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18- 2
Objectives
Learn Major Goals of MarketingLearn Major Goals of MarketingLearn how to understand Learn how to understand competitors as well as customers competitors as well as customers via competitor analysis.via competitor analysis.Learn the fundamentals of Learn the fundamentals of competitive marketing strategies competitive marketing strategies based on creating value for based on creating value for customers.customers.
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Has dominated the Has dominated the chip industrychip industrySuccess is directly Success is directly related to Intel’s related to Intel’s competitive strategycompetitive strategyStrategy focuses on Strategy focuses on superior value and superior value and product leadershipproduct leadership
Heavy focus on product Heavy focus on product and advertising and advertising innovation and R&D innovation and R&D investmentsinvestmentsChanging market needs Changing market needs have challenged Intel to have challenged Intel to adaptadaptIntel is capitalizing on Intel is capitalizing on the Internet nowthe Internet now
cIntelIntel
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Two Major Goals of Marketing*
1. Design and Manage a Superior 1. Design and Manage a Superior Value-Delivery SystemValue-Delivery System to Reach to Reach and Satisfy Target Customer and Satisfy Target Customer Segments.Segments.
2. Gain and Sustain 2. Gain and Sustain Competitive Competitive AdvantageAdvantage..
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==
Total CustomerBenefit
Total CustomerBenefit
Total CustomerCost
Total CustomerCost
(Product, Service,Personnel, &
Image Values)
(Product, Service,Personnel, &
Image Values)
(Monetary, Time,Energy, &
Psychic Costs)
(Monetary, Time,Energy, &
Psychic Costs)
CustomerDelivered Value
CustomerDelivered Value
(Profit to theConsumer)
(Profit to theConsumer)
Defining Customer Value
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Value Chain Analysis**Value Chain Analysis**
Firm InfrastructureFirm InfrastructureHuman Resource ManagementHuman Resource Management
Technology DevelopmentTechnology DevelopmentProcurementProcurement
InboundLogistics
InboundLogistics OperationsOperations Outbound
Logistics
OutboundLogistics
Marketingand
Sales
Marketingand
SalesServiceService
Marg
in
Support Activities
Primary Activities
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Customer Value-Delivery Network*Customer Value-Delivery Network*
Customer (you)Customer (you)
Retailer (Sears)Retailer (Sears)
Producer (Levi)Producer (Levi)
Vendor (Milliken)Vendor (Milliken)
Raw MaterialSupplier (Du Pont)
Raw MaterialSupplier (Du Pont)
Del
iver
yOrd
erO
rder
Ord
erO
rder
Ord
erD
eliv
ery
Del
iver
yD
eliv
ery
Del
iver
y
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Definition
Competitive AdvantageCompetitive Advantage An advantage An advantage
over competitors over competitors gained by offering gained by offering consumers greater consumers greater value than value than competitors offer.competitors offer.
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Competitor Analysis
Firms face a wide Firms face a wide range of competitionrange of competitionBe careful to avoid Be careful to avoid “competitor myopia”“competitor myopia”Methods of Methods of identifying identifying competitors:competitors: Industry point-of-viewIndustry point-of-view Market point-of-viewMarket point-of-view
Identifying Identifying CompetitorsCompetitorsAssessing Assessing CompetitorsCompetitorsSelecting Selecting Competitors to Competitors to Attack or AvoidAttack or Avoid
Steps in the Steps in the Process:Process:
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Levels of Competition
Diet lemon limes
Baseball cards
Fruit flavored colas
Coffee
DietCoke
DietPepsi
Diet-Rite cola
Bottled water
Lemon limes
Regularcolas
Beer
Juices
Wine
Fast food
Tea
Video rentals
Icecream
Product form competition: Diet colas
Product category competition: Soft drinks
Generic competition: Beverages
Budget competition: Food and entertainment
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230-year-old Encyclopedia Britannica viewed itself as competing with other publishers of printed encyclopedias. Big mistake! Its real competitors were software encyclopedias and the Internet.
