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7/31/2019 UNit 5- Dealing With Competition
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Meaning of competition1. The act of competing, as for profit or prize.
2. A test of skill or ability, contest
3. Rivalry between two or more business starving for
the same customer or market.
4. Many companies try to provide goods and services
to the same customer or market.
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Compels the company to revise product portfolio
( BPL)
Motivates the firms to make their product more rich
and versatile( modern financial institutions)
It is great leveler of the product prices.(VSNL)
It help firms to eliminate market inefficiency.
Innovation in products (IT) Development of rural market
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Government policy- (Protection of local industry, culture,)
Cost( high tariff and taxation)
Presence of strong brands
Customer-( strong nationalist feeling)
Technology( Microsoft)
Lack of credible competition
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Strategies- ( product line,mfg.cost,service,price)
Objectives( maximize of profit, sales growth, market share
technological leadership, service leadership, expansion planor mix of these)
Strength and weaknesses ( table)
Share of market
Share of mind
Share of heart
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Market leader 40%
Market challenger- 30%
Market follower- 20%
Market nichers- 10%
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Strong versus weak
Close versus distant
Good versus bad
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Innovative Solutions to Customers' Problem
New entrants with innovative ideas
Market leader can be removed
Innovation should help the customer It should be simple
Should be connected with existing need of customer
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Offering identical product at a lower price
Price is sensitive aspect in India
Product should be identical
Price difference should be substantial Comparison should be possible between two products
Switch Channels of Distribution
Development of new channel of distribution
Reduction of cost of distribution
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Service based Competition
Service is important for customer
Experience based Competition
Firms are giving more than just a purchase
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Potentialentrants
( Threat ofmobility)
Substitutes
( Threat ofSubstitutes)
Buyers
( BuyerPower)
Suppliers
( SupplierPower)
IndustryCompetitor( Segment
Rivalry)
Porters Five forces of Competition
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1. Threats of intense segment rivalry(cell phone) Numerous ,strong, aggressive competitors
Exit barriers are high
Price wars, advertising battles, new product introductions
2. Threats of new entrants Entry barriers are high, exit barriers are low- few new firms enter
Entry and exit barriers high- profit potential high
Entry and exit barriers low- firms easily enter and go, return slowand stable
Entry barriers low ,exit barriers high- depressed earning
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3. Threats of substitute products Place a limit on price and profit
4. Threats of buyers growing bargainingpower More concentrated and organized
Buyers switching cost low, buyers are price sensitive
5. Threats of suppliers growing bargainingpower ( petroleum products)
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