MARKETING STRATEGY

11 Dealing with Competition

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Internal Analysis1. Analysis of Organizational Strengths and

Weaknesses

To understand the capabilities of a firm, its internal resources should be analysed in relation to the value they offer to customers. Such an analysis can indicate the areas of strength and weakness of the company and permit the decision makers to take corrective actions in order to protect and maintain the strengths, while trying to reduce weaknesses.

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External Analysis1. Market Threats and OpportunitiesPossible Threats:

new competitors A change in consumption patterns the evolution of technology New governmental regulations

Possible Opportunities: The development of a new market niche Governmental intervention for business development in specific

industrial sectors Changes in consumption patterns of the evolution of technology

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Porter analysis

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Figure 1.1 Five Forces Determining Segment Structural Attractiveness

Potential entrants: High / low entry / exit barriers Suppliers Buyers Industry competitors: aggressive competition –

unattractive – barrier of entry Substitutes: segment is unattractive when there

are actual and potential substitutes

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Industry Concept of Competition

Number of sellers and degree of differentiation

Entry, mobility, and exit barriers restaurant / airline

Cost structure Degree of vertical integration Degree of globalization

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Industry Concept of Competition

Pure monopoly: only one firm provides a certain product (e.g. EAC)

Oligopoly: small number of usually large firms Monopolistic competition: many sellers of

differentiated product (e.g. technology) Pure competition: many competitors offer the

same / similar product or service

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Analyzing Competitors

Share of market: competitor’s share of target market

Share of mind: percentage of customers who named the competitors – Company that comes to mind

Share of heart: name the company from which you would prefer to buy a product

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Other Competitive Strategies

Market challengers: being the leader in the market (e.g. Toyota, Airbus)

Market followers Market nichers

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Competitive Strategies - Market Challenger Strategies Define the strategic objective and

opponents: whom to attack to increase market share

Choose an attack strategy

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Competitive Strategies - Specific Attack Strategies

Price discounts Lower-priced goods Value-priced goods Prestige goods Product proliferation

Product innovation Improved services Distribution innovation Manufacturing-cost

reduction Intensive advertising

promotion

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Competitive Strategies

Market followers: Product differentiation and image are low, service quality is comparable, price sensitivity is high. Companies should try to keep current customers, keep low manufacturing costs, increase product quality and service

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Competitive Strategies

Market nichers: be a leader in a small market. Avoid competing with larger firms by targeting smaller market segments which are of no interest of the larger firms