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COMPETITIVE BUSINESS STRATEGY Besting one’s Rivals.

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Presentation on theme: "COMPETITIVE BUSINESS STRATEGY Besting one’s Rivals."— Presentation transcript:

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 T30 Fig Potential Entrants (Threat of Mobility) Buyers (Buyer power) Suppliers (Supplier power) Industry Competitors (Segment rivalry) Substitutes (Threats of substitutes)

6 Product / Market Battlefield for ToothpasteT32 Fig Topol Plain toothpaste Toothpaste with fluoride Gel Smoker’s toothpaste Striped Colgate-Palmolive Procter & Gamble Colgate-Palmolive Procter & Gamble Colgate-Palmolive Procter & Gamble Lever Bros. Beecham Colgate-Palmolive Procter & Gamble Lever Bros. Colgate-Palmolive Procter & Gamble Colgate-Palmolive Procter & Gamble Colgate-Palmolive Procter & Gamble Colgate-Palmolive Procter & Gamble Colgate-Palmolive Procter & Gamble Lever Bros. Beecham Product segmentation Customer segmentation Children / TeensAge 19-35Age 36+

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

8 Five Patterns of Target Market Selection Fig T37 Single-segmentconcentrationSelectivespecializationProductspecialization M1 M2 M3 P1 P2 P3 Full market coverage Marketspecialization M1 M2 M3 P1 P2 P3 P1 P2 P3 M1 M2 M3 P1 P2 P3 P1 P2 P3 P = Product M = Market

9 Segment-by-Segment Invasion Plan T38 Fig Customer Groups TruckersRailroadsAirlines Company B Company A Largecomputers Product Varieties Personalcomputers Mid-sizecomputers Company C

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 T31 Low, stable returns High, risky returns Low, risky returns High, stable returns Low High LowHigh Fig Entry Barriers Exit barriers

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


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