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MKTG 1265
    Advanced Marketing Concepts and
             Applications

          Lecture Three
       Competitive Marketing
            Strategy


1
                                  MKTG 1265 (AMCA)
Agenda
      Competitor Analysis
      Positioning Strategy
      Application of Strategy Models in
      Marketing
       Porter’s Generic Strategies Model
       Ansoff Matrix Model
       Marketing Warfare Concepts
      (for further reference): Blue Ocean
      Strategy
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                                            MKTG 1265 (AMCA)
References:
      Week 3 - Competetive Marketing Strategy

      Kotler, P., Brown, L. Adam, S. and Armstrong, G., (2004) Marketing, 6th
      Edition, Prentice Hall, Sydney, pp. 738-768. (Chapter 19, Sustainable
      Competitive Advantage)

      Porter, M.E. and Kramer, M.R. (2006). Strategy & Society: The Link
      between Competitive Advantage and Corporate Social Responsibility,
      Harvard Business Review, December, 78-92.



           Cover the Kotler reading in detail; many concepts and
           frameworks on competitive strategies are covered here.
           The Porter article is also important.


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                                                                          MKTG 1265 (AMCA)
Competitor Analysis

      Definition:
       The process of identifying major
       competitors, assessing their objectives,
       strategies, strengths and weaknesses,
       and selecting which competitors to
       attack or avoid




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                                          MKTG 1265 (AMCA)
Evolving Company Orientations




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                                MKTG 1265 (AMCA)
Competitor Oriented Company
      A competitor-centered company is one that
      spends most of its time tracking competitors’
      moves and market shares and trying to find
      strategies to counter them.

      This approach has pluses and minuses.
       On the positive side, the company develops a
       fighter orientation.
       On the negative side, the company becomes too
       reactive.

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                                                MKTG 1265 (AMCA)
Customer Oriented Company

      A customer-centered company focuses
      more on customer developments in designing
      its strategies.

      Clearly, the customer-centered company is in
      a better position to identify new opportunities
      and set long-run strategies that make sense




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                                               MKTG 1265 (AMCA)
Market Oriented Company

      In practice, today’s companies must be
      market-centered companies, watching
      both their customers and their
      competitors.

      But they must not let competitor
      watching blind them to customer
      focusing.

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                                         MKTG 1265 (AMCA)
Figure 19-7 of the Reading:

      Figure 19-7 shows that companies have moved through
      four orientations over the years.

        In the first stage, they were product oriented, paying little
      attention to either customers or competitors.
        In the second stage, they became customer oriented and
      started to pay attention to customers.
        In the third stage, when they started to pay attention to
      competitors, they became competitor oriented.
        Today, companies need to be market oriented, paying
      balanced attention to both customers and competitors.


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                                                             MKTG 1265 (AMCA)
Competitor Analysis: the Six Stages Model
       1.   Who the competitors are
       2.   What the competitors’ objectives are
       3.   What their strategies are
       4.   What their strengths and
            weaknesses are
       5.   What their reaction patterns are
       6.   Who to confront and how to avoid



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                                            MKTG 1265 (AMCA)
Steps in Analyzing Competitors

              1                2                    3

       Identifying the   Determining        Identifying
       company’s         competitors’       competitors’
       competitors       objectives         strategies




        Assessing                            Selecting
                           Estimating
        competitors’                         competitors to
                           competitors’
        strengths and                        attack and
                           reactions
        weaknesses                           avoid
              6                    5                    4


3-11                                      Source: Kotler
                                                            MKTG 1265 (AMCA)
1
       Identifying Competitors
       At the narrowest level, a company can define its
       competitors as other companies offering similar
       products and services to the same customers at
       similar prices.
       But companies actually face a much wider range
       of competitors. The company might define
       competitors as all firms making the same product
       or class of products.
       Finally, and still more broadly, competitors might
       include all companies that compete for the same
       consumer dollars

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                                                    MKTG 1265 (AMCA)
Identifying the Competitors

        Competitors could be
         DIRECT (within the same industry
         or market sector)
         INDIRECT (competing for the
         consumer dollar- substitutes)
         LATENT (potential threats)


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                                     MKTG 1265 (AMCA)
Avoiding competitor myopia
        Companies must avoid “competitor myopia.” A company is
        more likely to be “buried” by its latent competitors than its current
        ones.
        Companies can identify their competitors from the industry point
        of view. A company must understand the competitive patterns in
        its industry if it hopes to be an effective “player” in that industry.
        Companies can also identify competitors from a market point of
        view. Here they define competitors as companies that are trying
        to satisfy the same customer need or build relationships with the
        same customer group.
        In general, the market concept of competition opens the
        company’s eyes to a broader set of actual and potential
        competitors.


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                                                                    MKTG 1265 (AMCA)
2
       Determining Competitors Objectives

        Each competitor has a mix of objectives.
        The company wants to know the relative importance
        that a competitor places on current profitability,
        market share growth, cash flow, technological
        leadership, service leadership, and other goals.
        Knowing a competitor’s mix of objectives reveals
        whether the competitor is satisfied with its current
        situation and how it might react to different
        competitive actions.
        A company must also monitor its competitors’
        objectives for various segments.

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                                                     MKTG 1265 (AMCA)
3
       Identifying Competitors Strategies

        The more that one firm’s strategy
        resembles another firm’s strategy, the
        more the two firms compete.
        A strategic group is a group of firms in
        an industry following the same or a
        similar strategy in a given target market.




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                                            MKTG 1265 (AMCA)
Strategic Groups Model

        A strategic group is a concept used in strategic
        management that groups companies within an
        industry that have similar business models or similar
        combinations of strategies.
        For example, the restaurant industry can be divided
        into several strategic groups including fast-food and
        fine-dining based on variables such as preparation
        time, pricing, and presentation.
        The number of groups within an industry and their
        composition depends on the dimensions used to
        define the groups.


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                                                       MKTG 1265 (AMCA)
Some simplified versions of SGA
       BANKS




                                               AIRLINES

                              Extensive
                                                                        International
                 Fleet Size                                                Carriers




                                                 Budget
                              Limited




                                                 Carriers

                                          Domestic          Regional      International
                                                                             MKTG 1265 (AMCA)
                                                               Routes
Uses of the SG model

          Helps identify who the most direct competitors
          are and on what basis they compete.
          Raises the question of how likely or possible it
          is for another organization to move from one
          strategic group to another.
          Strategic Group mapping might also be used
          to identify opportunities.
          Can also help identify strategic problems



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                                                   MKTG 1265 (AMCA)
Strategic Groups - Implications
       Although competition is intense within a strategic
       group, there is also rivalry between groups.
       Some of the strategic groups may appeal to
       overlapping customer segments.
          Example budget versus full service airlines
       The customers may not see much difference in
       the offers of different groups.
       Members of one strategic group might expand
       into new strategy segments.
       The company needs to look at all of the
       dimensions that identify strategic groups within
       the industry.
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                                                        MKTG 1265 (AMCA)
Don’t confuse Strategic Groups Model with the
Market Positioning Model

       May look the same
       But SG model focuses more on the
       scope of business operations and the
       business model used (example think of
       how Amazon.com operates versus
       traditional book stores)
       The Positioning Model (perceptual map)
       is used in marketing to cluster different
       competitors based on attributes
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                                           MKTG 1265 (AMCA)
4
Assessing Competitors Strengths and Weaknesses
       Marketers need to assess each competitor’s
       strengths and weaknesses carefully in order
       to answer the critical question: What can our
       competitors do?
       As a first step, companies can gather data on
       each competitor’s goals, strategies, and
       performance over the last few years.
       Companies normally learn about their
       competitors’ strengths and weaknesses
       through secondary data, personal experience,
       and word of mouth.
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                                              MKTG 1265 (AMCA)
Assessing Competitors Strengths and Weaknesses

       They can conduct primary marketing
       research with customers, suppliers, and
       dealers.
       They can benchmark themselves
       against other firms, comparing the
       company’s products and processes to
       those of competitors or leading firms in
       other industries to find ways to improve
       quality and performance.
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                                          MKTG 1265 (AMCA)
5
       Estimating Competitors’ Reactions

       What will our competitors do?
        A competitor’s objectives, strategies, and strengths
        and weaknesses go a long way toward explaining its
        likely actions. They also suggest its likely reactions to
        company moves such as price cuts, promotion
        increases, or new-product introductions.
        In addition, each competitor has a certain philosophy
        of doing business, a certain internal culture and
        guiding beliefs.
        Each competitor reacts differently.


