1. COMPETITIVE BUSINESS STRATEGY
Besting one’s Rivals

2. How Do Firms Dominate their Rivals?
Collusion
Special knowledge about customers, products, or production techniques that enables them to make better products than other firms or make them at a lower cost
Government protection
Effective product-market strategies and tactics.

3. Goals of this class: You will know about
Identifying competitor strategies
Selecting competitors to attack or avoid
Understanding the conflicts between customer and competitor orientation

4. Basic Concepts Porter’s Five Forces -- first 3 focus on rivals
Identifying rivals
Understanding their objectives
Anticipating their reactions
Designing competitive intelligence systems

5. Five Forces Determining Segment Structural Attractiveness
Fig. 8.01
T30
Five Forces Determining Segment Structural Attractiveness
Potential Entrants
(Threat of
Mobility)
Suppliers
(Supplier power)
Industry
Competitors
(Segment rivalry)
Buyers
(Buyer power)
Substitutes
(Threats of
substitutes) 1

6. Product / Market Battlefield for Toothpaste
Fig. 8.03
Product / Market Battlefield for Toothpaste
Customer segmentation
Children / Teens
Age 19-35
Age 36+
Plain
toothpaste
Colgate-Palmolive
Procter & Gamble
Colgate-Palmolive
Procter & Gamble
Colgate-Palmolive
Procter & Gamble
Toothpaste
with fluoride
Colgate-Palmolive
Procter & Gamble
Colgate-Palmolive
Procter & Gamble
Colgate-Palmolive
Procter & Gamble
Gel
Colgate-Palmolive
Procter & Gamble
Lever Bros.
Colgate-Palmolive
Procter & Gamble
Lever Bros.
Colgate-Palmolive
Procter & Gamble
Lever Bros.
Product segmentation
Striped
Beecham
Beecham
Smoker’s
toothpaste
Topol
Topol 3

7. Strategic Groups in the Major Appliance Industry
Fig. 8.04
T33
Strategic Groups in the Major Appliance Industry
Group A
Narrow line
Lower mfg. cost
Very high service
High price
High
Group C
Moderate line
Medium mfg. cost
Medium service
Medium price
Quality
Group B
Full line
Low mfg. cost
Good service
Medium price
Group D
Broad line
Medium mrg. cost
Low service
Low price
Low
High
Low
Vertical Integration 4 4 4

8. Five Patterns of Target Market Selection
Fig. 9.05
T37
Five Patterns of Target Market Selection
Single-segment
concentration
Selective
specialization
Product
specialization
M1 M2 M3
M1 M2 M3
M1 M2 M3 P1 P2 P3 P1 P2 P3 P1 P2 P3
Market
specialization
Full market
coverage
M1 M2 M3
M1 M2 M3 P1 P2 P3 P1 P2 P3
P = Product
M = Market 8

9. Segment-by-Segment Invasion Plan
Fig. 9.06
T38
Segment-by-Segment Invasion Plan
Customer Groups
Airlines
Railroads
Truckers
Large
computers
Mid-size
computers
Product Varieties
Personal
computers
Company A
Company B
Company C 9

10. TACTICS
All’s Fair in Love & War?

11. GET THERE FIRST WITH THE MOST
Positioning
Entrenched products have several competitive advantages
Consumer awareness and product reputation
Production experience
Advantageous arrangements with suppliers, wholesalers, and retailers
Barriers to Entry

12. Barriers and Profitability
Fig. 8.02
T31
Barriers and Profitability
Exit barriers
Low
High
Low, stable
returns
Low, risky
returns
Low
Entry Barriers
High, stable
returns
High, risky
returns
High 2

13. THREATEN, BLUFF, LIE
Tacit -- take steps that CREDIBLY commit the firm to defend position --
Price, product, place, promotion
Example: Walmart -- we will not be undersold
Explicit THREATS-- if successful, will probably get you in trouble with law
LIES may not

14. EXPLOIT YOUR STRENGTHS TO HANDICAP RIVALS
ALLIANCES
Tacit example: GM
Explicit example: Wintel
Plus threat example: Microsoft
Government & Mafias
KNOWLEDGE
Market example: LiviCo/Mannesman
Resource example: Shell, Exxon

15. UTILIZE SURPRISE AND MISDIRECTION
DO THE UNEXPECTED (pursue avenues that the conventional wisdom rejects -- research)
SEND ambiguous or deliberately misleading signals about your intentions
KNOW YOUR RIVAL’ TENDANCIES AND TELLS -- formulas and recipes can be identified, anticipated, and defeated

16. DON’T GET SURPRISED OR MISLEAD
KNOW YOUR CUSTOMERS AND YOUR BUSINESS and don’t get distracted by your RIVALS (Execution usually trumps strategy)
SWOT

17. The Costs of Competitive Strategy
Distracts attention from core business
Corrupts
Behavior tends to spill over into relationships with customers, suppliers, and employees
Poisons those relationships
Criminal behavior
Leads to distorted aims -- winning as beating rivals rather than increasing value