3- ms mms 2011

7/30/2019 3- MS MMS 2011

1/20

2011 MARKETING STRATEGY MMM 3rd

YEAR SEM IPROF. MOHAN B.RAO

FOR RESTRICTED CIRCULATION ONLY1

COMPETITIVE STRATEGY

7/30/2019 3- MS MMS 2011

2/20

2

Competitor analysis -- levels of competition

Brand Competition

Industry Competition

Companies offering acloselysimilar product and /or services to the

same customer within a price/ value

range

All companies making thesameProduct class.

Form Competition

Generic Competition

All companies manufacturing

products that supply thesame utility

or requirement

All companies competing for a similar

price / value share of consumer wallet.

2011

MARKETING STRATEGY MMM 3rd YEAR SEM I

PROF. MOHAN B.RAOFOR RESTRICTED CIRCULATION ONLY

7/30/2019 3- MS MMS 2011

3/20

3

From Competitors to Competitive Dynamics

2011 MARKETING STRATEGY MMM 3

rd


FOR RESTRICTED CIRCULATION ONLY

7/30/2019 3- MS MMS 2011

4/20

4

A Model of Competitive Rivalry

2011 MARKETING STRATEGY MMM 3

rd



7/30/2019 3- MS MMS 2011

5/20

5

A Framework of Competitor Analysis

2011 MARKETING STRATEGY MMM 3rd YEAR SEM I

PROF. MOHAN B.RAO


7/30/2019 3- MS MMS 2011

6/20

6

Competitive Rivalry

Important to understand competitors awareness,motivation and ability in order to predict the likelihood of anattack study likelihood of attack factors

What are the strategicand tacticalactions?

Competitive Action Strategic or tactical action firm takes to build or defend its

competitive advantages or improve its market position

Competitive Response Strategic or tactical action the firm takes to counter effects of

a competitor's action Tactical Action (or Response)

Market-based move the firm takes in order to fine-tune astrategy


PROF. MOHAN B.RAO


7/30/2019 3- MS MMS 2011

7/20

7

Competitive Dynamics: 3 Market Cycles

1. Slow-Cycle Markets Markets in which the firm's competitive advantages are

shielded from imitation for long periods of time, and in which

imitation is costly

Build a one-of-a-kind competitive advantage which createssustainability (I.e., proprietary and difficult for competitors to

understand)

Once a proprietary advantage is developed, competitive

behavior should be oriented to protecting, maintaining, and

extending that advantage

Organizational structure should be used to effectively support

strategic efforts


PROF. MOHAN B.RAO


7/30/2019 3- MS MMS 2011

8/20

8

Competitive Dynamics: 3 Market Cycles(Contd)

2. Fast-Cycle Markets Markets in which the firm's capabilities that contribute to

competitive advantages are not shielded from imitation andwhere imitation is often rapid and inexpensive

Focus: learning how to rapidly and continuously develop newcompetitive advantages that are superior to those theyreplace (creating innovation)

Avoid loyalty to any one product, possibly cannibalizing theirown current products to launch new ones before competitorslearn how to do so through successful imitation

Continually try to move on to another temporary competitiveadvantage before competitors can respond to the first one


PROF. MOHAN B.RAO


7/30/2019 3- MS MMS 2011

9/20

9

Competitive Dynamics: 3 Market Cycles(Contd)

3. Standard-Cycle Markets Markets where firms competitive advantages are moderately

shielded from imitation and where imitation is moderatelycostly

Competitive advantages partially sustained as quality is

continuously upgraded Seek to serve many customers and gain a large market share

Gain brand loyalty through brand names

Careful operational control / manage a consistent experience

for the customer


PROF. MOHAN B.RAO


7/30/2019 3- MS MMS 2011

10/20

10

Competitive Advantage

How to create and sustain competitive

adv.