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                                                          MKTG 1265 (AMCA)
6
Selecting Competitors To Attack and Avoid

       Strong or Weak Competitors

       Close or Distant Competitors

       “Good” or “Bad” Competitors




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                                            MKTG 1265 (AMCA)
Strong or Weak Competitors

        Most companies prefer to compete against
        weak competitors. This requires fewer
        resources and less time. But in the process,
        the firm may gain little.
        A useful tool for assessing competitor
        strengths and weaknesses is customer value
        analysis.
        To analyze the profiles of different competitors
        and compare it against the firm itself.


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                                                 MKTG 1265 (AMCA)
An example of Competitor Profile Analysis


       Key success factor         Our company   Competitor 1   Competitor 2
       Innovativeness             1 2 3 4 5     1 2 3 4 5      1 2 3 4 5

       Financial strength         1 2 3 4 5     1 2 3 4 5      1 2 3 4 5
       Technical assistance to
       customers                  1 2 3 4 5     1 2 3 4 5      1 2 3 4 5

       Product quality            1 2 3 4 5     1 2 3 4 5      1 2 3 4 5

       Well-qualified workforce   1 2 3 4 5     1 2 3 4 5      1 2 3 4 5
       Access to international
       distribution channels      1 2 3 4 5     1 2 3 4 5      1 2 3 4 5


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                                                                    MKTG 1265 (AMCA)
Customer Value Analysis

        The aim of customer value analysis is to
        determine the benefits that target customer
        value and how customers rate the relative
        value of various competitors’ offers.
        The key to gaining competitive advantage is
        to take each customer segment and examine
        how the company’s offer compares to that of
        its major competitor



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                                              MKTG 1265 (AMCA)
Close or Distant Competitors

        Most companies will compete with close
        competitors—those that resemble them the
        most—rather than distant competitors.

        At the same time, the company may want to
        avoid trying to “destroy” a close competitor




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                                                MKTG 1265 (AMCA)
Good or Bad Competitors
       Is competition always bad?
       The existence of competitors results in
       several strategic benefits.
         Competitors may help increase total demand.
         They may share the costs of market and product
         development and help to legitimize new
         technologies.
         They may serve less-attractive segments or lead to
         more product differentiation.
         They lower the antitrust risk and improve bargaining
         power versus labor or regulators.

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                                                      MKTG 1265 (AMCA)
Good or Bad Competitors

        An industry often contains “good” competitors and
        “bad” competitors.
        Good competitors play by the rules of the industry.
        Bad competitors break the rules. They try to buy
        share rather than earn it, take large risks, and in
        general shake up the industry.

        The implication is that “good” competitors would like
        to shape an industry that consists of only well-
        behaved competitors.


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                                                       MKTG 1265 (AMCA)
Finding Uncontested Market Spaces

        Rather than competing head to head with
        established competitors, many companies
        seek out unoccupied positions in uncontested
        market spaces.

        They try to create products and services for
        which there are no direct competitors.

        Later we look at ‘Blue Ocean Strategy.’

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                                                MKTG 1265 (AMCA)
Competitor Intelligence System
       The competitive intelligence system:
        Identifies the vital types of competitive information
        and the best sources of this information;
        Continuously collects information from the field
        and from published data;
        Checks the information for validity and reliability,
        interprets it, and organizes it in an appropriate
        way;
        Sends key information to relevant decision
        makers and responds to inquiries from managers
        about competitors.
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                                                      MKTG 1265 (AMCA)
Models in Competitive Marketing
                Strategy
                1.   Ansoff Matrix
          2. Porter Generic Strategies
              3. Marketing Warfare
      4. Blue Ocean Strategy (optional but it
             is the latest model out there)


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                                                MKTG 1265 (AMCA)
Which   direction
        Refers to long term decisions that the company
        must take with regards to where it should compete
        and what its product/service offer should be
        Referred to as “product-market” scope
        Use the Ansoff    Matrix
        Should know the meaning of each cell in the
        matrix and how it can be applied specifically to
        marketing.


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The Ansoff Matrix




3-36
© Strategy in Marketing (Pearson Asia 2009)




                  Marketing Implications of a Market
                        Penetration Strategy
         • Overall strategy: to increase volume sales in existing
           markets with existing product offers. The full extent of
           the market is untapped- need to gain greater
           penetration
         • Segmentation/Targeting: Current users
         • Product: no changes; stick to existing product lines
         • Price: could use penetration pricing in orde37r to
           increase sales volume
         • Promotions: mainly on sales promotions; generally a
           “push” strategy
         • Place: increase distribution channels/ intermediaries in
           order to widen availability of the product

                                                                      LEC3-37
© Strategy in Marketing (Pearson Asia 2009)




                    Marketing Implications of a Market
                         Development Strategy
    • Overall strategy: to take existing products into new
      markets (geographic, customer segments)
    • Segmentation/Targeting: New users
    • Product: no major changes but adaptation for new
      user segment
    • Price: use differential pricing for different segments
    • Promotions: targeting at new audiences; possibly
      reaching with different media and messages
    • Place: use new distribution channels to reach new
      segments. International marketing for geographic
      market expansion
                                                               LEC3-38
© Strategy in Marketing (Pearson Asia 2009)




                   Marketing Implications of a Product
                        Development Strategy

         • Overall strategy: to launch new products and
           innovations. Establish market leadership position
         • Segmentation/Targeting: Innovators/ Early
           adopters
         • Product: Innovation (“first-in-market”)
         • Price: Skim pricing
         • Promotions: Creating awareness, educating
           customers about new products
         • Place: Selective distribution initially

                                                                  3-39

                                                               LEC3-39
© Strategy in Marketing (Pearson Asia 2009)



       Apply this to Apple (examples)
                   Market Penetration:           Product Development:

                   • Apple uses extensive        •Introduction of innovative
                   promotions and pricing to     new products (i-pods/ i-
                   increase demand for its       Phone/ Macbook Air)
                   current rang of products      •Updates of product range
                   • Cross selling of Apple      (ipods+ Macbooks)
                   products



                   Market Development:           Diversification:

                   •Expand into new country      • Bold move into digital music
                   markets                       (i-Tunes)
                   •Appoint more distributors    •Movies?
                   and resellers


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An example of applying the Product Market
   Expansion Grid (Malaysian Airlines)




             Source: Kotler and da Silva (2006) Pearson Asia   LEC3-41
Competitive Advantage

       How do companies achieve competitive
           advantages and how do they
         operationalize these advantages in
                     marketing?




