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Chapter 3 Sections 3.1 & 3.2

The Competitive Market

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If businesses were not allowed to set up operations and compete with other businesses in the marketplace, how would this affect your lifestyle?

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Canadian Regulations - The Canadian Government insists on competition

therefore they regulate monopolies; and they legislate against trade practices that limit competition unfairly.

such as price fixing, restrictive mergers etc.

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Types of Competition

MonopolisticMonopolistic

CompetitionCompetitionOligopolyOligopoly

OneOne

SellersSellers

ManyMany

MonopolyMonopoly PerfectPerfect CompetitionCompetition

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Types of Competition

MonopolisticMonopolistic

CompetitionCompetitionOligopolyOligopoly

OneOne

SellersSellers

ManyMany

MonopolyMonopoly PerfectPerfect CompetitionCompetition

NB Power

Gas Companies

Coke & Pepsi

Fast Food Restaurants

Agriculture

Retail Clothing Stores

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Monopoly

market in which a single company has complete market control

Bell Canada was a monopoly until the 1980s because it was the sole provider of long- distance phone service. Until the 1980s, long-distance phone rates were much higher than in recent years. When more providers of long-distance phone service entered the market prices became competitive.

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Oligopoly

market with a small number of large companies, each with a substantial amount of market control

The retail gas market is a good example of an oligopoly because a small number of firms control a large majority of the market.

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Monopolistic Competition

market consisting of a large number of companies, each having a chance for a degree of market control.

The best examples of monopolistic competition come from retail trade, including restaurants, clothing stores, and convenience stores.

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Perfect Competition

market characterized by a large number of small companies

no one company controls the market

requires government regulation

Markets for many agricultural products are highly competitive because there are many sellers. For example, many farmers grow apples; no apple grower can monopolize the market.

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Benefits of Competition

Encourages the creation of new businesses; contributes to the economyWide selection of goods & services offered to consumers Encourages service businesses to increase their level of customer service; dissatisfied customers will go somewhere else.Leads to better products at better prices, new technology that improves our standard of living, increased productivity & improved service & selection.

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Competition & Productivity

The best way to compete is to charge less than your competitors.

To do this businesses must become more efficient, use fewer resources, or make better deals with suppliers. (Research and Development Departments, R&D)

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Direct & Indirect Competition

Direct competition - Products that are similar. Ex: If you are thirsty and you want a bottle of water, any brand of bottled water will be competing directly for you money. Pop would be a good substitute, but not as direct as water.

Indirect competition – all the other products that you could buy for the price of a bottle of water, e.g. a chocolate bar, represent indirect competition.

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Comparing Direct & Indirect Competitors

Business/ Product

Direct Competitors

Indirect Competitors

Toothpaste

SUV

American Eagle

Credit Card

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Competitive AdvantagesSection 3.2

Businesses always look for advantages over their competition.

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Sustainable Competitive Advantages

methods by which a business holds on to its customers, in spite of competition.

There are four ways a company can do this:

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Sustainable Competitive Advantages Continued

1. Unique Selling Proposition Video - (USP) – one thing that a company’s product has that competing companies do not and are not likely to develop. (see page 89 in text book)

2. Lowering production costs - by using cost-efficient, high-technology manufacturing systems & processes to reduce costs.

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Sustainable Competitive Advantages Continued

3. Servicing a Niche Market – providing a product or service for a very small market which keeps competitors out. (Billing software for Dentists)

4. Creating Customer Loyalty – “It can take years to develop customer loyalty but only seconds to lose it forever”. (relationship marketing)

Video

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Non-Sustainable Competitive Advantages

are those that can be used by competitors to shift sales in their direction for a short period of time.There are 6 types:

1. Promotion2. Placement3. Quality4. Benefits of use5. Price6. Design features

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Promotion

companies want to create brand awareness through promotions. (ex. “roll up the rim to win”) Tim Hortons achieved top-of-the-mind awareness with this promo. (consumers are more likely to think about one brand of product or service before they think of another one)

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Placement

To compete, a product must have a placement in the market.

The more places a consumer can get an item the more competitive it is.

Using a unique placementJones Soda

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Quality

A product can compete with other similar products by being the best.

Businesses are constantly trying to make their products better: stronger, faster, lighter, easier to open, easier to close etc.

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Benefits of Use

a product that can do more or perform better than another product will have a competitive advantage until their competitors come up with something better.Example the new fully automatic Cuisinart Burr & Thermal Coffee Maker has an integrated burr grinder that automatically grinds whole beans just before coffee is brewed. It even lets you customize your coffee by choosing a strong, medium or mild brew to suit your taste.

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Price

If all other features are equal then the company that has the lowest price will have an advantage, at least for awhile.

If two products are different, then price is not the main competitive adv.

Price adv is difficult to sustain, as price reductions occur for many reasons.

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Design Features

a design that catches a consumers eye or a design that they prefer will give the product a competitive advantage.

Examples:Package designs (Squeezable bottles)

Clothing

Clocky, the alarm clock that runs away to get you out of bed. This cool robotic alarm clock will roll off your night stand out of reach and keep moving 'til you catch him.

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Activity: Identify Advertising Slogans

To gain a competitive advantage, companies try to use slogans or jingles to create top of the mind awareness.

How many current advertising slogans can you identify? Take a minute and write down as many advertising slogans as you can.

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Review the following list of past and present

advertising slogans and identify as many as you can.

Slogan Brand Name of Product

Think Different

When you care enough to send the very best

Look, Ma, no cavities

M'm! M'm! Good!

A diamond is forever

Put a tiger in your tank

When it absolutely, positively has to be there overnight

Nothing runs like a Deere

Snap! Crackle! Pop!

Because I'm worth it

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Correct Answers Slogan Brand Name of

Product

Think Different Apple Macintosh

When you care enough to send the very best Hallmark

Look, Ma, no cavities Crest

M'm! M'm! Good! Campbell’s Soup

A diamond is forever DeBeers/Charm

Put a tiger in your tank Esso

When it absolutely, positively has to be there overnight

Federal Express

Nothing runs like a Deere John Deere

Snap! Crackle! Pop! Kellogg’s Rice Krispies

Because I'm worth it L’Orea

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Another strategy used by marketers to create top-of-the-mind awareness for their brand is creating a jingle.

Small children often sing these even when they do not know what the product is.

See if you can identify the brand name for each of the following jingles.

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Top Advertising Jingles

Jingle Brand Name of Product

You deserve a break today

It’s the real thing

I wish I was an ______ Wiener

Double your pleasure, double your fun

Be all you can be

A little dab’ll do ya

____ Cola hits the spot

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Correct Answers

McDonalds - Jingle

Coca Cola - Jingle

Oscar Meyer - Jingle

Wrigley’s Double-mint gum -

US Army

Brylcreem - Jingle

Pepsi Cola - Jingle