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1. Chapter 8
Dealing with the
Competition
PowerPoint by Karen E. James
Louisiana State University - Shreveport
©2003 Prentice Hall, Inc.
To accompany A Framework for
Slide 1 in

2. Objectives
 Understand how a company
identifies its primary competitors
and ascertains their strategies.
 Review how companies design
competitive intelligence systems.
©2003 Prentice Hall, Inc.
To accompany A Framework for
Slide 2 in

3. Objectives
 Learn how a company decides
whether to position itself as a
market leader, a challenger, a
follower, or a nicher.
 Identify how a company can
balance a customer vs. competitor
orientation.
©2003 Prentice Hall, Inc.
To accompany A Framework for
Slide 3 in

4. Competitive Markets
 Porter’s Five Forces that Determine
Market Attractiveness:
– Threat of intense segment rivalry
– Threat of new entrants
– Threat of substitute products
– Threat of buyers’ growing bargaining
power
– Threat of suppliers’ growing bargaining
power
©2003 Prentice Hall, Inc.
To accompany A Framework for
Slide 4 in

5. Competitive Markets
 Failing to identify competitors
can lead to extinction
 Internet businesses have led to
disintermediation of middlemen
 Competition can be identified
using the industry or market
approach
©2003 Prentice Hall, Inc.
To accompany A Framework for
Slide 5 in

6. Competitive Markets
Industries Can Be Classified By:
 Number of sellers  Entry, mobility and
exit barriers
and degree of
differentiation
 Degree of vertical
 Cost structure
integration
 Degree of globalization
©2003 Prentice Hall, Inc.
To accompany A Framework for
Slide 6 in

7. Competitive Markets
Industry Structures
 Pure Monopoly
 Pure Oligopoly
 Differentiated
Oligopoly
 Monopolistic
Competition
 Pure Competition
©2003 Prentice Hall, Inc.
 Only one firm offers
an undifferentiated
product or service
in an area
– Unregulated
– Regulated
 Example: Most
utility companies
To accompany A Framework for
Slide 7 in

8. Competitive Markets
Industry Structures
 Pure Monopoly
 Pure Oligopoly
 Differentiated
Oligopoly
 Monopolistic
Competition
 Pure Competition
©2003 Prentice Hall, Inc.
 A few firms produce
essentially identical
commodities and
little differentiation
exists
 Lower costs are the
key to higher profits
 Example: oil
To accompany A Framework for
Slide 8 in

9. Competitive Markets
Industry Structures
 Pure Monopoly
 Pure Oligopoly
 Differentiated
Oligopoly
 Monopolistic
Competition
 Pure Competition
©2003 Prentice Hall, Inc.
 A few firms produce
partially
differentiated items
 Differentiation is by
key attributes
 Premium price may
be charged
 Example: Luxury
autos
To accompany A Framework for
Slide 9 in

10. Competitive Markets
Industry Structures
 Pure Monopoly
 Pure Oligopoly
 Differentiated
Oligopoly
 Monopolistic
Competition
 Pure Competition
©2003 Prentice Hall, Inc.
 Many firms
differentiate items
in whole or part
 Appropriate market
segmentation is key
to success
 Example: beer,
restaurants
To accompany A Framework for
Slide 10 in

11. Competitive Markets
Industry Structures
 Pure Monopoly
 Pure Oligopoly
 Differentiated
Oligopoly
 Monopolistic
Competition
 Pure Competition
©2003 Prentice Hall, Inc.
 Many competitors
offer the same
product
 Price is the same
due to lack of
differentiation
 Example: farmers
selling milk, crops
To accompany A Framework for
Slide 11 in

12. Competitive Markets
 A broader group of competitors
will be identified using the
market approach
 Competitor maps plot buying
steps in purchasing and using
the product, as well as direct and
indirect competitors
©2003 Prentice Hall, Inc.
To accompany A Framework for
Slide 12 in

13. Competitor Analysis
 Key characteristics of the
competition must be identified:
– Strategies
– Objectives
– Strengths and Weaknesses
Effect
a firm’s competitive position in
the target market
– Reaction Patterns
©2003 Prentice Hall, Inc.
To accompany A Framework for
Slide 13 in

