4MBAM30 - week 4
Analysing Competitors
Stokes - Unit 4 (1)
Needs, wants, demands
Maslow’s hierarchy of needs
Marketing myopia (Levitt)
Matching Benefits to Customers
Benefits vs. features
Product mortality
What business are we in?
Stokes - Unit 4 (1)
Needs:
what we need to survive & thrive
Want:
a specific means of satisfying the need
Demand:
a want, backed up by the having the ability
to pay for it
Stokes - Unit 4 (2)
Who are our Customers?
Customers or consumers?
Customer chains
Internal customers
Stokes - Unit 4 (3)
Markets – old, and new meanings:
Old: a place where buyers and sellers
exchange goods/services
New: a grouping of customers with similar
needs, eg. “the teenage market”
New: the total demand for a product, eg.
“the jeans market”
New: a combination of the two, eg. “the
teenage jeans market”
Stokes - Unit 4 (4)
Competitive Forces in the market place
Porter’s 5 Forces
Analysing Competitors
Identifying
competitors
Determining
objectives
Identifying
strategies
Assessing
strengths/weaknesses
Estimating
reaction patterns
Selecting those
to attack/avoid
(Kotler)
Analysing Competitors
Identifying
competitors
Determining
objectives
Identifying
strategies
Assessing
strengths/weaknesses
Estimating
reaction patterns
Selecting those
to attack/avoid
(Kotler)
Analysing Competitors
Identify competitors
Observe
strategies
Assess strengths
& weaknesses
Observe
reactions
Determine objectives
Decide whom to attack/avoid
J El-Murad, 2001
Analysing Competitors - why? 1
If you know neither the enemy nor yourself,
you will succumb in every battle.
If you know yourself, but not the enemy,
for every victory you gain you will suffer a
defeat.
If you know your enemy as you know
yourself, you need not fear the result of a
hundred battles.
(Sun Tzu Ping Fa)
Analysing Competitors - why? 2
Removal of trade barriers (eg EU/GATT/NAFTA)
De-regulation, and the encouragement
by governments of market forces
The state of the economy domestic
global
in countries where your competitors are
based
What is Competitor Analysis? 1
analysis
of data and information about Competitors
to generate outputs
that are useful in decision making
Data » Information » Intelligence
DATA
Unintegrated “raw” individual items
• requires identification and collection
INFORMATION
Evaluated data
• requires judgements
INTELLIGENCE
Information that informs decision making
• requires judgement and use
What is Competitor Analysis? 2
It is NOT about:
massive data banks
intricate computer retrieval systems
large numbers of data collectors
full-time data analysers
Competitor Analysis -
Common Problems
Preoccupation with data - not
intelligence
Data massaging vs Analysis
Outputs not geared to decision-makers’
needs
Analysts not part of decision making
process
Uses of Competitor Analysis
To learn about the competitive environment
Current and potential competitors
customers
distributors
suppliers
technology
Uses of Competitor Analysis (2)
To learn about your own company
competences
(strengths)
vulnerabilities
(weaknesses)
constraints
strategies
....
Uses of Competitor Analysis (3)
In order to generate
more successful
strategies
3 Requirements for good CA
1: Driven by Decisions
2: Knowledge
of
• organisation
• industry
• analysis techniques
• data sources
3: Skills
in
• data gathering
• using analysis
techniques
• drawing inferences
• transmitting data
Identifying Competitors
WHO ARE OUR COMPETITORS?
All those firms that compete in the
same market as we do.
Marketing Myopia (Levitt)
Kodak vs Fuji vs filmless cameras
Unilever vs P&G vs ultrasound washing machines
Identifying Competitors 1
LEVELS OF COMPETITION
Brand competition
Industry competition
Form competition
Generic competition
Levels of Competition
ROVER’S COMPETITORS:
Ford and Vauxhall
but not Skoda or Mercedes
All car manufacturers
All manufacturers of personal transportation
All major consumer spending opportunities
(eg foreign holidays, home improvement, MBA
courses?)
Parker Pen
Identifying Competitors 2
WHO ARE OUR
current “Direct” competitors?
potential “Direct” competitors?
current Substitute competitors?
potential Substitute competitors?
Identifying Competitors 2
WHO ARE OUR
current
“Direct” competitors?
potential “Direct” competitors?
current
Substitute competitors?
potential Substitute competitors?