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                                              MKTG 1265 (AMCA)
Competitive Advantage
       Definition:
       An advantage over competitors gained by offering
       consumers greater value, either through lower prices
       or by providing more benefits that justify higher prices
       Organizations might deliver more customer value than
       their competitors by:
         Offering lower prices
         Providing more benefits, justifying higher prices
         Offering specialist products and services
            (more later when we cover Porter generic
            strategies)

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                                                        MKTG 1265 (AMCA)
Competitive Advantages in Marketing
          Can exist in any or all aspects of the marketing
          mix
       1. Product : quality, functions, design, branding
       2. Pricing: levels versus the competitors; sources of
          cost advantages
       3. Place: location, convenience, store image
       4. Promotions: creativity, use of media, execution
          (integrated MC)
       5. People: Customer Service
       6. Processes: Service Delivery Systems
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                                                      MKTG 1265 (AMCA)
Basic Competitive Strategies
   More than two decades ago, Michael Porter suggested
   four basic competitive positioning strategies that
   companies can follow—three winning strategies and one
   losing one.
   The winning strategies are:

     Overall cost leadership: The company works hard to
   achieve the lowest production and distribution costs.
     Differentiation: The company concentrates on
   creating a highly differentiated product line and
   marketing program.
     Focus: The company focuses on serving a few market
   segments well rather than going after the whole market.
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                                                      MKTG 1265 (AMCA)
The meaning of each strategy:




3-46
© Strategy in Marketing (Pearson Asia 2009)




         Marketing Implications of a Differentiation
         Strategy

           Overall strategy: to achieve superiority in all aspects
           of marketing and business operations
           Segmentation/Targeting: Quality/ Value seeking
           customers
           Product: Premium product; excellent service. Strong
           brand equity
           Price: Value based pricing; higher than competitors
           Promotions: Creating product differentiation and
           brand image
           Place: Selective distribution
                                                              3-47
© Strategy in Marketing (Pearson Asia 2009)




             Marketing Implications of a Cost
             Leadership Strategy
             Overall strategy: to be the lowest cost player ni
             the market
             Segmentation/Targeting: Mass market; value
             seeking customers
             Product: Basic, functional, no-frills
             Price: Penetration pricing
             Promotions: Mass media advertising; sales
             promotions to create push effect
             Place: Intensive distribution
                                                                 3-48
© Strategy in Marketing (Pearson Asia 2009)




         Marketing Implications of a Focus Strategy

           Overall strategy: Become a specialist in a given
           product market sector
           Segmentation/Targeting: Niche market segments
           Product: Specialist product line; deep assortment
           but limited range
           Price: Skim pricing
           Promotions: Focused media
           Place: Exclusive or selective distribution

                                                           3-49
Gaining Leadership Positions Through Delivering
Superior Value

       More recently, a new classification of
       competitive marketing strategies has been
       offered. It is suggested companies gain
       leadership positions by delivering superior
       value to their customers.

       Companies can pursue any of three
       strategies—called value disciplines—for
       delivering superior customer value.


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                                               MKTG 1265 (AMCA)
Value Disciplines:

       Operational excellence: The company provides
       superior value by leading its industry in price and
       convenience.
       Customer intimacy: The company provides superior
       value by precisely segmenting its markets and tailoring
       its products or services to match exactly the needs of
       targeted customers.
       Product leadership: The company provides superior
       value by offering a continuous stream of leading-edge
       products or services.



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                                                        MKTG 1265 (AMCA)
Marketing Warfare Concepts
       “How aggressovely do we
       compete?”




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                                         MKTG 1265 (AMCA)
Marketing Wars (‘battles for market share
       and dominance or a market position)
        Another way of studying marketing strategy is
        to observe and track major marketing wars
        between key competitors
        What turf (battle-ground= Market) are they
        fighting for?
        How are they fighting? What are the differences
        in the ways the rivals are competing?




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Marketing Warfare Concepts
        Marketing is dynamic
        Competitors will react against each other
        The marketing mix becomes the weapons of
        warfare
        Battle terrain= Market Segments
        Targeting and Positioning
        Attack and Counter-Attack (“for every action
        there opposite reaction”- physics law)
        Competitive Posturing: adopt a stance-
        leader, challenger, follower, nicher
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                                               MKTG 1265 (AMCA)
Competitive Positions

       Firms competing in a given target market,
           at any point in time, differ in their
               objectives and resources.




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                                                   MKTG 1265 (AMCA)
Strategic Positioning
       Market Leaders
        Focus on expanding total demand
        Defending market share is important
        May not wish to aggressively take more market share from rivals
       Market Challengers
        Concentrate on a single target. Attacking the leader
       Market Followers
        Compete with modest strategic objective
        Often use innovative imitation
        Compete in selective few segments
       Market Nichers
        Focus on narrow slice of the market

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                                                               MKTG 1265 (AMCA)
Market Leader Strategies

        Most industries contain an acknowledged market
        leader. Competitors focus on the leader as a
        company to challenge, imitate, or avoid.

          To remain number one, leading firms can take any of
          three actions.
       1. They can find ways to expand total demand.
       2. They can protect their current market share through
          good defensive and offensive actions.
       3. They can try to expand their market share further,
          even if market size remains constant.

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                                                       MKTG 1265 (AMCA)
Market Leaders
Strategies:             Examples of marketing
                         strategies:
                         Superior customer knowledge
1.Expand total demand    Long-term outlook
                         Product innovation
  - New Users            Total quality
  - New uses             Product flanking, multiple
                         brands, brand extension
  - More usage           Heavy advertising
                         Aggressive sales force
                         Effective Promotion
2.Defend market share    Quick, effective competitive
                         response
                         Manufacturing efficiency
3.Expand market share    Brand management system

                                                        3-58
Market Leader Strategy #1: Expanding Total
Demand

      The leading firm normally gains the most when
      the total market expands.
      Market leaders can expand the market by
      developing new users, new uses, and more
      usage of its products.




                                               MKTG 1265 (AMCA)
Market Leader Strategy#2: Protecting Market
Share
  While trying to expand total market size, the leading firm also
    must protect its current business against competitors’ attacks.

  What can the market leader do to protect its position?
     1. It must prevent or fix weaknesses that provide
        opportunities for competitors.
     2. It must always fulfill its value promise.
     3. Its prices must remain consistent with the value that
        customers see in the brand.
     4. It must work to keep strong relationships with valued
        customers.
     5. It should “plug holes” so that competitors do not jump in.
    The best defense is a good offense, and the best response is
    continuous innovation.

                                                           MKTG 1265 (AMCA)
Market Leader Strategy#3:Expanding Market
Share
     Studies have shown that, on average, profitability rises
     with increasing market share.

     Some studies have found that many industries contain one
     or a few highly profitable large firms, several profitable and
     more focused firms, and a large number of medium-sized
     firms with poorer profit performance. It appears that
     profitability increases as a business gains share relative to
     competitors in its served market.

     Companies must not think that gaining increased market
     share will improve profitability automatically. Much
     depends on their strategy for gaining increased share




                                                           MKTG 1265 (AMCA)
Defense Strategies


                                              2
                 3 Pre-emptive                 Flanking
                 defence                      defence
                                   1
   Attacker                        Position                   6
                                   defence                    Strategic
                                                              withdrawal
              4 counteroffensive
                                              Defender
              defence




                5 Mobile defence

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                                                          MKTG 1265 (AMCA)
Market Challenger Strategies
        Firms that are second, third, or lower in an
        industry are sometimes quite large.
        These runner-up firms can adopt one of two
        competitive strategies:
           They can challenge the leader and other
           competitors in an aggressive bid for more market
           share (market challengers).
           They can play along with competitors and not rock
           the boat (market followers).
        A market challenger must first define which
        competitors to challenge and its strategic
        objective.
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                                                      MKTG 1265 (AMCA)
Market Challenger Strategies

        The challenger can attack the market leader, a high-risk
        but potentially high-gain strategy. Its goal might be to take
        over market leadership. Or the challenger’s objective may
        simply be to wrest more market share.
        The challenger observes what has made the leader
        successful and then improves up it. This is known as the
        “second-mover advantage.”
        Alternatively, the challenger can avoid the leader and
        instead challenge firms its own size, or smaller local and
        regional firms. These smaller firms may be underfinanced
        and not serving their customers well. The challenger must
        choose its opponents carefully and have


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                                                             MKTG 1265 (AMCA)
How can the market challenger best attack the chosen
competitor and achieve its strategic objectives?

