1. Dealing with Competition Chapter 11
Market Concept of Competition: companies, products, and/or services that satisfy the same customer need
Word processing software provides “writing ability” – a need that can be satisfied by pencils, pens, or typewriters

2. Competition Analyzing competition (p. 348)
1. Share of market – competitor’s share of total market
2. Share of mind – “name the first company that comes to mind in this industry”
3. Share of heart – “name the company from which you would prefer to buy the product”
Companies that make steady gains in mind share and heart share will inevitable make gains ____________________
________________________

3. Competition
Value
Benchmarking
Mission Competition
Customer
Company

4. Hypothetical Market Structure & Strategies (p. 349)
Market Leader (40%)
Market Challenger (30%)
Market Follower (20%)
Market Nicher (10%)
Market Share: % of total industry sales accounted for by one firm
Market Leader: largest share of the product market

5. Market Leader Strategies
1. Expand total market
Market leader has most to gain from expanded market:
Increase usage of product (regardless of whose brand is chosen), find new customers, more usage

6. Market Leader Strategies
Expand total market
New Customers: Starbucks – company-oriented retail stores; supermarkets; Frappuccino and ice cream / joint ventures
More Usage: larger package size; new uses and application – ____________________________

7. Market Leader Strategies
2. Defending Market Share
Continuous innovation – new product and customer service, distribution effectiveness, cost cutting
Defense strategies (p. 353 – 354)
Mobile defense – market diversification: expand into unrelated industries; _________________
__________________________

8. Market Leader Strategies
3. Expand Market Share
Increase promotions; offer superior value – price, quality, options, features, etc.

9. Market Challenger Strategies
Market Challenger: firm that occupies second, third, and lower ranks in an industry (runner-up): Burger King, Pepsi Cola
Attack Market Leader and Other Competitors
Increase (take away) market share
Better products/service
Comparative advertising
Average or low quality at much lower price

10. Market Challenger Strategies
Attack Strategies (p )
Bypass Attack – diversify into unrelated markets; new geographical markets; leapfrogging into new technologies: Pepsi bypassed Coke by (1) purchasing Tropicana vs. Coke’s Minute Maid and (2) Quaker Oats which owns Gatorade vs. Coke’s Powerade)
____________________________________
_______________________

11. Market Follower Strategies
Imitate
- Avoid risk/cost of introducing new product
- Adapt or improve leader’s products
_________________________________

12. Market-Nicher Strategies
Specialize
Leader of a small market or niche
Nicher most knowledgeable about their customers; can best meet their needs
Virgin Mobile targets young phone users – no contracts, no hidden fees

13. Application Understand your company: mission, objectives, resources
Understand your competitors: who are they? what value do they offer?
Understand your customer: what do they value?

14. Setting Product Strategy (Chapter 12)
Procter & Gamble's Product Mix
Detergents
Toothpaste
Bar Soap
Disposable
Paper Products
Diapers
Width – number of product lines (5 lines)
Length – total number of items the company carries product lines

15. Product Management Challenge
Should product line be extended, maintained, or reduced? Why?
Should new product lines be added to the mix? Should existing lines be deleted?
Company Objectives: __________________________
Projections/trends: __________________________________
Satisfy customers

16. Product line length issues
Lengthening product lines could mean higher market share and market growth (customer satisfaction)
But, longer lines result in : design, engineering, inventory carrying, new promotion, etc.

17. Product line length issues
Growth strategies: line stretching (_____________)
downmarket stretch: enter low end of the market (Sony Value Line)
upmarket stretch: enter high-end (Toyota-Lexus; Honda-Acura)
two-way stretch: both directions (Marriott: Renaissance, Courtyard, Fairfield Inns)

18. Product line length issues
Line modernization: improvements to encourage customer _______ to higher valued, higher priced items __________________________
Pruning: product from the line
Product is not selling
Limited production capacity