Dealing

with Competition

Marketing Management, 13th ed-

A South Asian Perspective

9

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

•Number of sellers and

degree of differentiation

•Entry, mobility, and exit

barriers

•Cost structure

•Degree of vertical

integration

•Degree of globalization

Barriers and Profitability

Low, stablereturns

Low

High, stablereturnsHigh

Low

Low, riskyreturns

High, riskyreturns

High

En

try B

arr

iers

Exit barriers

Competitive Strategy

Industry

Force

Generic Strategies

Cost

LeadershipDifferentiation Focus

Entry

Barriers

Ability to cut price

in retaliation deters

potential entrants.

Customer loyalty can

discourage potential

entrants.

Focusing develops core competencies

that can act as an entry barrier.

Buyer

Power

Ability to offer

lower price to

powerful buyers.

Large buyers have less

power to negotiate because

of few close alternatives.

Large buyers have less power to negotiate

because of few alternatives.

Supplier

Power

Better insulated from

powerful suppliers.

Better able to pass on

supplier price increases to

customers.

Suppliers have power because of low

volumes, but a differentiation-focused

firm is better able to pass on supplier

price increases.

Threat of

Substitutes

Can use low price to

defend against

substitutes.

Customer's become

attached to differentiating

attributes, reducing threat

of substitutes.

Specialized products & core competency

protect against substitutes.

RivalryBetter able to

compete on price.

Brand loyalty to keep

customers from rivals.

Rivals cannot meet differentiation-

focused customer needs.

Analyzing Competitors

Competitor

Actions

Objectives

Strengths &

Weaknesses

Reaction

Patterns

Strategies

A Competitor’s Expansion Plans

Customer

AwarenessProduct Quality

Product

Availability

Technical

AssistanceSelling Staff

Junaid Jamshed E E P E E

R-Sheen G G G G G

Shahid Afridi F P E F P

Note: E= Excellent, G= good, F = Fair, P= poor

Customers’ ratings of competition on Key Success

Factors: An example

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

Strong Vs Weak (Fewer Resources required)

Close Vs Distant (Resemblance)

Good Vs Bad

2006 2007 2008 2006 2007 2008 2006 2007 2008

Junaid Jamshed 50% 47% 44% 60% 58% 54% 45% 42% 39%

R-Sheen 30 34 37 30 31 35 44 47 53

Shahid Afridi 20 19 19 10 11 11 11 11 8

Market Share Mind Share Heart Share

Competitive Strategies for Market

Leaders

40%

Market

leader

30%

Market

challenger

20%

Market

follower

Expand Market

Defend Market Share

Expand Market Share

Attack leader

Status quoImitate

10%

Market

nicher

Special-

ize

Expanding the Total Market

New customers(Penetration/new market

segmentation/geographical-expansion)

More usage(Consumption Amount/Frequency)

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

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)

Types of Attack

Strategies

Frontal attack

Flank attack

Encirclement attack

Bypass attack

Guerrilla 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

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

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

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

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?

Use a combination of several strategies

to improve market share over time

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)

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

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)

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

“[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

Competitor-

Centered

Customer-

Centered