The document discusses competitive marketing strategy, outlining Porter's generic strategies model and Ansoff matrix model. It covers competitor analysis including identifying competitors, determining their objectives and strategies, assessing strengths and weaknesses, and selecting which to attack or avoid. The presentation also analyzes different competitive orientations and applications of strategic models in marketing.
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AMCA Lecture Three Competitive Marketing Strategy
1. MKTG 1265
Advanced Marketing Concepts and
Applications
Lecture Three
Competitive Marketing
Strategy
1
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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
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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.
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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
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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.
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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
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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.
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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.
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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
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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
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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
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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)
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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.
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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.
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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.
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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.
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18. Some simplified versions of SGA
BANKS
AIRLINES
Extensive
International
Fleet Size Carriers
Budget
Limited
Carriers
Domestic Regional International
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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
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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.
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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
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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.
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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.
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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.
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25. 6
Selecting Competitors To Attack and Avoid
Strong or Weak Competitors
Close or Distant Competitors
“Good” or “Bad” Competitors
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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.
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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
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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
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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.
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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.
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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.’
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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.
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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)
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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.
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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?
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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)
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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
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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.
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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.
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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.
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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?
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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
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55. Competitive Positions
Firms competing in a given target market,
at any point in time, differ in their
objectives and resources.
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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
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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.
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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
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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.
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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.
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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
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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.
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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
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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
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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
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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.
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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.
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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.
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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.
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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.
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74. Blue Ocean Strategy
How to create uncontested
market space and make the
competition irrelevant……
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85. Past Year Examination Questions
Competitive Marketing
Strategy
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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.
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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?
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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?
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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
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90. Specimen Question # 5
Briefly describe Porter’s generic
competitive strategies. Which one is most
appropriate to a company and why?
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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
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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
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93. Specimen Question # 8
Briefly explain to your marketing
manager in a brief report on the
purpose of the Ansoff
Product/Market Expansion Grid.
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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?
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