Value: what buyers are willing to pay Cost

Competitive advantage = Value -- Cost


PROF. MOHAN B.RAO


7/30/2019 3- MS MMS 2011

11/20

11

Building Blocks of Competitive

Advantage


PROF. MOHAN B.RAO


7/30/2019 3- MS MMS 2011

12/20

12

Analyzing Competitive

Advantage and Profitability

Competitive Advantage When a companys profitability is greater than the average of all

other companies in the same industry that compete for the same

customers

Benchmarking Comparing company performance against that of competitors and

the companys historic performance

Measures of Profitability

Return On Invested Capital (ROIC) Net profit* Net income after tax

Capital invested Equity + Debt to creditors

(*Net Profit = Total revenues Total costs)

=ROIC =


PROF. MOHAN B.RAO


7/30/2019 3- MS MMS 2011

13/20

13

Drivers of Profitability (ROIC)


PROF. MOHAN B.RAO


7/30/2019 3- MS MMS 2011

14/20

14

The Durability of Competitive

Advantage

1. Barriers to ImitationMaking it difficult to copy a companys distinctive

competencies

2. Capability of Competitors Strategic commitment Absorptive capacity

3. Industry DynamismAbility of an industry to change rapidly

The durability of a companys competitive advantage over itscompetitors depends on:

Competitors are also seeking to develop distinctivecompetencies that will give them a competitive edge.


PROF. MOHAN B.RAO


7/30/2019 3- MS MMS 2011

15/20

15

Why Companies Fail

Inertia Companies find it difficult to change their strategies and structures Prior Strategic Commitments

Limit a companys ability to imitate and cause competitivedisadvantage

The Icarus Paradox A company can become so specialized and inner-directed based

on past success that it loses sight of market realities

Categories of rising and falling companies:

Craftsmen Builders Pioneers Salespeople

When a company loses its competitive advantage,its profitability falls below that of the industry then

It loses the ability to attract and generate resources.Profit margins and invested capital shrink rapidly.


PROF. MOHAN B.RAO


7/30/2019 3- MS MMS 2011

16/20

16

Avoiding Failure:

Sustaining Competitive Advantage

1. Focus on the Building Blocks of Competitive AdvantageDevelop distinctive competencies and superior performance in:

Efficiency Quality Innovation Responsiveness to Customers

Institute Continuous Improvement and Learning

Track Best Practice and Use Benchmarking

Overcome InertiaLuck may play a role in success, so always exploit a

lucky break - but remember:

The harder you work, the luckier you seem to get.J P Morgan


PROF. MOHAN B.RAO


7/30/2019 3- MS MMS 2011

17/20

17

Identifying Competitors

A. Industry Concept of Competition Industry group of firms that offer a product or class of

products that are close substitutes for one another

1. Number of Sellers and Degree of Differentiation

Pure monopoly one firm providing a certain product e.g.

gas, electricity, water services

Oligopoly few large firms, large range of products

Pure oligopoly few firms, same products e.g. oil, steel

Differentiated oligopoly few firms, different products e.g. cars,

cameras

Monopolistic competition many competitors, differentiated

offerings e.g. restaurants, stores

Pure competition many competitors, same offerings e.g.

stock market, commodity market2011 MARKETING STRATEGY MMM 3rd YEAR SEM I

PROF. MOHAN B.RAO


7/30/2019 3- MS MMS 2011

18/20

18

Identifying Competitors

2. Entry, Mobility and Exit Barriers Entry barriers high capital, patents, licenses

Mobility barriers inability to enter other markets

Exit barriers legal obligations to customers and

creditors, government restrictions

3. Cost Structure of different companies

Each industry has a certain cost burden Raw Materials,

Manufacturing, Distribution, Marketing

4. Degree of Globalization

B. Market Concept of Competition

Competitors are companies that satisfy the same

customer need in a given market


PROF. MOHAN B.RAO


7/30/2019 3- MS MMS 2011

19/20

19

Identifying CompetitorsC. Direct Competitors

Offer similar products and services to the samecustomers.

D. Product Competitors

Sell the same product to two different customergroups. A steel business focusing on the carindustry would not be directly competitive with oneselling to the Railway industry.

E. Indirect Competitors

Sell different products to the same industry.F. Implicit Competitors (broader)

Alternatives e.g. a family might prefer to spendmoney on a new car, a holiday or a major homeimprovement

2011

MARKETING STRATEGY MMM 3rd YEAR SEM I

PROF. MOHAN B.RAO


7/30/2019 3- MS MMS 2011

20/20

20

Competitor Map Eastman Kodak

Customer Activities


PROF. MOHAN B.RAOFOR RESTRICTED CIRCULATION ONLY

3- ms mms 2011

Documents