Competition• A business’s attempt to get customers in the face of other

businesses selling the same or similar products• Forces companies to become more efficient• Keeps prices down and quality up

8-2

Identifying Competitors

8-3

Five Forces Determining Segment Structural Attractiveness

• Threat of intense segment rivalry—cellular phone market

8-4

Five Forces Determining Segment Structural Attractiveness

• Threat of new entrants—Can come from anywhere

8-5

Five Forces Determining Segment Structural Attractiveness

• Threat of substitute products—Greyhound and Amtrak profitability threatened by rise of air travel

8-6

Five Forces Determining Segment Structural Attractiveness

• Threat of buyers’ growing bargaining power—Wal-Mart buying power

8-7

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

Analyzing Competitors

Share of market—target marketShare of market—target market

Share of mind--% of customers who names companiesShare of mind--% of customers who names companies

Share of heart--% of customers who prefer a companyShare of heart--% of customers who prefer a company

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.

8-10

Five Forces Determining Segment Structural Attractiveness

Price vs. Non-Price Competition• Price

• Established firms focus on keeping prices down• Revenue lost to lower prices is made up through higher sales

• Non-price• Factors such as quality service, and reputation• Customers are willing to pay more

Who are your Competitors?• First level

• Specific brands which are direct competitors to your product or service, in your geographic locality

• Second level • Competitors who offer similar products in a different business

category or who are more geographically remote • Third level

• Competitors who compete for the “same-occasion” dollars • Toots

• 1st Other sports bars• 2nd Other sit down restaurants• 3rd Fast food or convenience stores

Three Levels of Competition1 s t, 2 n d , 3 rd L eve l C o m p etito rs

P h illip 's B o o ks to re H a s tin gs

L ife w ay C hris tia n S h op B a rne s an d N o b le .com

H o llyw oo d V id eo L in e ba u g h P u b lic L ib ra ry R h ino G am es E le c tro n ics B o u tiq ue C D W are h o u se

B lu e R a id er B o oks to re A m azo n.com W a l-M a rt

H A S B o o ks to re C o rn er B o oks to re B o o ks -A -M illion

C h ris a n d B e n 's B o oks to re

Competitors

Competition Analysis

Colorado Bearcats• 1st level competitors: Other professional sports teams

• Denver Broncos• Denver Nuggets• Colorado Avalanche

• 2nd level competitors: Collegiate sports and geographically remote professional teams• Kansas City Chiefs• University of Colorado athletics• Air Force Academy athletics• Colorado Springs Sky Sox

• 3rd level competitors: Other businesses competing for money• Rocky Mountain Motorcycle Museum• Pro Rodeo Hall of Fame• World Figure Skating Hall of Fame

Levels of Competition

WE Are Boats

West Marine

Bass ProDick’s

Sporting Goods

Academy Sports and Outdoors

Murfreesboro Outdoors

REIHibbett Sports

EBay OvertonsBoatowne

rs.com

Wal-Mart Kmart TargetSams Club

Boatersworld.com

What Every Company Should Know About Their Competitors

• Who is the price leader?• Who is the quality leader?• Who has the largest market share?• Why have certain companies recently entered or withdrawn

from the market?

Competition Analysis

• Buy your competitors’ products• Frequent your competitors’ territory• Read industry publications• Don’t forget to focus on your own

business

Determine Competitors Strengths & Weaknesses

• Why customers buy from them?• Value • Service• Convenience• Reputation• “Perceived” or “Actual” Strengths

Competition: Common Mistakes to Avoid

• Assuming you have no competition! • Demonstrates inexperience and minimal understanding of your

business• Failing to identify both direct and indirect competitors• Underestimating the power and strength of competitors• Omitting the specific competitive advantages you hold

over your competition• Demonstrating a lack of knowledge or strategy to combat

changing competitive conditions• Failing to define and clarify you position, strength, and

market niche focus

Factors to Consider in Analyzing the Competition

ProductLine (Breadth)

Pricing Advertising SupplierAdvantage

Product Line (Depth)

Financial Resources

Employee Morale

Sales Force

Uses of Technology

Distribution Advantage

Operational Efficiency

Technology Competence

Market Share Strengths Weaknesses

Analyzing Consumer Perceptions of Competitions

Quality ProductAttributes

Reliability TimelyService

FriendlyService

Knowledgeable Staff

Convenient Location

Store Hours

Delivery Parking Guarantees Brand Recognition

Credit Cards

Image of Competitor

Selection of Products

Installation