Creating

Competitive Advantage

Prof. Aparna Kanchan

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Objective Outline
Competitor Analysis
1 Discuss the need to understand competitors as well as
customers through competitor analysis.

Competitive Strategies
Explain the fundamentals of competitive marketing
2 strategies based on creating value for customers.

Balancing Customer and Competitor

Orientations
Illustrate the need for balancing customer and
3 competitor orientations in becoming a truly market-
centered organization.

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Competitor Analysis
 Competitor analysis is the process of identifying key
competitors; assessing their objectives, strategies,
strengths and weaknesses, and reaction patterns; and
selecting which competitors to attack or avoid.
 Competitive marketing strategies strongly position the
company against competitors and give the company the
strongest possible strategic advantage.

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Identifying Competitors

 Companies actually face a much wider range of

competitors.

The company might define its competitors as all firms with

the same product or class of products.

Even more broadly, competitors might include all

companies making products that supply the same service.

Finally, and still more broadly, competitors might include

all companies that compete for the same consumer share of
wallet.

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Assessing Competitors

 Having identified the main competitors, marketing

management now asks:
• What are the competitors’ objectives?
• What does each seek in the marketplace?
• What is each competitor’s strategy?
• What are various competitor’s strengths and weaknesses,
and how will each react to actions the company might take?

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Determining Competitor’s Objectives
 The company wants to know the relative importance that
a competitor places on
Current
profitability

Market
Service
share
leadership
growth

Technological
Cash flow
leadership

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Assessing Competitors’ Strengths
and Weaknesses
 Or they can benchmark themselves against other
firms, comparing the company’s products and
processes to those of competitors or leading firms
in other industries to identify best practices and
find ways to improve quality and performance.

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Estimating Competitors’ Reactions

 Next, the company wants to know: What will our

competitors do?
 Knowing how major competitors react gives the
company clues on how best to attack competitors
or how best to defend its current positions.

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Selecting Competitors to Attack and
Avoid
 A company has already largely selected its major
competitors through prior decisions on customer
targets, positioning, and its marketing mix
strategy.

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Strong or Weak Competitors
 Customer value analysis is an analysis conducted to
determine what benefits target customers value and how
they rate the relative value of various competitors’ offers.
 In conducting a customer value analysis, the company
first identifies the major attributes that customers value
and the importance customers place on these attributes.
 Next, it assesses its performance against competitors on
those valued attributes.

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Close or Distant Competitors

 Most companies will compete with close

competitors—those that resemble them most—
rather than distant competitors.
 At the same time, the company may want to
avoid trying to “destroy” a close competitor.

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Good or Bad Competitors

 The existence of competitors

Good
results in several
strategic benefits. competitors
Good competitors play by the rules of the industry.
Competitors may share the costs of market and product
1
development and help legitimize new technologies.
Bad
They may serve competitors
less-attractive segments or lead to more
2
product
• Bad differentiation.
competitors, in contrast, break the rules.
• They try to buy share rather than earn it, take large
3 risks, and play
Finally, by theirmay
competitors ownhelp
rules.
increase total demand.

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Finding Uncontested Market Spaces
 Rather than competing head to head with established
competitors, many companies seek out unoccupied
positions in uncontested market spaces.
 They try to create products and services for which there
are no direct competitors.

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Designing a Competitive Intelligence System
The competitive intelligence system first identifies
the vital types of competitive information needed
and the best sources of this information.

Then, the system continuously collects information

from the field (sales force and suppliers)and
published data (speeches and online databases).

Next the system checks the information for validity

and reliability, interprets it, and organizes it in an
appropriate way.

Finally, it sends relevant information to decision

makers and responds to inquiries from managers
about competitors.

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COMPETITIVE STRATEGIES
Competitive Strategies

 Having identified and evaluated its major

competitors, a company now must design broad
marketing strategies by which it can gain
competitive advantage.

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Approaches to Marketing Strategy

 In fact, approaches to marketing strategy and

practice often pass through three stages:
Entrepreneurial
marketing
• Interpersonal
It involves visualizing an opportunity and constructing and
marketing flexible strategies.
implementing
• They now need to reestablish within their companies the
entrepreneurial
Formulated spirit and actions that made them successful in
the first place.
marketing
• They develop formal marketing strategies and adhere to them
closely.

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 Basic Competitive Strategies –
Michael Porters Generic Strategies
 The three winning strategies are as follows:

• Here the company works hard to achieve the lowest

Overall
production and distribution costs.
cost
• Low costs let it price lower than its competitors and win
leadership
a large market share.

• Here the company concentrates on creating a highly

Differenti
differentiated product line and marketing program so that
ation
it comes across as the class leader in the industry.

• Here the company focuses its effort on serving a few

Focus market segments well rather than going after the whole
market.

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 Basic Competitive Strategies
 Companies can pursue any of three strategies—called
value disciplines—for delivering superior customer value.
• The company provides superior value by leading its
Operation
industry in price and convenience.
al
• It works to reduce costs and create a lean and efficient
excellence
value delivery system.
• The company provides superior value by precisely
Customer segmenting its markets and tailoring its products or
intimacy services to exactly match the needs of targeted
customers.
• The company provides superior value by offering a
Product continuous stream of leading-edge products or services.
leadership • Product leaders are open to new ideas, relentlessly pursue
new solutions, and work to get new products to market

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quickly.
Competitive Positions
Different The firm in an industry
competitive Market Leader with the largest market
positions share.

A runner-up firm that is

Market challenger fighting hard to increase its
market share in an industry.

A runner-up firm that

Market follower wants to hold its share in
an industry without rocking
the boat.
A firm that serves small
Market nicher segments that the other
firms in an industry
overlook or ignore.

