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Competitive
Advantage
Chapter 18
Objectives
Learn how to understand competitors as
well as customers via competitor
analysis.
Learn the fundamentals of competitive
marketing strategies based on creating
value for customers.
Realize the need for balancing customer
and competitor organizations in order to
become a truly market-centered
organization.
18- 2
c
Intel
Heavy focus on
product and
advertising innovation
and R&D investments
Changing market
needs have
challenged Intel to
adapt
Intel is capitalizing on
the Internet now
18- 3
Definition
Competitive Advantage
An advantage
over competitors
gained by offering
consumers greater
value than
competitors offer.
18- 4
Definition
Competitive Analysis
The process of identifying key
competitors; assessing their
objectives, strategies, strengths
and weaknesses, and reaction
patterns; and selecting which
competitors to attack or avoid.
18- 5
Figure 18-1:
Steps in Analyzing
Competitors
18- 6
Competitor Analysis
Steps in the
Process:
Identifying
Competitors
Assessing
Competitors
Selecting
Competitors to
Attack or Avoid
can help
maps
18- 7
230-year-old
Encyclopedia
Britannica
viewed itself as
competing with
your publishers
of printed
encyclopedias.
Big mistake! Its
real competitors
were software
encyclopedias
and the Internet.
18- 8
Figure 18-2:
Competitor Map
18- 9
Discussion Question
Create a competitor
map for one of the
following:
WalMart
McDonalds
Nike
Starbucks
Google
18- 10
Competitor Analysis
Steps in the
Process:
Identifying
Competitors
Assessing
Competitors
Selecting
Competitors to
Attack or Avoid
Determining
competitors objectives
Identifying competitors
strategies
Strategic groups
Assessing competitors
strengths and
weaknesses
Benchmarking
Estimating competitors
reactions
18- 11
Competitor Analysis
Steps in the
Process:
Identifying
Competitors
Assessing
Competitors
Selecting
Competitors to
Attack or Avoid
Strong or weak
competitors
Customer value analysis
Close or distant
competitors
Most companies compete
against close competitors
Good or Bad
competitors
The existence of
competitors offers several
strategic benefits
18- 12
Competitive Strategies
Basic Winning Competitive
Strategies: Porter
Overall cost leadership
Lowest production and
distribution costs
Differentiation
Creating a highly
differentiated product line
and marketing program
Focus
Effort is focused on serving
a few market segments
18- 13
Hohner has
successfully
implemented a
focus strategy to
capture an 85%
share of the
harmonica
market.
18- 14
Competitive Strategies
Basic Competitive Strategies:
Value Disciplines
Operational excellence
Customer intimacy
Product leadership
Figure 18-3:
Hypothetical
Market Structure
18- 16
Competitive Strategy
Competitive
Positions
Market Leader
Market
Challenger
Market
Follower
Market Nicher
Competitive Strategy
WD-40 has a knack
for developing new
uses for its product.
What other brands
have adopted a
similar strategy?
WD40
18- 18
Competitive Strategy
Competitive
Positions
Market Leader
Market
Challenger
Market
Follower
Market Nicher
Pepsi is an
example of
market
challenger
that has
chosen to use
a full frontal
attack
18- 20
Competitive Strategy
Competitive
Positions
Market Leader
Market
Challenger
Market
Follower
Market Nicher
from the
market leaders
experience
Copy or improve on
the leaders offerings
Strong profitability
18- 21
Dial Corporation
successfully
uses a market
follower strategy
18- 22
Competitive Strategy
Competitive
Positions
Market Leader
Market
Challenger
Market
Follower
Market Nicher
Serving market
niches means
targeting
subsegments
Good strategy for
small firms with
limited resources
Offers high margins
Specialization is key
By market, customer,
product, or marketing
mix lines
18- 23
Balancing Customer
and Competitor
Orientations
Companies can become so
competitor centered that they
lose their customer focus.
Types of companies:
Competitor-centered companies
Customer-centered companies
Market-centered companies
18- 24
Nintendo
a. Wii hyperlink
b.
Microsoft
a. Xbox 360
c.
Sony
a. Play Station
18- 25
18- 26
Competitive Rivalry
number of competitors
rate of industry growth
intermittent industry overcapacity
exit barriers
diversity of competitors
informational complexity and
asymmetry
brand equity
fixed cost allocation per value added
level of advertising expense
18- 28
Supplier Power
supplier switching costs relative to
firm switching costs
degree of differentiation of inputs
presence of substitute inputs
supplier concentration to firm
concentration ratio
threat of forward integration by
suppliers relative to the threat of
backward integration by firms
cost of inputs relative to selling price
of the product
18- 29
Buyer Power
buyer concentration to firm concentration
ratio
bargaining leverage
buyer volume
buyer switching costs relative to firm
switching costs
buyer information availability
ability to backward integrate
availability of existing substitute products
buyer price sensitivity
price of total purchase
18- 30
Threat of Substitution
buyer propensity to
substitute
relative price performance of
substitutes
buyer switching costs
perceived level of product
differentiation
18- 31