14. Competitor Analysis
Competitive Positions in
the Target Market
 Dominant
 Tenable
 Strong
 Weak
 Favorable
 Nonviable
©2003 Prentice Hall, Inc.
To accompany A Framework for
Slide 14 in

15. Competitive Intelligence Systems
 Designing the system involves:
– Setting up the system
– Collecting the data
– Evaluating and analyzing the data
– Disseminating information and
responding to queries
©2003 Prentice Hall, Inc.
To accompany A Framework for
Slide 15 in

16. Competitive Intelligence Systems
 Value analysis helps firms to select
competitors to attack and to avoid
– Customers identify and rate attributes
important in the purchase decision for
the company and competition
 Attacking strong, close, and bad
competitors will be most beneficial
©2003 Prentice Hall, Inc.
To accompany A Framework for
Slide 16 in

17. Designing Competitive Strategies
Major Strategies
 Market-Leader
 MarketChallenger
 Market-Follower
 Expanding the
total market
 Defending
market share
 Expanding
market share
 Market-Nicher
©2003 Prentice Hall, Inc.
To accompany A Framework for
Slide 17 in

18. Designing Competitive Strategies
 Expanding the Total Market:
– Targeting Product to New Users
Market-penetration
strategy
New-market strategy
Geographical-expansion strategy
– Promoting New Uses of Product
– Encouraging Greater Product Use
©2003 Prentice Hall, Inc.
To accompany A Framework for
Slide 18 in

19. Designing Competitive Strategies
Defending Market Share
 Position
defense
 Flank defense
 Counteroffensive
defense
 Preemptive
defense
 Contraction
defense
©2003 Prentice Hall, Inc.
 Mobile defense
To accompany A Framework for
Slide 19 in

20. Designing Competitive Strategies
 Before Attempting to Expand
Market Share, Consider:
– Probability of invoking antitrust
action
– Economic costs involved
– Likelihood that marketing mix
decisions will increase profits
©2003 Prentice Hall, Inc.
To accompany A Framework for
Slide 20 in

21. Designing Competitive Strategies
Major Strategies
 Market-Leader
 MarketChallenger
 Market-Follower
 Market-Nicher
©2003 Prentice Hall, Inc.
 First define the
strategic goals
and opponent(s)
 Choose general
attack strategy
 Choose specific
attack strategy
To accompany A Framework for
Slide 21 in

22. Designing Competitive Strategies
 General Attack Strategies:
– Frontal attacks match competition
– Flank attacks serve unmet market
needs or underserved areas
– Encirclement “blitzes” opponent
– Bypassing opponent and attacking
easier markets is also an option
©2003 Prentice Hall, Inc.
To accompany A Framework for
Slide 22 in

23. Competitive Markets
Specific Attack Strategies Include:
 Price-discount
 Lower-price goods
 Prestige goods
 Improved services
 Product
innovation
 Distribution
innovation
 Manufacturing
cost reduction
 Product proliferation
 Intensive advertising promotion
©2003 Prentice Hall, Inc.
To accompany A Framework for
Slide 23 in

24. Designing Competitive Strategies
Major Strategies
 Market-Leader
 MarketChallenger
 Market-Follower
 Market-Nicher
©2003 Prentice Hall, Inc.
 Imitation may be
more profitable
than innovation
 Four broad
strategies:
–
–
–
–
Counterfeiter
Cloner
Imitator
Adapter
To accompany A Framework for
Slide 24 in

25. Designing Competitive Strategies
Major Strategies
 Market-Leader
 MarketChallenger
 Market-Follower
 Market-Nicher
©2003 Prentice Hall, Inc.
 Niche specialties:
–
–
–
–
–
–
–
–
–
–
–
End-user
Vertical-level
Customer-size
Specific customer
Geographic
Product/product line
Product feature
Job-shop
Quality-price
Service
Channel
To accompany A Framework for
Slide 25 in

26. Balancing Customer and
Competitor Orientations
 Competitor-centered companies
evaluate what competitors are
doing, then formulate competitive
reactions
 Customer-centered companies
focus on customer developments
when formulating strategy
©2003 Prentice Hall, Inc.
To accompany A Framework for
Slide 26 in