9
Dealing
with Competition
Marketing Management, 13th edA South Asian Perspective
Chapter Questions
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How do marketers identify primary competitors?
How should we analyze competitors’ strategies,
objectives, strengths, and weaknesses?
How can market leaders expand the total market and
defend market share?
How should market challengers attack market
leaders?
How can market followers or nichers compete
effectively?
Five Forces Determining Segment Structural
Attractiveness
•Number of sellers and
degree of differentiation
•Entry, mobility, and exit
barriers
•Cost structure
•Degree of vertical
integration
•Degree of globalization
Barriers and Profitability
Exit barriers
Entry Barriers
Low
High
Low
Low, stable
returns
Low, risky
returns
High
High, stable
returns
High, risky
returns
Competitive Strategy
Industry
Force
Entry
Barriers
Buyer
Power
Supplier
Power
Threat of
Substitutes
Rivalry
Generic Strategies
Cost
Leadership
Differentiation
Focus
Ability to cut price
in retaliation deters
potential entrants.
Customer loyalty can
discourage potential
entrants.
Focusing develops core competencies
that can act as an entry barrier.
Ability to offer
lower price to
powerful buyers.
Large buyers have less
power to negotiate because
of few close alternatives.
Large buyers have less power to negotiate
because of few alternatives.
Better able to pass on
Better insulated from
supplier price increases to
powerful suppliers.
customers.
Suppliers have power because of low
volumes, but a differentiation-focused
firm is better able to pass on supplier
price increases.
Can use low price to
defend against
substitutes.
Customer's become
attached to differentiating
attributes, reducing threat
of substitutes.
Specialized products & core competency
protect against substitutes.
Better able to
compete on price.
Brand loyalty to keep
customers from rivals.
Rivals cannot meet differentiationfocused customer needs.
Analyzing Competitors
Objectives
Strategies
Competitor
Actions
Reaction
Patterns
Strengths &
Weaknesses
A Competitor’s Expansion Plans
Customers’ ratings of competition on Key Success
Factors: An example
Customer
Awareness
Product Quality
Junaid Jamshed
E
E
R-Sheen
G
G
Shahid Afridi
F
P
Note: E= Excellent, G= good, F = Fair, P= poor
Product
Availability
Technical
Assistance
Selling Staff
P
G
E
E
G
F
E
G
P
Strengths and Weaknesses
Share of market
(The competitor’s share of the target market)
Share of mind
(The first company that comes to mind)
Share of heart
(The company from which you would prefer to
buy)
Selecting Competitor
Market Share
Junaid Jamshed
R-Sheen
Shahid Afridi
2006
50%
30
20
2007
47%
34
19
Mind Share
2008
44%
37
19
2006
60%
30
10
2007
58%
31
11
Heart Share
2008
54%
35
11
2006
45%
44
11
Strong Vs Weak (Fewer Resources required)
Close Vs Distant (Resemblance)
Good Vs Bad
2007
42%
47
11
2008
39%
53
8
Competitive Strategies for Market
Leaders
Market
leader
40%
Expand Market
Defend Market Share
Expand Market Share
Market
challenger
30%
Attack leader
Status quo
Market
nicher
Market
follower
20%
Imitate
10%
Specialize
Expanding the Total Market
New customers
(Penetration/new market
segmentation/geographical-expansion)
More usage
(Consumption Amount/Frequency)
Defense Strategy- Creative/Anticipative/Responsive
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A market leader should generally adopt a defense strategy
Six commonly used defense strategies
 Position Defense
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Mobile Defense
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Withdraw from the most vulnerable segments and redirect
resources to those that are more defendable
Pre-emptive Defense
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Secondary markets (flanks) are the weaker areas and prone to
being attacked
Contraction Defense
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By market broadening and diversification (Dialog Telekom Srilanka)
Flanking Defense
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e.g. Mercedes was using a position defense strategy until Toyota
launched a frontal attack with its Lexus.
Detect potential attacks and attack the enemies first
Counter-Offensive Defense
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Responding to competitors’ head-on attack by identifying the
attacker’s weakness and then launch a counter attack
e.g. Toyota launched the Lexus to respond to Mercedes attack
Market Challenger Strategies
The market challengers’ strategic objective is to
gain market share and to become the leader
eventually
How?
 By attacking the market leader
 By attacking other firms of the same size
 By attacking smaller firms
Market Challenger Strategies (cont’d)
Types of Attack
Strategies
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Frontal attack
Flank attack
Encirclement attack
Bypass attack
Guerrilla attack
Frontal Attack
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Seldom work unless
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The challenger has sufficient fire-power (a
3:1 advantage) and staying power, and
The challenger has clear distinctive
advantage(s)
e.g. Japanese and Korean firms launched
frontal attacks in various ASPAC
countries through quality, price and low
cost
Surf Vs Ariel
Flank attack
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Attack the enemy at its weak points or
blind spots i.e. its flanks
Ideal for challenger who does not have
sufficient resources
e.g. Google Vs ChaCha and or
Wikipedia
Encirclement attack
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Attack the enemy at many fronts at the
same time
Ideal for challenger having superior
resources
e.g. Seiko attacked on fashion,
features, user preferences and
anything that might interest the
consumer
Zong???
Bypass attack
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By diversifying into unrelated products
or markets neglected by the leader
Could overtake the leader by using new
technologies
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e.g. Pepsi used a bypass attack strategy
against Coke by acquiring Tropicana Vs.
Minute Maid
Telenor in Pakistan
Instead of launching carbonated drinks
Nestle brought pure jiuces vs. the
carbonated drinks
Guerrilla attack
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By launching small, intermittent hit-andrun attacks to harass and destabilize
the leader
Usually use to precede a stronger
attack
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e.g. airlines use short promotions to attack
the national carriers especially when
passenger loads in certain routes are low
local water brands vs. multinational water
brands
Which Attack Strategy should a Challenger
Choose?
Use a combination of several strategies
to improve market share over time
Market-Follower Strategies
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Theodore Levitt in his article, “Innovative
Imitation” argued that a product imitation
strategy might be just as profitable as a
product innovation strategy
e.g.
Product innovation--Sony
Product-imitation--Panasonic
Market-Follower Strategies (cont’d)
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Each follower tries to bring distinctive
advantages to its target market--location,
services, financing
Four broad follower strategies:
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Counterfeiter (which is illegal)
Cloner (emulation of leader’s product, name & package)
 e.g. New Joshanda Brand Vs Qarshi
 S&S Cycle Vs. Harley
Imitator e.g. car manufacturers imitate the style of one
another
Adapter e.g. many Japanese firms are excellent
adapters initially before developing into challengers and
eventually leaders
Market-Nicher Strategies
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Smaller firms can avoid
larger firms by targeting
smaller markets or
niches that are of little
or no interest to the
larger firms
e.g. Zippo
Digicel
Bullet-Proof Cars
Market-Nicher Strategies (cont’d)
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Nichers must create niches, expand the
niches and protect them
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e.g. Nike constantly creates new niches-cycling, walking, hiking, cheerleading, etc
What is the major risk faced by nichers?
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Market niche may be attacked by larger firms
once they notice the niches are successful
Multiple Niching
“[A] firm should `stick to its niching’ but not
necessarily to its niche. That is why multiple
niching is preferable to single niching. By
developing strength in two or more niches the
company increases its chances for survival.”
Philip Kotler
Balancing Orientations
CompetitorCentered
CustomerCentered