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Hypothetical
Market Structure

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2
Competitive Strategy

Competitive Positions
Expanding the total demand
• Finding new users
Market Leader • Discovering and promoting new
product uses
Market • Encouraging greater product usage
Challenger Protecting market share
Market Follower • Many considerations
• Continuous innovation
Market Nicher Expanding market share
• Profitability rises with market
share

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Expanding total marketing demand
Expanding Total Demand

 Market leaders can expand the market by

developing new users, new uses, and more usage
of its products.

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PROTECTING MARKET SHARE

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Protecting Market Share

 There are some steps to protect current market:

• First, it must prevent or fix weaknesses that provide opportunities
for competitors.

• It must always fulfill its value promise and work tirelessly to keep
strong relationships with valued customers.

• Its prices must remain consistent with the value that customers see
in the brand.

• But the best defense is a good offense, and the best response is
continuous innovation.

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PROACTIVE MARKETING

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Proactive Marketing

 Responsive Marketing – Finds a stated need and

fills it
 Anticipative Marketing – looks ahead at needs
customers may have in the future
 Creative Marketing –discovers solutions
customers may not have asked for but to which
they enthusiastically respond

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Protecting Market Share

Responsive Anticipation

Creative Anticipation

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6
DEFENSIVE MARKETING

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Types of Defense Strategies
Flank
Pre-emptive HUL -
SBI’s ATM in rural Wheel,Rin,Sunlight
areas Contraction
Microsoft Planned, Strategic
“Preannouncements” Withdrawal

Counter Offensive Position:

Fed Ex V/s UPS HUL – Surf excel
Economic or Political Clout
Premature upgrade
announcements
Mobile
Market Broadening an
Market Diversification
Eg: Petroleum cos- Energy
ITC- Foods

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EXPANDING MARKET SHARE

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Expanding Market Share
 It appears that profitability increases as a business gains
share relative to competitors in its served market.
 And it has achieved this high share in its served market
because it does other things right, such as producing high-
quality products, creating outstanding service
experiences, and building close customer relationships.

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The Concept of Optimal Market Share

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Competitive Strategy

Competitive Positions Option 1: challenge the market

leader
• High-risk but high-gain
• Sustainable competitive advantage
Market Leader over the leader is key to success
Market Option 2: challenge firms of
Challenger the same size, smaller size or
challenge regional or local
Market Follower firms
Market Nicher Full frontal vs. indirect
attacks

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 Market Challenger Strategies-
Challenge the Market Leader
 They can challenge the market leader and other
competitors in an aggressive bid for more market share
(market challengers). Or they can play along with
competitors and not rock the boat (market followers).
 Although it might seem that the market leader has the
most going for it, challengers often have what some
strategists call a “second-mover advantage.”
 The challenger observes what has made the market leader
successful and improves on it.

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Market Challenger Strategies

 Define the strategic objective ( usually increase market

share) and opponents ( market leader? Firm its own size? small
local and regional firms)

 Choose a general attack strategy

 Choose a specific attack strategy

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https://www.youtube.com/watch?v=1GCr2WzqcCE
 General Attack Strategies
 Frontal attack- matches its opponent’s product, advertising,
price, and distribution
 Flank attack - identifying shifts that are causing gaps to
develop, then rushing to fill the gaps
 Encirclement attack - capture a wide slice of territory by
launching a grand offensive on several fronts
 Bypass attack - Bypassing the enemy altogether to attack
easier markets instead offers three lines of approach:
diversifying into unrelated products, diversifying into new
geographical markets, and leapfrogging into new technologies.
 Guerilla warfare - attacks consist of small, intermittent
attacks, conventional and unconventional

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Specific Attack Strategies

Price discounts Improved services

Lower-priced goods Distribution
Value-priced goods innovation

Prestige goods Manufacturing-cost

reduction
Product proliferation
Intensive advertising
Product innovation promotion

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Pepsi is an
example of
market
challenger
that has
chosen to use
a full frontal
attack

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Competitive Strategy

Competitive Positions Follow the market leader

• Focus is on improving profit
instead of market share
Market Leader • Many advantages:
• Learn from the market
Market leader’s experience
Challenger • Copy or improve on the
Market Follower leader’s offerings
• Strong profitability
Market Nicher

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Market Follower Strategies

The counterfeiter- Duplicates the leaders product & packages

The cloner- emulates the leader’s products, name, and
packaging, with slight variations
The imitator - copies some things from the leader but
differentiates on packaging, advertising, pricing, or location.
The adapter - takes the leader’s products and adapts or
improves them

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Market Nicher Strategies
 An ideal market niche is big enough to be profitable and
has growth potential.
 Perhaps most importantly, the niche is of little interest to
major competitors.
 A market nicher can specialize along any of several
market, customer, product, or marketing mix lines.

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Niche Specialist Roles

End-User Specialist Product-Line

Vertical-Level Specialist
Specialist Job-Shop Specialist
Customer-Size Quality-Price
Specialist Specialist
Specific-Customer Service-Specialist
Specialist Channel Specialist
Geographic Specialist

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Balancing Customer and Competitor
Orientations

Competitor-
Customer-centered
Market-centered
centered company
company
company
• A company whose moves are mainly based on competitors’
• actions
A company that focuses on customer developments in
and reactions.
• •OnAthe
company
designing its that
positive pays
marketing
side, thebalanced attention
strategies
company toa both
and delivering
develops customers
superior
fighter
and competitors
value target in
to itswatches
orientation, designing
customers.
for its marketing
weaknesses in its ownstrategies.
position, and
• searches
It’s a better position to identify
out competitors; new opportunities and set
weaknesses.
• Onlong-run strategies
the negative side,that
the make sense.
company becomes too reactive.

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