       It may launch a full frontal attack, matching the
       competitor’s product, advertising, price, and
       distribution efforts. It attacks the competitor’s
       strengths rather than its weaknesses.
       Rather than challenging head-on, the challenger
       can make an indirect attack on the competitor’s
       weaknesses or on gaps in the competitor’s
       market coverage




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                                                  MKTG 1265 (AMCA)
Attack strategies

                   4. Bypass attack


                  2. Flanking attack              5.
                                                  Guerrilla
                                                  attack


       Attacker   1. Frontal
                                       Defender
                  attack

                  3. Encirclement




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                                                  MKTG 1265 (AMCA)
Types of attack strategies
       Types of attack strategy   Marketing Examples
       1. Frontal Attack          Head on competition usually undertaken by
                                  largest competitors who have the muscle
                                  (resources) to engage in prolonged
                                  promotion or price wars.
       2. Flank Attack            Attack the competition on its weakest spots
                                  (example distribution) and take advantage of
                                  this weakness to grab market share.
       3. Encirclement Attack     Attack the competition on multiple fronts
                                  (using more than one aspect of the
                                  marketing mix strategy).
       4. Bypass Attack           Plan to enter markets not currently
                                  considered by competition; create “blue
                                  ocean opportunities” – fight the next war.
       6. Guerilla Attack         Used by smaller competitors to attack by
                                  surprise to upset strategies of larger rivals;
                                  smaller competitor then withdraws to attack
3-67                              another day.
© Strategy in Marketing (Pearson Asia 2009)



  Apple versus Samsung Phones
       How do they compete?
       Design?
       Functionality (Apple has its own OS;
       Samsung uses Windows Mobile)
       Pricing: both are comparatively high
       Promotions: Apple is stronger on WOM
       and OL; Samsung uses media might
       Place: Apple appointed Telcos;
       Samsung uses wider distribution
       network
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Market Follower Strategies
       Not all runner-up companies want to challenge the
       market leader. Challenges are never taken lightly by
       the leader.
       A follower can gain many advantages.
       The market leader often bears the huge expenses of
       developing new products and markets, expanding
       distribution, and educating the market.
       By contrast, the market follower can learn from the
       leader’s experience. It can copy or improve on the
       leader’s products and programs, usually with much
       less investment. Although the follower will probably
       not overtake the leader, it often can be as profitable.

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                                                         MKTG 1265 (AMCA)
Market Follower Strategies

        Following is not the same as being passive or a
        carbon copy of the leader.
        Each follower tries to bring distinctive advantages
        to its target market.
        The follower is often a major target of attack by
        challengers. Therefore, the market follower must
        keep its manufacturing costs low and its product
        quality and services high. It must also enter new
        markets as they open up.



3-70
                                                    MKTG 1265 (AMCA)
Market Nicher Strategies
        Almost every industry includes firms that specialize in serving
        market niches. Instead of pursuing the whole market, or even
        large segments, these firms target subsegments.
        Nichers are often smaller firms with limited resources. But
        smaller divisions of larger firms also may pursue niching
        strategies.
        Why is niching profitable? The main reason is that the market
        nicher ends up knowing the target customer group so well that it
        meets their needs better than other firms that casually sell to this
        niche.
        As a result, the nicher can charge a substantial markup over
        costs because of the added value.
        Whereas the mass marketer achieves high volume, the nicher
        achieves high margins.

3-71
                                                                   MKTG 1265 (AMCA)
Market Nicher Strategies

        Nichers try to find one or more market niches that
        are safe and profitable.
        An ideal market niche is big enough to be
        profitable and has growth potential.
        Perhaps most important, the niche is of little
        interest to major competitors.
        The key idea in niching is specialization. A market
        nicher can specialize along any of several market,
        customer, product, or marketing mix lines.


3-72
                                                    MKTG 1265 (AMCA)
Risks of Market Nichers

        Niching carries some major risks.
        For example, the market niche may dry up, or it
        might grow to the point that it attracts larger
        competitors.

        That is why many companies practice multiple
        niching. By developing two or more niches, a
        company increases its chances for survival.




3-73
                                                  MKTG 1265 (AMCA)
Blue Ocean Strategy




                     How to create uncontested
                     market space and make the
                     competition irrelevant……


3-74
© Strategy in Marketing (Pearson Asia 2009)




       Blue Ocean Strategy Implications
        Don’t get stuck in markets
        that are crowded (‘red
        oceans’)
        Redefine your market
        Create new solutions and
        business models for
        meeting customer needs
        See ahead to unmet needs
        and make the competition
        irrelevant

3-75
                                                             MKTG 1265 (AMCA)
5-76
       MKTG 1265 (AMCA)
© Strategy in Marketing (Pearson Asia 2009)


                      Uses the concept of the “Strategy
                      Canvas”
High
 Attribute Strength




                                The combination of attributes gives
                                 an idea of the strategic profile of
                                   the firm and its competitors
Low
                      #1   #2    #3      #4      #5      #6     #7     #8          #9            #10

                                                 Attributes
5-77
                                                                                             MKTG 1265 (AMCA)
© Strategy in Marketing (Pearson Asia 2009)

                      Through competitive intelligence and marketing
                      research you profile the strategy of your main
                      competitor/s


                            Competitor A
 Attribute Strength




                           Competitor B




                           Competitor C




                      #1     #2     #3     #4   #5     #6    #7   #8           #9           #10

                                                Attributes
5-78
                                                                                         MKTG 1265 (AMCA)
© Strategy in Marketing (Pearson Asia 2009)



                      There is a bunching and a very clear “Red Ocean”
                      Scenario
                                                                   “What should you do now?
                                                                  “What should you do now?
                                                                        Seek opportunities in
                                                                       Seek opportunities in
                            Competitor A                             market areas not tapped
                                                                    market areas not tapped
                                                                                 by the rivals
                                                                                by the rivals
                                                                      Sometimes you need to
 Attribute Strength




                           Competitor B                              Sometimes you need to
                                                                    reinvent the product offer
                                                                   reinvent the product offer
                                                                          and service delivery
                                                                         and service delivery
                                                                                       system
                                                                                      system

                           Competitor C




                      #1     #2     #3     #4   #5     #6    #7    #8           #9            #10

                                                Attributes
5-79
                                                                                           MKTG 1265 (AMCA)
© Strategy in Marketing (Pearson Asia 2009)




                      Blue Ocean Strategy: Create a New Value Curve


                            Competitor A
 Attribute Strength




                           Competitor B




                           Competitor C




                      #1     #2     #3     #4   #5     #6    #7   #8           #9            #10

                                                Attributes
5-80
                                                                                          MKTG 1265 (AMCA)
The budget airline market




                                            Blue Ocean market space for budget airlines
3-81
                                   MKTG 1265 (AMCA)
3-82
© Strategy in Marketing (Pearson Asia 2009)

       BO Strategy: Marketing Implications
       PRODUCT
        Innovate products and services
        that redefine the market
        Create new categories not
        thought of before
        Apple i-Pod is a good example
        Even marketing real estate-
        DUBAI
          Palm
          The World



3-83
© Strategy in Marketing (Pearson Asia 2009)

       BO Strategy: Marketing Implications
       PLACE
        Create a new system for delivering product or
        services to customers

        Dell



        Amazon.com

        Zuji.com (travel portal)


3-84
Past Year Examination Questions

           Competitive Marketing
                Strategy



3-85
                                    MKTG 1265 (AMCA)
Specimen Question # 1

        Industry figures suggest that XYZ company is
        the market leader in its industry. Describe
        the main objectives or focus of a market
        leader,
        leader in terms of their competitive strategy,
        and the activities they may undertake to
        achieve those objectives. Please provide
        specific examples that relate to the industry
        to illustrate your answer.


3-86
                                                MKTG 1265 (AMCA)
Specimen Question # 2

        Describe the quadrants in the Ansoff
        product/market expansion grid, using
        examples relevant to company. (Just give
        one example per quadrant.) What is the
        main strength and weakness of each of
        your examples? What is the purpose of
        this grid?