Identifying Competitors 4
TWO APPROACHES:
The INDUSTRY
The MARKET
The INDUSTRY Concept
AN INDUSTRY IS ...
a group of firms producing products
that are close substitutes for each other
Demand
(Michael Porter)
for Y
Substitutes are products
that have high crosselasticities of demand
b2
b1
a1
a2
Price of X
Eg. Vauxhall vs Ford
The INDUSTRY Concept
Number of sellers and degree of
differentiation
Entry barriers
Exit barriers
Cost structures
Vertical integration
Global reach
The MARKET Concept
Instead of looking at companies that
make the same product,
look at companies that satisfy the same
customer need
The MARKET Concept
Refine by market segment:
by end-customer
by distribution channel
by geography
by technology
Identifying Competitors 5
Identifying competitors by linking
industry and market analysis through
mapping the
Product/Market Battlefield.
Product/Market Battlefield
for toothpaste
Product
segmentation
Plain toothpaste
Toothpaste with fluoride
Gel
Striped
Smoker's toothpaste
Colgate
P&G
Colgate
P&G
Colgate
P&G
Lever Bros
Beecham
Colgate
P&G
Colgate
P&G
Colgate
P&G
Lever Bros
Beecham
Topol
19-35
Colgate
P&G
Colgate
P&G
Colgate
P&G
Lever Bros
The market for
toothpaste
Children
Topol
36+
Customer segmentation
by age group
Identifying Competitors’ Strategies
Strategic mapping:
construct a series of two-dimensional maps
where the axes are key strategic dimensions:
plot your company and your competitors
Quality
Quality
x
z
x
y
Price
Range
Identifying Competitors’ Strategies
Industry-wide
Single segment
Differentiation
Cost
Leadership
Focus
(Porter)
Identifying Competitors’ Strategies
Strategic profiling: summarise the apparent
strategy of each key competitor in tables:
Who are they Targeting?
What is their Positioning?
How do they differentiate their product?
4Ps/7Ps
etc
Determining Competitors’ Objectives
What is the competitor trying to achieve?
Profit Maximisation
Short Term
High price rel. cost
Low investment
?
Long Term
Low price rel. cost
High investment
Possible Competitors’ Objectives
Current profits
Cash-flow
Long Term profits through
market-share growth
technological leadership
service leadership
quality leadership
Assessing their strengths and weaknesses
Gather data on:
Sales
Market share
Profit margin
ROI
Cash flow
New investment
Capacity utilisation
Marketing mix
Etc
Sources of Data:
Desk research (2ry data)
Primary marketing research
• customers
• suppliers
• dealers
Observation
Estimating C’s Reaction Style
The Laid Back Competitor
no quick or strong reaction, because:
feels customers are loyal
milking the business
slow to notice
lacks funds to react
Estimating C’s Reaction Style
The Selective Competitor
Reacts only to certain types of attack, eg
price cuts. Reacts swiftly to demonstrate that
this particular strategy is futile, and will not
be tolerated.
Estimating C’s Reaction Style
The Tiger Competitor
Reacts swiftly and strongly to any
encroachment on its territory.
E.g. P&G will not allow any new
detergent to come easily onto the
market.
Canada Dry
Estimating C’s Reaction Style
The Stochastic Competitor
No predictable
reaction pattern
Whom to attack/avoid?
Strong vs. Weak competitors
Levitt:
“If thinking is an intellectual
response to a problem, then the
absence of a problem leads to the
absence of thinking”
Whom to attack/avoid?
• Close vs. Distant
if you destroy your close competitors you
may open the way for tougher competition
–
e.g.. Bausch & Lomb forced their
competitors to sell out to Revlon and J&J
Whom to attack/avoid?
Good vs. Bad
good competitors “play by the rules”:
prices, accept general level of share & profits
Support these & attack the bad
competitors, who price below cost to buy share
rather than earn it
E.g. For IBM, Cray is good, Fujitsu is bad
(Kotler)
Competitor vs Customer Orientation
Customer centred
No
Yes
No
Product/
Production
Orientation
Customer
Orientation
Yes
Competitor
Orientation
Market
Orientation
Competitor
Centred
Competitor vs Customer Orientation
Competitor W is going all out to crush us in France
We will withdraw from France because we cannot
afford to fight this battle
Competitor X is improving distribution in Germany,
and hurting our sales
We will increase advertising in Germany
Competitor Y has cut its price in Manchester
We will meet competitor Y’s price in Manchester
- - - REACTIVE
Competitor vs Customer Orientation
The quality-sensitive segment is growing
We will improve quality, and emphasise it in our
advertising
The deal-prone customer segment is growing fast,
but these customers are not loyal
We will avoid cutting prices & making deals
because we do not want the type of customer
who buys in this way.
Pro-Active
Market Orientation
The two principal threats facing any marketing
organisation:
Someone will “steal” your
customers
Customers will no longer need your
goods/services
Market Orientation
Need to keep track of
both of these elements,
need to find and
maintain correct
balance:
the Market orientation