1. Dealing with Competition Marketing Management, 13 th ed 11

2. Chapter Questions (cont.) How do marketers identify primary competitors? How should we analyze competitors’ strategies, objectives, strengths, and weaknesses? How can market leaders expand the total market and defend market share? Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 11-2

3. Chapter Questions (cont.) How should market challengers attack market leaders? How can market followers or nichers compete effectively? Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 11-3

4. Five Forces Determining Segment Structural Attractiveness Threat of intense segment rivalry—cellular phone market 8-4

5. Five Forces Determining Segment Structural Attractiveness Threat of new entrants—Can come from anywhere 8-5

6. Five Forces Determining Segment Structural Attractiveness Threat of substitute products—Greyhound and Amtrak profitability threatened by rise of air travel 8-6

7. Five Forces Determining Segment Structural Attractiveness Threat of buyers’ growing bargaining power— Wal-Mart buying power 8-7

8. Five Forces Determining Segment Structural Attractiveness Threat of Suppliers’ growing bargaining power— ExxonMobil, Shell, BP, and Chevron-Texaco are at the mercy of oil-supplying cartels such as OPEC. 8-8

9. Five Forces Determining Segment Structural Attractiveness Threat of intense segment rivalry—cellular phone market Threat of new entrants—Can come from anywhere Threat of substitute products—Greyhound and Amtrak profitability threatened by rise of air travel Threat of buyers’ growing bargaining power— Wal-Mart buying power Threat of Suppliers’ growing bargaining power— ExxonMobil, Shell, BP, and Chevron-Texaco are at the mercy of oil-supplying cartels such as OPEC. 8-9

10. Five Forces Determining Segment Structural Attractiveness 8-10

11. Identifying Competitors 8-11

12. Industry Concept of Competition Number of sellers and degree of differentiation Entry, mobility, and exit barriers Cost structure Degree of vertical integration Degree of globalization 8-12

13. Industry Concept of Competition 8-13 Pure Monopoly Oligopoly Monopolistic Competition Pure Competition

14. A Competitor’s Expansion Plans 8-14

15. Analyzing Competitors 8-15 Share of market—target market Share of mind--% of customers who names companies Share of heart--% of customers who prefer a company

16. Steps in Benchmarking—art of learning from companies that perform certain tasks better than other companies Determine which functions or processes to benchmark Identify the key performance variables to measure Identify the best-in-class companies Measure the performance of best-in- class companies Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 11-16

17. Steps in Benchmarking (cont.) Measure the company’s performance Specify programs and actions to close the gap Implement and monitor results Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 11-17

18. Expanding the Total Market 8-18 New customers More usage

19. Six Types of Defense Strategies Position Defense—occupying the most desirable market spaces in the consumers’ minds (e.g., Procter & Gamble—Tide detergent; Crest Toothpaste—cavity prevention; Pampers diapers—dryness) Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 11-19

20. Six Types of Defense Strategies Flank—erect outpost to protect a weak front (e.g., Smirnoff attacked by low-priced competitor Wolfschmidt, Smirnoff introduce Relska to compete with Wolfschmidt and Popov to sell less than Wolfschmidt) Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 11-20

21. Six Types of Defense Strategies Preemptive—attack before the enemy starts its offense (e.g., Bank of America has 17M ATMs and 5,700 retail branches) Israel hints at pre-emptive strike on Iran Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 11-21

22. Six Types of Defense Strategies Counteroffensive—meet the attacker frontally or hit its flank (i.e., invade the attacker’s main territory so that it will pull back to defend it) (e.g., FedEx watched UPS successfully invade its airborne delivery system, FedEx invested heavily in ground delivery service to challenge UPS on its home turf) Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 11-22

23. Six Types of Defense Strategies Mobile—leader stretches its domain over new territories that can serve future centers for defense and offense; Market broadening (e.g., BP recast itself from oil to energy); Diversification (e.g., Reynolds and Philip Morris moved into new industries—beer, liquor, soft drinks and frozen foods). SPYDER Mobile Firing Unit Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 11-23

24. Six Types of Defense Strategies Contraction—giving up weaker territories and reassigning resources to stronger territories (e.g., Sara Lee spun off products that accounted for 40% of its profits, such as Hanes hosiery brand, to concentrate on food brand) Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 11-24

25. Six Types of Defense Strategies 8-25

26. Factors Relevant to Pursuing Increased Market Share Possibility of provoking antitrust action-- monopoly Economic cost—market share might exceed value Pursuing the wrong marketing-mix strategy—may be irrelevant to target customers The effect of increased market share on actual and perceived quality—dilute brand equity by putting a strain on resources. 8-26

27. Other Competitive Strategies Market challengers Attack the market leader (e.g., Miller Lite attacked Bud Lite on product quality) Attack firms of its own size and are not doing the job and are underfinanced Attack small local and regional firms Market followers Market niches Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 11-27

28. Market Challenger Strategies Define the strategic objective and opponents Choose a general attack strategy Choose a specific attack strategy Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 11-28

29. General Attack Strategies Frontal attack—Matching (e.g., Helene Curtis is good at convincing the market that “Suave” and “Finese” are equal in quality but a better value than higher-priced brands) Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 11-29

30. General Attack Strategies Flank attack—Geographic (e.g., Internet has siphoned newspaper readers and advertisers in many markets, Independent News & Media sells a majority of its 175 newspaper and magazine titles in cities where the economy is strong but the Internet is still relatively weak—Ireland, South Africa, Australia, New Zealand, and India Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 11-30

31. General Attack Strategies Encirclement attack--Blitz the territory (e.g., Sun Microsystems licensed its java software to hundreds of companies and many software developers to make a stand against Microsoft) Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 11-31

32. General Attack Strategies Bypass attack--Unrelated product (e.g. Pepsi rolled out Aquafina Bottled water before Coke introduced Dasani brand), new geographically and new technology (e.g., Google search overtook Yahoo) Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 11-32

33. General Attack Strategies Guerilla warfare--Small, intermittent attacks (e.g., Princeton Review successfully challenged Kaplan Educational Centers for test preparation) Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 11-33

34. Pepsi buys Gatorade in a Bypass Strategy 8-34

35. Specific Attack Strategies Price discounts Lower-priced goods- lower quality Value-priced goods— low price and high quality—Southwestern Airlines Prestige goods—high quality and high price-- Mercedes Product proliferation— large product variety— Baskin-Robbins Product innovation— improvement or breakthrough—3M Improved services—new or better services--Avis Distribution innovation—developing a new channel--Avon Manufacturing-cost reduction—Lower production costs Intensive advertising promotion—increased spending 8-35

36. Market Follower Strategies 8-36 Counterfeiter (Duplication) Rolex Cloner (Emulates) Corn Flakes Imitator (Copy/Differentiation) Adapter (Modifies or improves)

37. Balancing Orientations Competitor-centered-- Reactive fighter Customer-centered-- focused on Customer Developments Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 11-37