3-87
                                           MKTG 1265 (AMCA)
Specimen Question # 3

        Describe the quadrants in the Ansoff
        product/market expansion grid, using
        examples relevant to a given company in
        order to illustrate your answer. (Just give
        one example per quadrant.) What is the
        main strength and weakness of each of
        your examples? What is the purpose of
        this grid?

3-88
                                               MKTG 1265 (AMCA)
Specimen Question # 4

        A firm's position in the market influences its
        competitive strategy. Briefly describe the main
        strategies for each of the market positions.
        Which position does the “case company” occupy
        (be sure to identify the market/industry in which
        they compete) and why do you say that?

             Note: the “case company” referred to here
             is dependent on the actual case you are
             given in the exam

3-89
                                                     MKTG 1265 (AMCA)
Specimen Question # 5

        Briefly describe Porter’s generic
        competitive strategies. Which one is most
        appropriate to a company and why?




3-90
                                            MKTG 1265 (AMCA)
Specimen Question # 6

        Describe the quadrants in the Ansoff
        product/market expansion grid, using
        examples relevant to the case company to
        illustrate your answer. (Just give one
        example per quadrant.) What is the
        purpose of this grid?

         Note: the “case company” referred to here
         is dependent on the actual case you are
         given in the exam
3-91
                                                     MKTG 1265 (AMCA)
Specimen Question # 7

        Based on a company’s position in a target
                     company’
        market,
        market describe the four competitive
        positions a firm might occupy. What
        position does the “case study company”
        occupy in the market and what
        competitive strategies would they be likely
        to pursue?
         Note: the “case company” referred to here
         is dependent on the actual case you are
         given in the exam
3-92
                                                     MKTG 1265 (AMCA)
Specimen Question # 8

        Briefly explain to your marketing
        manager in a brief report on the
        purpose of the Ansoff
        Product/Market Expansion Grid.




3-93
                                            MKTG 1265 (AMCA)
Specimen Question # 9

 Describe the quadrants in the Ansoff
 product/market expansion grid, using
 examples relevant to the (case company).
 Just give one example per quadrant. What
 are the main strength and weakness of
 each of your examples? What is the
 purpose of this grid?



                                    MKTG 1265 (AMCA)

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AMCA Lecture Three Competitive Marketing Strategy

