COMPETITIVE BUSINESS
STRATEGY
Besting one’s Rivals
How Do
Firms Dominate their Rivals?
• Collusion
• Special knowledge about customers, products,
or production techniques that enables them to
make better products than other firms or make
them at a lower cost
• Government protection
• Effective product-market strategies and
tactics.
Goals of this class: You will
know about
• Identifying competitor strategies
• Selecting competitors to attack or avoid
• Understanding the conflicts between
customer and competitor orientation
Basic Concepts
• Porter’s Five Forces -- first 3 focus on
rivals
• Identifying rivals
• Understanding their objectives
• Anticipating their reactions
• Designing competitive intelligence
systems
Fig. 8.01
T30
Five Forces Determining Segment
Structural Attractiveness
Potential Entrants
(Threat of
Mobility)
Suppliers
(Supplier power)
Industry
Competitors
(Segment rivalry)
Substitutes
(Threats of
substitutes)
Buyers
(Buyer power)
Fig. 8.03
T32
Product / Market Battlefield for
Toothpaste
Customer segmentation
Product segmentation
Children / Teens
Age 19-35
Age 36+
Plain
toothpaste
Colgate-Palmolive Colgate-Palmolive Colgate-Palmolive
Procter & Gamble Procter & Gamble Procter & Gamble
Toothpaste
with fluoride
Colgate-Palmolive Colgate-Palmolive Colgate-Palmolive
Procter & Gamble Procter & Gamble Procter & Gamble
Gel
Colgate-Palmolive Colgate-Palmolive Colgate-Palmolive
Procter & Gamble Procter & Gamble Procter & Gamble
Lever Bros.
Lever Bros.
Lever Bros.
Striped
Smoker’s
toothpaste
Beecham
Beecham
Topol
Topol
Fig. 8.04
T33
Strategic Groups in the Major
Appliance Industry
Group A
Quality
High •Narrow line
•Lower mfg. cost
•Very high service
•High price
Group B
•Full line
•Low mfg. cost
•Good service
•Medium price
Low
Group C
•Moderate line
•Medium mfg. cost
•Medium service
•Medium price
Group D
•Broad line
•Medium mrg. cost
•Low service
•Low price
High
Low
Vertical Integration
Fig. 9.05
T37
Five Patterns of Target Market
Selection
Single-segment
concentration
M1 M2 M3
P1
Selective
specialization
M1 M2 M3
P1
P1
P2
P2
P2
P3
P3
P3
Market
specialization
M1 M2 M3
Product
specialization
M1 M2 M3
Full market
coverage
M1 M2 M3
P1
P1
P2
P2
P3
P3
P = Product
M = Market
Segment-by-SegmentT38
Invasion Plan
Fig. 9.06
Product Varieties
Customer Groups
Airlines
Railroads
Truckers
Large
computers
Mid-size
computers
Personal
computers
Company A
Company B
Company C
TACTICS
All’s Fair in Love & War?
GET THERE FIRST WITH THE
MOST
• Positioning
• Entrenched products have several competitive
advantages
• Consumer awareness and product reputation
• Production experience
• Advantageous arrangements with suppliers,
wholesalers, and retailers
Barriers to Entry
Fig. 8.02
T31
Barriers and Profitability
Exit barriers
Entry Barriers
Low
High
Low
Low, stable
returns
Low, risky
returns
High
High, stable
returns
High, risky
returns
THREATEN, BLUFF, LIE
• Tacit -- take steps that CREDIBLY
commit the firm to defend position -– Price, product, place, promotion
– Example: Walmart -- we will not be undersold
• Explicit THREATS-- if successful, will
probably get you in trouble with law
• LIES may not
EXPLOIT YOUR STRENGTHS
TO HANDICAP RIVALS
• ALLIANCES
–
–
–
–
Tacit example: GM
Explicit example: Wintel
Plus threat example: Microsoft
Government & Mafias
• KNOWLEDGE
– Market example: LiviCo/Mannesman
– Resource example: Shell, Exxon
UTILIZE SURPRISE AND
MISDIRECTION
• DO THE UNEXPECTED (pursue avenues
that the conventional wisdom rejects -research)
• SEND ambiguous or deliberately
misleading signals about your intentions
• KNOW YOUR RIVAL’ TENDANCIES
AND TELLS -- formulas and recipes can
be identified, anticipated, and defeated
DON’T GET SURPRISED OR
MISLEAD
• KNOW YOUR CUSTOMERS AND YOUR
BUSINESS and don’t get distracted by your
RIVALS (Execution usually trumps strategy)
• SWOT
The Costs of Competitive
Strategy
• Distracts attention from core business
• Corrupts
– Behavior tends to spill over into relationships
with customers, suppliers, and employees
– Poisons those relationships
– Criminal behavior
– Leads to distorted aims -- winning as beating
rivals rather than increasing value