Dealing with Competition
Chapter 11
Market Concept of Competition: companies, products,
and/or services that satisfy the same customer need
Word processing software provides “writing ability” – a
need that can be satisfied by pencils, pens, or typewriters
Competition
Analyzing competition (p. 348)
1. Share of market – competitor’s share of total market
2. Share of mind – “name the first company that comes to
mind in this industry”
3. Share of heart – “name the company from which you
would prefer to buy the product”
Companies that make steady gains in mind share and heart
share will inevitable make gains ____________________
________________________
Competition
Value
Benchmarking
Mission
Competition
Customer
Company
Hypothetical Market Structure &
Strategies (p. 349)
Market Leader (40%)
Market Challenger (30%)
Market Follower (20%)
Market Nicher (10%)
Market Share: % of total industry sales accounted for by
one firm
Market Leader: largest share of the
product
market
Market Leader Strategies
1. Expand total market
Market leader has most to gain from expanded market:
Increase usage of product (regardless of whose brand is
chosen), find new customers, more usage
Market Leader Strategies
1. Expand total market
New Customers: Starbucks – company-oriented
retail stores; supermarkets; Frappuccino and ice
cream / joint ventures
More Usage: larger package size; new uses and
application – ____________________________
Market Leader Strategies
2. Defending Market Share
Continuous innovation – new product and
customer service, distribution effectiveness, cost
cutting
Defense strategies (p. 353 – 354)
Mobile defense – market diversification: expand
into unrelated industries; _________________
__________________________
Market Leader Strategies
3. Expand Market Share
Increase promotions; offer superior value – price,
quality, options, features, etc.
Market Challenger Strategies
Market Challenger: firm that occupies second, third,
and lower ranks in an industry (runner-up): Burger
King, Pepsi Cola
Attack Market Leader and Other Competitors
Increase (take away) market share
Better products/service
Comparative advertising
Average or low quality at much lower price
Market Challenger Strategies
Attack Strategies (p. 356-359)
Bypass Attack – diversify into unrelated markets;
new geographical markets; leapfrogging into new
technologies: Pepsi bypassed Coke by (1) purchasing
Tropicana vs. Coke’s Minute Maid and (2) Quaker Oats
which owns Gatorade vs. Coke’s Powerade)
____________________________________
_______________________
Market Follower Strategies
Imitate
- Avoid risk/cost of introducing new product
- Adapt or improve leader’s products
_________________________________
Market-Nicher Strategies
Specialize
Leader of a small market or niche
Nicher most knowledgeable about their customers;
can best meet their needs
Virgin Mobile targets young phone users – no
contracts, no hidden fees
Application
Understand your company: mission,
objectives, resources
Understand your competitors: who are they?
what value do they offer?
Understand your customer: what do they
value?
Setting Product Strategy (Chapter 12)
Procter & Gamble's Product Mix
Detergents
Toothpaste
 Width – number of
lines (5 lines)
Bar Soap
Disposable
Diapers
product
 Length – total number of items the
company carries
product lines
Paper Products
Product Management Challenge
Should product line be extended, maintained, or reduced?
Why?
Should new product lines be added to the mix? Should
existing lines be deleted?
Company Objectives: __________________________
Projections/trends: __________________________________
Satisfy customers
Product line length issues
Lengthening product lines could mean higher
market share and market growth (customer
satisfaction)
But, longer lines result in
: design,
engineering, inventory carrying, new
promotion, etc.
Product line length issues
Growth strategies: line stretching (_____________)
•
downmarket stretch: enter low end of the market
(Sony Value Line)
•
upmarket stretch: enter high-end (Toyota-Lexus;
Honda-Acura)
•
two-way stretch: both directions (Marriott:
Renaissance, Courtyard, Fairfield Inns)
Product line length issues
Line modernization: improvements to encourage
customer _______ to higher valued, higher priced
items __________________________
Pruning:
product from the line
Product is not selling
Limited production capacity