  • 1. MKTG 1265 Advanced Marketing Concepts and Applications Lecture Three Competitive Marketing Strategy 1 MKTG 1265 (AMCA)
  • 2. Agenda Competitor Analysis Positioning Strategy Application of Strategy Models in Marketing Porter’s Generic Strategies Model Ansoff Matrix Model Marketing Warfare Concepts (for further reference): Blue Ocean Strategy 3-2 MKTG 1265 (AMCA)
  • 3. References: Week 3 - Competetive Marketing Strategy Kotler, P., Brown, L. Adam, S. and Armstrong, G., (2004) Marketing, 6th Edition, Prentice Hall, Sydney, pp. 738-768. (Chapter 19, Sustainable Competitive Advantage) Porter, M.E. and Kramer, M.R. (2006). Strategy & Society: The Link between Competitive Advantage and Corporate Social Responsibility, Harvard Business Review, December, 78-92. Cover the Kotler reading in detail; many concepts and frameworks on competitive strategies are covered here. The Porter article is also important. 5-3 MKTG 1265 (AMCA)
  • 4. Competitor Analysis Definition: The process of identifying major competitors, assessing their objectives, strategies, strengths and weaknesses, and selecting which competitors to attack or avoid 3-4 MKTG 1265 (AMCA)
  • 6. Competitor Oriented Company A competitor-centered company is one that spends most of its time tracking competitors’ moves and market shares and trying to find strategies to counter them. This approach has pluses and minuses. On the positive side, the company develops a fighter orientation. On the negative side, the company becomes too reactive. 3-6 MKTG 1265 (AMCA)
  • 7. Customer Oriented Company A customer-centered company focuses more on customer developments in designing its strategies. Clearly, the customer-centered company is in a better position to identify new opportunities and set long-run strategies that make sense 3-7 MKTG 1265 (AMCA)
  • 8. Market Oriented Company In practice, today’s companies must be market-centered companies, watching both their customers and their competitors. But they must not let competitor watching blind them to customer focusing. 3-8 MKTG 1265 (AMCA)
  • 9. Figure 19-7 of the Reading: Figure 19-7 shows that companies have moved through four orientations over the years. In the first stage, they were product oriented, paying little attention to either customers or competitors. In the second stage, they became customer oriented and started to pay attention to customers. In the third stage, when they started to pay attention to competitors, they became competitor oriented. Today, companies need to be market oriented, paying balanced attention to both customers and competitors. 3-9 MKTG 1265 (AMCA)
  • 10. Competitor Analysis: the Six Stages Model 1. Who the competitors are 2. What the competitors’ objectives are 3. What their strategies are 4. What their strengths and weaknesses are 5. What their reaction patterns are 6. Who to confront and how to avoid 3-10 MKTG 1265 (AMCA)
  • 11. Steps in Analyzing Competitors 1 2 3 Identifying the Determining Identifying company’s competitors’ competitors’ competitors objectives strategies Assessing Selecting Estimating competitors’ competitors to competitors’ strengths and attack and reactions weaknesses avoid 6 5 4 3-11 Source: Kotler MKTG 1265 (AMCA)
  • 12. 1 Identifying Competitors At the narrowest level, a company can define its competitors as other companies offering similar products and services to the same customers at similar prices. But companies actually face a much wider range of competitors. The company might define competitors as all firms making the same product or class of products. Finally, and still more broadly, competitors might include all companies that compete for the same consumer dollars 3-12 MKTG 1265 (AMCA)
  • 13. Identifying the Competitors Competitors could be DIRECT (within the same industry or market sector) INDIRECT (competing for the consumer dollar- substitutes) LATENT (potential threats) 3-13 MKTG 1265 (AMCA)
  • 14. Avoiding competitor myopia Companies must avoid “competitor myopia.” A company is more likely to be “buried” by its latent competitors than its current ones. Companies can identify their competitors from the industry point of view. A company must understand the competitive patterns in its industry if it hopes to be an effective “player” in that industry. Companies can also identify competitors from a market point of view. Here they define competitors as companies that are trying to satisfy the same customer need or build relationships with the same customer group. In general, the market concept of competition opens the company’s eyes to a broader set of actual and potential competitors. 3-14 MKTG 1265 (AMCA)
  • 15. 2 Determining Competitors Objectives Each competitor has a mix of objectives. The company wants to know the relative importance that a competitor places on current profitability, market share growth, cash flow, technological leadership, service leadership, and other goals. Knowing a competitor’s mix of objectives reveals whether the competitor is satisfied with its current situation and how it might react to different competitive actions. A company must also monitor its competitors’ objectives for various segments. 3-15 MKTG 1265 (AMCA)
  • 16. 3 Identifying Competitors Strategies The more that one firm’s strategy resembles another firm’s strategy, the more the two firms compete. A strategic group is a group of firms in an industry following the same or a similar strategy in a given target market. 3-16 MKTG 1265 (AMCA)
  • 17. Strategic Groups Model A strategic group is a concept used in strategic management that groups companies within an industry that have similar business models or similar combinations of strategies. For example, the restaurant industry can be divided into several strategic groups including fast-food and fine-dining based on variables such as preparation time, pricing, and presentation. The number of groups within an industry and their composition depends on the dimensions used to define the groups. 3-17 MKTG 1265 (AMCA)
  • 18. Some simplified versions of SGA BANKS AIRLINES Extensive International Fleet Size Carriers Budget Limited Carriers Domestic Regional International MKTG 1265 (AMCA) Routes
  • 19. Uses of the SG model Helps identify who the most direct competitors are and on what basis they compete. Raises the question of how likely or possible it is for another organization to move from one strategic group to another. Strategic Group mapping might also be used to identify opportunities. Can also help identify strategic problems 3-19 MKTG 1265 (AMCA)
  • 20. Strategic Groups - Implications Although competition is intense within a strategic group, there is also rivalry between groups. Some of the strategic groups may appeal to overlapping customer segments. Example budget versus full service airlines The customers may not see much difference in the offers of different groups. Members of one strategic group might expand into new strategy segments. The company needs to look at all of the dimensions that identify strategic groups within the industry. 3-20 MKTG 1265 (AMCA)
  • 21. Don’t confuse Strategic Groups Model with the Market Positioning Model May look the same But SG model focuses more on the scope of business operations and the business model used (example think of how Amazon.com operates versus traditional book stores) The Positioning Model (perceptual map) is used in marketing to cluster different competitors based on attributes 3-21 MKTG 1265 (AMCA)
  • 22. 4 Assessing Competitors Strengths and Weaknesses Marketers need to assess each competitor’s strengths and weaknesses carefully in order to answer the critical question: What can our competitors do? As a first step, companies can gather data on each competitor’s goals, strategies, and performance over the last few years. Companies normally learn about their competitors’ strengths and weaknesses through secondary data, personal experience, and word of mouth. 3-22 MKTG 1265 (AMCA)
  • 23. Assessing Competitors Strengths and Weaknesses They can conduct primary marketing research with customers, suppliers, and dealers. They can benchmark themselves against other firms, comparing the company’s products and processes to those of competitors or leading firms in other industries to find ways to improve quality and performance. 3-23 MKTG 1265 (AMCA)
  • 24. 5 Estimating Competitors’ Reactions What will our competitors do? A competitor’s objectives, strategies, and strengths and weaknesses go a long way toward explaining its likely actions. They also suggest its likely reactions to company moves such as price cuts, promotion increases, or new-product introductions. In addition, each competitor has a certain philosophy of doing business, a certain internal culture and guiding beliefs. Each competitor reacts differently. 3-24 MKTG 1265 (AMCA)
  • 25. 6 Selecting Competitors To Attack and Avoid Strong or Weak Competitors Close or Distant Competitors “Good” or “Bad” Competitors 3-25 MKTG 1265 (AMCA)
  • 26. Strong or Weak Competitors Most companies prefer to compete against weak competitors. This requires fewer resources and less time. But in the process, the firm may gain little. A useful tool for assessing competitor strengths and weaknesses is customer value analysis. To analyze the profiles of different competitors and compare it against the firm itself. 3-26 MKTG 1265 (AMCA)
  • 27. An example of Competitor Profile Analysis Key success factor Our company Competitor 1 Competitor 2 Innovativeness 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 Financial strength 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 Technical assistance to customers 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 Product quality 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 Well-qualified workforce 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 Access to international distribution channels 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 3-27 MKTG 1265 (AMCA)
  • 28. Customer Value Analysis The aim of customer value analysis is to determine the benefits that target customer value and how customers rate the relative value of various competitors’ offers. The key to gaining competitive advantage is to take each customer segment and examine how the company’s offer compares to that of its major competitor 3-28 MKTG 1265 (AMCA)
  • 29. Close or Distant Competitors Most companies will compete with close competitors—those that resemble them the most—rather than distant competitors. At the same time, the company may want to avoid trying to “destroy” a close competitor 3-29 MKTG 1265 (AMCA)
  • 30. Good or Bad Competitors Is competition always bad? The existence of competitors results in several strategic benefits. Competitors may help increase total demand. They may share the costs of market and product development and help to legitimize new technologies. They may serve less-attractive segments or lead to more product differentiation. They lower the antitrust risk and improve bargaining power versus labor or regulators. 3-30 MKTG 1265 (AMCA)
  • 31. Good or Bad Competitors An industry often contains “good” competitors and “bad” competitors. Good competitors play by the rules of the industry. Bad competitors break the rules. They try to buy share rather than earn it, take large risks, and in general shake up the industry. The implication is that “good” competitors would like to shape an industry that consists of only well- behaved competitors. 3-31 MKTG 1265 (AMCA)