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Create a levels of Create a levels of competition diagram competition diagram for one of the for one of the following: following:
• WalMartWalMart• McDonald’sMcDonald’s• NikeNike• StarbucksStarbucks• GoogleGoogle
Discussion Question
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Competitor Analysis
Determining Determining competitors’ objectivescompetitors’ objectivesIdentifying competitors’ Identifying competitors’ strategiesstrategies Strategic groupsStrategic groups
Assessing competitors’ Assessing competitors’ strengths and strengths and weaknessesweaknesses BenchmarkingBenchmarking
Estimating competitors’ Estimating competitors’ reactionsreactions
Identifying Identifying CompetitorsCompetitorsAssessing Assessing CompetitorsCompetitorsSelecting Selecting Competitors to Competitors to Attack or AvoidAttack or Avoid
Steps in the Steps in the Process:Process:
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Competitor Analysis
Strong or weak Strong or weak competitorscompetitors Customer value analysisCustomer value analysis
Close or distant Close or distant competitorscompetitors Most companies compete Most companies compete
against close competitorsagainst close competitors
““Good” or “Bad” Good” or “Bad” competitorscompetitors The existence of The existence of
competitors offers several competitors offers several strategic benefitsstrategic benefits
Identifying Identifying CompetitorsCompetitorsAssessing Assessing CompetitorsCompetitorsSelecting Selecting Competitors to Competitors to Attack or AvoidAttack or Avoid
Steps in the Steps in the Process:Process:
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Customer Value Analysis (for Competition)
Identify Attributes Customers ValueIdentify Attributes Customers ValueAssess Attribute ImportanceAssess Attribute ImportanceAssess Company and Competitor Assess Company and Competitor PerformancePerformanceExamine Segments on Attribute-by-Examine Segments on Attribute-by-Attribute BasisAttribute BasisMonitor Customer Values Over Time Monitor Customer Values Over Time
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Basic Winning Competitive Basic Winning Competitive Strategies: Michael PorterStrategies: Michael Porter Overall cost leadershipOverall cost leadership
Lowest production and Lowest production and distribution costs distribution costs
DifferentiationDifferentiation Creating a highly Creating a highly
differentiated product line differentiated product line and marketing program and marketing program
FocusFocus Effort is focused on serving Effort is focused on serving
a few market segments a few market segments
Competitive Strategies*
Attractiveness of an Industry
ExistingRivalry
Threat of Potential Entrants
Threat of Substitutes
BargainingPower ofSuppliers
BargainingPower ofBuyers
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Hohner has successfully implemented a focus strategy to capture an 85% share of the harmonica market.
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Basic Competitive Strategies: Basic Competitive Strategies: Value Disciplines*Value Disciplines* Operational excellenceOperational excellence
Superior value via price and convenienceSuperior value via price and convenience Customer intimacyCustomer intimacy
Superior value by means of building strong Superior value by means of building strong relationships with buyers and satisfying relationships with buyers and satisfying needs needs
Product leadershipProduct leadership Superior value via product innovationSuperior value via product innovation
Competitive Strategies
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Firms that follow a Firms that follow a customer intimacy customer intimacy strategy are willing to strategy are willing to do almost anything for do almost anything for their customers. their customers.
Does such a strategy Does such a strategy make sense for local make sense for local businesses, or only for businesses, or only for national / global national / global corporations?corporations?
Discussion Question
British Airways practices customer intimacy British Airways practices customer intimacy with select frequent flyerswith select frequent flyers
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Competitive Strategy
Expanding the total Expanding the total demanddemand Finding new usersFinding new users Discovering and Discovering and
promoting new product promoting new product usesuses
Encouraging greater Encouraging greater product usageproduct usage
Protecting market shareProtecting market share Many considerationsMany considerations Continuous innovationContinuous innovation
Expanding market shareExpanding market share Profitability rises with Profitability rises with
market sharemarket share
Market LeaderMarket LeaderMarket Market ChallengerChallengerMarket Market FollowerFollowerMarket NicherMarket Nicher
Competitive Competitive PositionsPositions
18- 24
Competitive Strategy
WD-40 has a knack for developing new uses for its product.
What other brands have adopted a similar strategy?
WD40
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Competitive Strategy
Option 1:Option 1: challenge the challenge the market leadermarket leader High-risk but high-gainHigh-risk but high-gain Sustainable competitive Sustainable competitive
advantage over the leader advantage over the leader is key to successis key to success
Option 2:Option 2: challenge firms challenge firms of the same size, smaller of the same size, smaller size or challenge size or challenge regional or local firmsregional or local firmsFull frontal vs. indirect Full frontal vs. indirect attacksattacks
Market LeaderMarket LeaderMarket Market ChallengerChallengerMarket Market FollowerFollowerMarket NicherMarket Nicher
Competitive Competitive PositionsPositions
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Competitive Strategy
Follow the market Follow the market leaderleader Focus is on improving Focus is on improving
profit instead of profit instead of market sharemarket share
Many advantages:Many advantages: Learn from the Learn from the
market leader’s market leader’s experienceexperience
Copy or improve on Copy or improve on the leader’s offeringsthe leader’s offerings
Strong profitabilityStrong profitability
Market LeaderMarket LeaderMarket Market ChallengerChallengerMarket Market FollowerFollowerMarket NicherMarket Nicher
Competitive Competitive PositionsPositions
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Competitive Strategy
Serving market Serving market niches means niches means targeting targeting subsegmentssubsegmentsGood strategy for Good strategy for small firms with small firms with limited resourceslimited resourcesOffers high marginsOffers high marginsSpecialization is keySpecialization is key By market, customer, By market, customer,
product, or marketing product, or marketing mix linesmix lines
Market LeaderMarket LeaderMarket Market ChallengerChallengerMarket Market FollowerFollowerMarket NicherMarket Nicher
Competitive Competitive PositionsPositions
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FedEx and UPS are two competitors in the package delivery business. What competitive strategy seems to describe each company?
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Companies can become so Companies can become so competitor centered that they competitor centered that they lose their customer focus.lose their customer focus.Types of companies:Types of companies: Competitor-centered companiesCompetitor-centered companies Customer-centered companiesCustomer-centered companies Market-centered companiesMarket-centered companies
Balancing Customer and Competitor
Orientations