9

Dealing
with Competition

Marketing Management, 13th edA South Asian Perspective

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

Exit barriers
Entry Barriers

Low

High

Low

Low, stable
returns

Low, risky
returns

High

High, stable
returns

High, risky
returns

Competitive Strategy
Industry
Force
Entry
Barriers
Buyer
Power
Supplier
Power
Threat of
Substitutes
Rivalry

Generic Strategies
Cost
Leadership

Differentiation

Focus

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.

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.

Better able to pass on

Better insulated from
supplier price increases to
powerful suppliers.
customers.

Suppliers have power because of low

volumes, but a differentiation-focused
firm is better able to pass on supplier
price increases.

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.

Better able to
compete on price.

Brand loyalty to keep

customers from rivals.

Rivals cannot meet differentiationfocused customer needs.

Analyzing Competitors
Objectives
Strategies
Competitor
Actions

Reaction
Patterns

Strengths &
Weaknesses

A Competitors Expansion Plans

Customers ratings of competition on

Key Success Factors: An example

Strengths and Weaknesses

Share of market

(The
(The competitors
competitors share
share of
of the
the target
target market)
market)

Share of mind

(The
(The first
first company
company that
that comes
comes to
to mind)
mind)

Share of heart

(The
(The company
companyfrom
from which
which you
you would
would prefer
prefer to
to
buy)
buy)

Selecting Competitor

Strong Vs Weak (Fewer Resources required)

Close Vs Distant (Resemblance)
Good Vs Bad

Competitive Strategies for

Market Leaders
Market
leader

40%
Expand Market
Defend Market Share
Expand Market Share

Market
challenger

30%
Attack leader
Status quo

Market
nicher
Market
follower

20%
Imitate

10%
Specialize

Expanding the Total Market

New customers

(Penetration/new
(Penetration/new market
market
segmentation/geographical-expansion)
segmentation/geographical-expansion)

More usage

(Consumption
(Consumption Amount/Frequency)
Amount/Frequency)

Defense Strategy-

Creative/Anticipative/Responsive
A market leader should generally adopt a defense strategy
Six commonly used defense strategies
Position Defense

Mobile Defense

Withdraw from the most vulnerable segments and redirect resources

to those that are more defendable

Pre-emptive Defense

Secondary markets (flanks) are the weaker areas and prone to

being attacked

Contraction Defense

By market broadening and diversification (Dialog Telekom Srilanka)

Flanking Defense

e.g. Mercedes was using a position defense strategy until Toyota

launched a frontal attack with its Lexus.

Detect potential attacks and attack the enemies first

Counter-Offensive Defense

Responding to competitors head-on attack by identifying the

attackers 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

(contd)
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-andrun 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

Each follower tries to bring distinctive

(contd)

advantages to its target market--location,

services, financing
Four broad follower strategies:

Counterfeiter (which is illegal)

Cloner (emulation of leaders 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
(contd)

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

CompetitorCentered

CustomerCentered