping, pickup and delivery, express check-in, drive-through windows, etc. Customers do NOT like having to work to buy a product Some businesses actually sell convenience E.g. eBox – read paragraph 3 on page 100 Easier Comfortable
35. 2. Degree of Service How much else is provided alongside the original service purchased? E.g. salons offer more than just haircuts – read paragraph 1 on page 102 Service businesses also compete by offering less Customers know that service costs money, so if less services are provided, then the purchase should be less expensive E.g. some airlines offer less services and a cheaper ticket: less leg room, no personal TV on the back of the chair in front, no free meals, etc.
36. 3. Selection Offering a greater selection of services is another way to compete E.g. a fitness center that offers a wide variety of classes, personal training, massage therapy and tanning beds has a competitive advantage over a smaller gym that just provides the space and equipment needed for consumers to workout The selection can be __________, meaning that a store carries a large number of different brands or types of merchandise, or it can be _________, meaning that the store carries a large quantity of one specific product or type of product Wide Deep
37. 4. Reputation Maintaining a positive relationship with customers Customers who receive good service may tell others about their experience Customers who have a bad experience almost always tell others about their experience When this happens a business will not only lose that customer, but also many potential customers
38. 5. Price Price is a factor in both product and service competition If two services are identical, the business with the lower price has the competitive advantage Although lower price may lure some customers, a considerably lower price may cause some to question the business’s reputation and credibility E.g. some consumers might not feel comfortable with a hair dresser who only charges $5 for a haircut Service businesses must set their price strategically, depending on __________________________ E.g. vacation packages are more expensive during peak time – Christmas, March Break, etc. Supply & Demand
39. Day 4 – Assigned Work Read Info Tech on page 101 and answer questions # 1- 3 Read the info provided in Figure 3.17 on page 103. Which airline would you prefer to fly 1st class with? Why? Answer questions 2a and 3c on page 107
40. Day 5 – Response Journal Many businesses sell a mix of both products and services. Provide 2 examples of different businesses that do provide a mix. Separately list the services and products sold by each. ***Save As March 19 in your Response Journal folder***
41. Retail Stores Retail businesses are actually considered part of the ______________ sector Retail stores provide a service to the ___________ (carrying products they need or want), and to the __________________ (putting their product in front of consumers) Consumers aren’t just paying for the products they buy in the retail store, they also pay for the services they receive; E.g. variety and selection of product, fitting rooms, return and exchange policies, payment options, etc. Service Consumer Manufacturer
42. Retail Stores Retail stores also make profit on some of the services they provide such as; Delivery Installation Alterations Gift wrapping, etc. Every new service that a store offers gives consumers another reason to select that store over another, even if at a cost E.g. extended warranties generate a great deal of profit for appliance retailers
43. The Product/Service Mix When a retailer store provides services along with the products they sell, it has a __________________ mix Conversely, many businesses that sell mainly services can also sell products E.g. movie theatres sell popcorn, vets sell pet food, salons sell hair care products, etc. Product/Service
44. The Competitive Market Every new product introduced into the market has the potential to overtake at least one existing product, because there are a limited number of customers who use a particular type and brand of product All businesses need to determine their ________________________; all the products or services that compete for consumer money within a specific category Competitive Market
45. Market Share The amount of money consumers spend annually on a specific type of product defines the size of that market in dollars ____________________ is the percentage that one company’s product takes of the total dollars spent by consumers on products within that category These market categories are very broad, such as beverages, computers or magazines Market categories are then broken down into smaller groups with a specific identifiable characteristics, called ____________________ New products when introduced into a market segment, directly compete with other brands in the segment for market share Market Share Market Segments
46. Market Share Market Segment Example Category: Beverages Juiceis a segment of the Beverage category Ready-to-Drink Chilled Fruit Juice is a segment of the Juice category Grapefruit Juice is a segment of the Ready-to-Drink Chilled Fruit Juicecategory
47. Market Share A company which leads in one market segment might not lead in other segments where it has products However, companies can use this market information to develop better strategies to increase the market share of their weaker products E.g. Lassonde Industries – read paragraphs 3 & 4 on page 108
48. Increasing Market Share A company can increase market share in 2 ways; Increasing the size of the existing market Increasing the market size is difficult, because you need to convince more people to buy the product by convincing existing customers to buy more or encouraging people who don’t currently use the product to start Medical discoveries often have this type of effect on the market E.g. consumers at risk of heart disease increased the market size for aspirin when it was discovered that aspirin was effective in reducing heart attacks
49. Increasing Market Share Take sales away from competitors Companies use various strategies to try to improve market share by taking sales from competitors E.g. find new retail locations to sell your product, negotiate better product placement with stores, etc.
50. Day 5 – Assigned Work Read Improving Market Share on pages 109 - 111, then complete the questions on the sheet provided
51. Day 6 – Response Journal As a marketer, what things would you need to take into consideration before selling your product in a foreign country? How might you have to change your product and the packaging it comes in? ***Save As March 20in your Response Journal folder***
52. Competing In International Markets Businesses use the same methods to compete in international markets as they do in domestic markets: Promotion Placement Quality Benefits of use Price Design However, marketing efforts must be changed to fit the foreign market Not all consumers are the same and have the same wants and needs as the Canadian consumer
53. Competing In International Markets The most important activity for a business to perform before entering a new market is ________________ Companies can avoid wasting time and money on marketing products and services that are not competitive by doing research first Research
54. Competing In International Markets: Promotion Promotion is not easy in foreign markets: Canadian ads may not translate well Coupons and contests are regulated differently Cultural, societal and religious beliefs must be respected E.g. Cultural – the portrayal of women in ads, etc. E.g. Societal and religious – the advertising of liquor in Muslim countries is strictly forbidden
55. Competing In International Markets: Placement Distribution in foreign countries may be extremely challenging. To meet these challenges, many businesses; Work with local _________________ within a specific country and region to sell their product to local retailers and/or consumers Form partnerships with foreign businesses, called ______________________. In a joint venture, a Canadian company and a foreign one, with similar goals, combine resources to make or sell a product in another country Distributors Joint Venture
56. Competing In International Markets: Quality Marketers trying to enter into international markets often try to focus on superior quality Pursuing this strategy can be difficult if a country has exceptional local products, but can be a great opportunity if the foreign country is lacking what the Canadian market has to offer E.g. Juice Market – read paragraph 3 on page 114
57. Competing In International Markets: Benefits of Use Marketers need to convince the consumer that their product has more benefit than the competition This can be difficult if there is a lot of competition However, if there is no competition, you have a major marketing challenge. You now need to overcome consumer resistance and change consumer habits
58. Competing In International Markets: Pricing Marketers must know the real cost of doing business in a foreign country Imported goods are often subject to taxes called ________________, which are used to protect local businesses from too much foreign competition Marketers must also calculate the _______________ of the product, which includes the cost of shipping, currency exchange and the tariff rate Tariffs Landed Cost
59. Competing In International Markets: Design Product design must adhere to local regulations and standards Packaging size and language on labels may need to be changed The product itself may also need to be modified E.g. car gadgets for cars in England need to be altered as the drivers side is on the opposite side of the car than it is in North America
60. Day 6 – Assigned Work Read Canada Around the World on pages 116 & 117 and answer the 2 corresponding questions Answer question 3b on page 117