  • 32. Finding Uncontested Market Spaces Rather than competing head to head with established competitors, many companies seek out unoccupied positions in uncontested market spaces. They try to create products and services for which there are no direct competitors. Later we look at ‘Blue Ocean Strategy.’ 3-32 MKTG 1265 (AMCA)
  • 33. Competitor Intelligence System The competitive intelligence system: Identifies the vital types of competitive information and the best sources of this information; Continuously collects information from the field and from published data; Checks the information for validity and reliability, interprets it, and organizes it in an appropriate way; Sends key information to relevant decision makers and responds to inquiries from managers about competitors. 3-33 MKTG 1265 (AMCA)
  • 34. Models in Competitive Marketing Strategy 1. Ansoff Matrix 2. Porter Generic Strategies 3. Marketing Warfare 4. Blue Ocean Strategy (optional but it is the latest model out there) 34 MKTG 1265 (AMCA)
  • 35. Which direction Refers to long term decisions that the company must take with regards to where it should compete and what its product/service offer should be Referred to as “product-market” scope Use the Ansoff Matrix Should know the meaning of each cell in the matrix and how it can be applied specifically to marketing. 3-35
  • 37. © Strategy in Marketing (Pearson Asia 2009) Marketing Implications of a Market Penetration Strategy • Overall strategy: to increase volume sales in existing markets with existing product offers. The full extent of the market is untapped- need to gain greater penetration • Segmentation/Targeting: Current users • Product: no changes; stick to existing product lines • Price: could use penetration pricing in orde37r to increase sales volume • Promotions: mainly on sales promotions; generally a “push” strategy • Place: increase distribution channels/ intermediaries in order to widen availability of the product LEC3-37
  • 38. © Strategy in Marketing (Pearson Asia 2009) Marketing Implications of a Market Development Strategy • Overall strategy: to take existing products into new markets (geographic, customer segments) • Segmentation/Targeting: New users • Product: no major changes but adaptation for new user segment • Price: use differential pricing for different segments • Promotions: targeting at new audiences; possibly reaching with different media and messages • Place: use new distribution channels to reach new segments. International marketing for geographic market expansion LEC3-38
  • 39. © Strategy in Marketing (Pearson Asia 2009) Marketing Implications of a Product Development Strategy • Overall strategy: to launch new products and innovations. Establish market leadership position • Segmentation/Targeting: Innovators/ Early adopters • Product: Innovation (“first-in-market”) • Price: Skim pricing • Promotions: Creating awareness, educating customers about new products • Place: Selective distribution initially 3-39 LEC3-39
  • 40. © Strategy in Marketing (Pearson Asia 2009) Apply this to Apple (examples) Market Penetration: Product Development: • Apple uses extensive •Introduction of innovative promotions and pricing to new products (i-pods/ i- increase demand for its Phone/ Macbook Air) current rang of products •Updates of product range • Cross selling of Apple (ipods+ Macbooks) products Market Development: Diversification: •Expand into new country • Bold move into digital music markets (i-Tunes) •Appoint more distributors •Movies? and resellers 3-40
  • 41. An example of applying the Product Market Expansion Grid (Malaysian Airlines) Source: Kotler and da Silva (2006) Pearson Asia LEC3-41
  • 42. Competitive Advantage How do companies achieve competitive advantages and how do they operationalize these advantages in marketing? 1-42 MKTG 1265 (AMCA)
  • 43. Competitive Advantage Definition: An advantage over competitors gained by offering consumers greater value, either through lower prices or by providing more benefits that justify higher prices Organizations might deliver more customer value than their competitors by: Offering lower prices Providing more benefits, justifying higher prices Offering specialist products and services (more later when we cover Porter generic strategies) 3-43 MKTG 1265 (AMCA)
  • 44. Competitive Advantages in Marketing Can exist in any or all aspects of the marketing mix 1. Product : quality, functions, design, branding 2. Pricing: levels versus the competitors; sources of cost advantages 3. Place: location, convenience, store image 4. Promotions: creativity, use of media, execution (integrated MC) 5. People: Customer Service 6. Processes: Service Delivery Systems 3-44 MKTG 1265 (AMCA)
  • 45. Basic Competitive Strategies More than two decades ago, Michael Porter suggested four basic competitive positioning strategies that companies can follow—three winning strategies and one losing one. The winning strategies are: Overall cost leadership: The company works hard to achieve the lowest production and distribution costs. Differentiation: The company concentrates on creating a highly differentiated product line and marketing program. Focus: The company focuses on serving a few market segments well rather than going after the whole market. 3-45 MKTG 1265 (AMCA)
  • 46. The meaning of each strategy: 3-46
  • 47. © Strategy in Marketing (Pearson Asia 2009) Marketing Implications of a Differentiation Strategy Overall strategy: to achieve superiority in all aspects of marketing and business operations Segmentation/Targeting: Quality/ Value seeking customers Product: Premium product; excellent service. Strong brand equity Price: Value based pricing; higher than competitors Promotions: Creating product differentiation and brand image Place: Selective distribution 3-47
  • 48. © Strategy in Marketing (Pearson Asia 2009) Marketing Implications of a Cost Leadership Strategy Overall strategy: to be the lowest cost player ni the market Segmentation/Targeting: Mass market; value seeking customers Product: Basic, functional, no-frills Price: Penetration pricing Promotions: Mass media advertising; sales promotions to create push effect Place: Intensive distribution 3-48
  • 49. © Strategy in Marketing (Pearson Asia 2009) Marketing Implications of a Focus Strategy Overall strategy: Become a specialist in a given product market sector Segmentation/Targeting: Niche market segments Product: Specialist product line; deep assortment but limited range Price: Skim pricing Promotions: Focused media Place: Exclusive or selective distribution 3-49
  • 50. Gaining Leadership Positions Through Delivering Superior Value More recently, a new classification of competitive marketing strategies has been offered. It is suggested companies gain leadership positions by delivering superior value to their customers. Companies can pursue any of three strategies—called value disciplines—for delivering superior customer value. 3-50 MKTG 1265 (AMCA)
  • 51. Value Disciplines: Operational excellence: The company provides superior value by leading its industry in price and convenience. Customer intimacy: The company provides superior value by precisely segmenting its markets and tailoring its products or services to match exactly the needs of targeted customers. Product leadership: The company provides superior value by offering a continuous stream of leading-edge products or services. 3-51 MKTG 1265 (AMCA)
  • 52. Marketing Warfare Concepts “How aggressovely do we compete?” 3-52 MKTG 1265 (AMCA)
  • 53. Marketing Wars (‘battles for market share and dominance or a market position) Another way of studying marketing strategy is to observe and track major marketing wars between key competitors What turf (battle-ground= Market) are they fighting for? How are they fighting? What are the differences in the ways the rivals are competing? 3-53
  • 54. Marketing Warfare Concepts Marketing is dynamic Competitors will react against each other The marketing mix becomes the weapons of warfare Battle terrain= Market Segments Targeting and Positioning Attack and Counter-Attack (“for every action there opposite reaction”- physics law) Competitive Posturing: adopt a stance- leader, challenger, follower, nicher 3-54 MKTG 1265 (AMCA)
  • 55. Competitive Positions Firms competing in a given target market, at any point in time, differ in their objectives and resources. 1-55 MKTG 1265 (AMCA)
  • 56. Strategic Positioning Market Leaders Focus on expanding total demand Defending market share is important May not wish to aggressively take more market share from rivals Market Challengers Concentrate on a single target. Attacking the leader Market Followers Compete with modest strategic objective Often use innovative imitation Compete in selective few segments Market Nichers Focus on narrow slice of the market 3-56 MKTG 1265 (AMCA)
  • 57. Market Leader Strategies Most industries contain an acknowledged market leader. Competitors focus on the leader as a company to challenge, imitate, or avoid. To remain number one, leading firms can take any of three actions. 1. They can find ways to expand total demand. 2. They can protect their current market share through good defensive and offensive actions. 3. They can try to expand their market share further, even if market size remains constant. 3-57 MKTG 1265 (AMCA)
  • 58. Market Leaders Strategies: Examples of marketing strategies: Superior customer knowledge 1.Expand total demand Long-term outlook Product innovation - New Users Total quality - New uses Product flanking, multiple brands, brand extension - More usage Heavy advertising Aggressive sales force Effective Promotion 2.Defend market share Quick, effective competitive response Manufacturing efficiency 3.Expand market share Brand management system 3-58
  • 59. Market Leader Strategy #1: Expanding Total Demand The leading firm normally gains the most when the total market expands. Market leaders can expand the market by developing new users, new uses, and more usage of its products. MKTG 1265 (AMCA)
  • 60. Market Leader Strategy#2: Protecting Market Share While trying to expand total market size, the leading firm also must protect its current business against competitors’ attacks. What can the market leader do to protect its position? 1. It must prevent or fix weaknesses that provide opportunities for competitors. 2. It must always fulfill its value promise. 3. Its prices must remain consistent with the value that customers see in the brand. 4. It must work to keep strong relationships with valued customers. 5. It should “plug holes” so that competitors do not jump in. The best defense is a good offense, and the best response is continuous innovation. MKTG 1265 (AMCA)
  • 61. Market Leader Strategy#3:Expanding Market Share Studies have shown that, on average, profitability rises with increasing market share. Some studies have found that many industries contain one or a few highly profitable large firms, several profitable and more focused firms, and a large number of medium-sized firms with poorer profit performance. It appears that profitability increases as a business gains share relative to competitors in its served market. Companies must not think that gaining increased market share will improve profitability automatically. Much depends on their strategy for gaining increased share MKTG 1265 (AMCA)
  • 62. Defense Strategies 2 3 Pre-emptive Flanking defence defence 1 Attacker Position 6 defence Strategic withdrawal 4 counteroffensive Defender defence 5 Mobile defence 3-62 MKTG 1265 (AMCA)
  • 63. Market Challenger Strategies Firms that are second, third, or lower in an industry are sometimes quite large. These runner-up firms can adopt one of two competitive strategies: They can challenge the leader and other competitors in an aggressive bid for more market share (market challengers). They can play along with competitors and not rock the boat (market followers). A market challenger must first define which competitors to challenge and its strategic objective. 3-63 MKTG 1265 (AMCA)
  • 64. Market Challenger Strategies The challenger can attack the market leader, a high-risk but potentially high-gain strategy. Its goal might be to take over market leadership. Or the challenger’s objective may simply be to wrest more market share. The challenger observes what has made the leader successful and then improves up it. This is known as the “second-mover advantage.” Alternatively, the challenger can avoid the leader and instead challenge firms its own size, or smaller local and regional firms. These smaller firms may be underfinanced and not serving their customers well. The challenger must choose its opponents carefully and have 3-64 MKTG 1265 (AMCA)
  • 65. How can the market challenger best attack the chosen competitor and achieve its strategic objectives? It may launch a full frontal attack, matching the competitor’s product, advertising, price, and distribution efforts. It attacks the competitor’s strengths rather than its weaknesses. Rather than challenging head-on, the challenger can make an indirect attack on the competitor’s weaknesses or on gaps in the competitor’s market coverage 3-65 MKTG 1265 (AMCA)
  • 66. Attack strategies 4. Bypass attack 2. Flanking attack 5. Guerrilla attack Attacker 1. Frontal Defender attack 3. Encirclement 3-66 MKTG 1265 (AMCA)
  • 67. Types of attack strategies Types of attack strategy Marketing Examples 1. Frontal Attack Head on competition usually undertaken by largest competitors who have the muscle (resources) to engage in prolonged promotion or price wars. 2. Flank Attack Attack the competition on its weakest spots (example distribution) and take advantage of this weakness to grab market share. 3. Encirclement Attack Attack the competition on multiple fronts (using more than one aspect of the marketing mix strategy). 4. Bypass Attack Plan to enter markets not currently considered by competition; create “blue ocean opportunities” – fight the next war. 6. Guerilla Attack Used by smaller competitors to attack by surprise to upset strategies of larger rivals; smaller competitor then withdraws to attack 3-67 another day.
  • 68. © Strategy in Marketing (Pearson Asia 2009) Apple versus Samsung Phones How do they compete? Design? Functionality (Apple has its own OS; Samsung uses Windows Mobile) Pricing: both are comparatively high Promotions: Apple is stronger on WOM and OL; Samsung uses media might Place: Apple appointed Telcos; Samsung uses wider distribution network 3-68
  • 69. Market Follower Strategies Not all runner-up companies want to challenge the market leader. Challenges are never taken lightly by the leader. A follower can gain many advantages. The market leader often bears the huge expenses of developing new products and markets, expanding distribution, and educating the market. By contrast, the market follower can learn from the leader’s experience. It can copy or improve on the leader’s products and programs, usually with much less investment. Although the follower will probably not overtake the leader, it often can be as profitable. 3-69 MKTG 1265 (AMCA)
  • 70. Market Follower Strategies Following is not the same as being passive or a carbon copy of the leader. Each follower tries to bring distinctive advantages to its target market. The follower is often a major target of attack by challengers. Therefore, the market follower must keep its manufacturing costs low and its product quality and services high. It must also enter new markets as they open up. 3-70 MKTG 1265 (AMCA)
  • 71. Market Nicher Strategies Almost every industry includes firms that specialize in serving market niches. Instead of pursuing the whole market, or even large segments, these firms target subsegments. Nichers are often smaller firms with limited resources. But smaller divisions of larger firms also may pursue niching strategies. Why is niching profitable? The main reason is that the market nicher ends up knowing the target customer group so well that it meets their needs better than other firms that casually sell to this niche. As a result, the nicher can charge a substantial markup over costs because of the added value. Whereas the mass marketer achieves high volume, the nicher achieves high margins. 3-71 MKTG 1265 (AMCA)
  • 72. Market Nicher Strategies Nichers try to find one or more market niches that are safe and profitable. An ideal market niche is big enough to be profitable and has growth potential. Perhaps most important, the niche is of little interest to major competitors. The key idea in niching is specialization. A market nicher can specialize along any of several market, customer, product, or marketing mix lines. 3-72 MKTG 1265 (AMCA)
  • 73. Risks of Market Nichers Niching carries some major risks. For example, the market niche may dry up, or it might grow to the point that it attracts larger competitors. That is why many companies practice multiple niching. By developing two or more niches, a company increases its chances for survival. 3-73 MKTG 1265 (AMCA)
  • 74. Blue Ocean Strategy How to create uncontested market space and make the competition irrelevant…… 3-74
  • 75. © Strategy in Marketing (Pearson Asia 2009) Blue Ocean Strategy Implications Don’t get stuck in markets that are crowded (‘red oceans’) Redefine your market Create new solutions and business models for meeting customer needs See ahead to unmet needs and make the competition irrelevant 3-75 MKTG 1265 (AMCA)
  • 76. 5-76 MKTG 1265 (AMCA)
  • 77. © Strategy in Marketing (Pearson Asia 2009) Uses the concept of the “Strategy Canvas” High Attribute Strength The combination of attributes gives an idea of the strategic profile of the firm and its competitors Low #1 #2 #3 #4 #5 #6 #7 #8 #9 #10 Attributes 5-77 MKTG 1265 (AMCA)
  • 78. © Strategy in Marketing (Pearson Asia 2009) Through competitive intelligence and marketing research you profile the strategy of your main competitor/s Competitor A Attribute Strength Competitor B Competitor C #1 #2 #3 #4 #5 #6 #7 #8 #9 #10 Attributes 5-78 MKTG 1265 (AMCA)
  • 79. © Strategy in Marketing (Pearson Asia 2009) There is a bunching and a very clear “Red Ocean” Scenario “What should you do now? “What should you do now? Seek opportunities in Seek opportunities in Competitor A market areas not tapped market areas not tapped by the rivals by the rivals Sometimes you need to Attribute Strength Competitor B Sometimes you need to reinvent the product offer reinvent the product offer and service delivery and service delivery system system Competitor C #1 #2 #3 #4 #5 #6 #7 #8 #9 #10 Attributes 5-79 MKTG 1265 (AMCA)
  • 80. © Strategy in Marketing (Pearson Asia 2009) Blue Ocean Strategy: Create a New Value Curve Competitor A Attribute Strength Competitor B Competitor C #1 #2 #3 #4 #5 #6 #7 #8 #9 #10 Attributes 5-80 MKTG 1265 (AMCA)
  • 81. The budget airline market Blue Ocean market space for budget airlines 3-81 MKTG 1265 (AMCA)
  • 82. 3-82
  • 83. © Strategy in Marketing (Pearson Asia 2009) BO Strategy: Marketing Implications PRODUCT Innovate products and services that redefine the market Create new categories not thought of before Apple i-Pod is a good example Even marketing real estate- DUBAI Palm The World 3-83
  • 84. © Strategy in Marketing (Pearson Asia 2009) BO Strategy: Marketing Implications PLACE Create a new system for delivering product or services to customers Dell Amazon.com Zuji.com (travel portal) 3-84
  • 85. Past Year Examination Questions Competitive Marketing Strategy 3-85 MKTG 1265 (AMCA)
  • 86. Specimen Question # 1 Industry figures suggest that XYZ company is the market leader in its industry. Describe the main objectives or focus of a market leader, leader in terms of their competitive strategy, and the activities they may undertake to achieve those objectives. Please provide specific examples that relate to the industry to illustrate your answer. 3-86 MKTG 1265 (AMCA)
  • 87. Specimen Question # 2 Describe the quadrants in the Ansoff product/market expansion grid, using examples relevant to company. (Just give one example per quadrant.) What is the main strength and weakness of each of your examples? What is the purpose of this grid? 3-87 MKTG 1265 (AMCA)
  • 88. Specimen Question # 3 Describe the quadrants in the Ansoff product/market expansion grid, using examples relevant to a given company in order to illustrate your answer. (Just give one example per quadrant.) What is the main strength and weakness of each of your examples? What is the purpose of this grid? 3-88 MKTG 1265 (AMCA)
  • 89. Specimen Question # 4 A firm's position in the market influences its competitive strategy. Briefly describe the main strategies for each of the market positions. Which position does the “case company” occupy (be sure to identify the market/industry in which they compete) and why do you say that? Note: the “case company” referred to here is dependent on the actual case you are given in the exam 3-89 MKTG 1265 (AMCA)
  • 90. Specimen Question # 5 Briefly describe Porter’s generic competitive strategies. Which one is most appropriate to a company and why? 3-90 MKTG 1265 (AMCA)
  • 91. Specimen Question # 6 Describe the quadrants in the Ansoff product/market expansion grid, using examples relevant to the case company to illustrate your answer. (Just give one example per quadrant.) What is the purpose of this grid? Note: the “case company” referred to here is dependent on the actual case you are given in the exam 3-91 MKTG 1265 (AMCA)
  • 92. Specimen Question # 7 Based on a company’s position in a target company’ market, market describe the four competitive positions a firm might occupy. What position does the “case study company” occupy in the market and what competitive strategies would they be likely to pursue? Note: the “case company” referred to here is dependent on the actual case you are given in the exam 3-92 MKTG 1265 (AMCA)
  • 93. Specimen Question # 8 Briefly explain to your marketing manager in a brief report on the purpose of the Ansoff Product/Market Expansion Grid. 3-93 MKTG 1265 (AMCA)
  • 94. Specimen Question # 9 Describe the quadrants in the Ansoff product/market expansion grid, using examples relevant to the (case company). Just give one example per quadrant. What are the main strength and weakness of each of your examples? What is the purpose of this grid? MKTG 1265 (AMCA)