Creating
Competitive
Advantage
Chapter 18
Objectives
Learn how to understand competitors as
well as customers via competitor
analysis.
Learn the fundamentals of competitive
marketing strategies based on creating
value for customers.
Realize the need for balancing customer
and competitor organizations in order to
become a truly market-centered
organization.
18- 1
c
Intel
Has dominated the
chip industry
Success is directly
related to Intel’s
competitive
strategy
Strategy focuses
on superior value
and product
leadership
Heavy focus on
product and
advertising innovation
and R&D investments
Changing market
needs have
challenged Intel to
adapt
Intel is capitalizing on
the Internet now
18- 2
Definition
Competitive Advantage
 An advantage
over competitors
gained by offering
consumers greater
value than
competitors offer.
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Definition
Competitive Analysis
 The process of identifying key
competitors; assessing their
objectives, strategies, strengths
and weaknesses, and reaction
patterns; and selecting which
competitors to attack or avoid.
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Figure 18-1:
Steps in Analyzing
Competitors
18- 5
Competitor Analysis
Steps in the
Process:
Identifying
Competitors
Assessing
Competitors
Selecting
Competitors to
Attack or Avoid
Firms face a wide
range of competition
Be careful to avoid
“competitor myopia”
Methods of
identifying
competitors:
 Industry point-of-view
 Market point-of-view
 Competitor
maps
can help
18- 6
230-year-old
Encyclopedia
Britannica
viewed itself as
competing with
your publishers
of printed
encyclopedias.
Big mistake! Its
real competitors
were software
encyclopedias
and the Internet.
18- 7
Figure 18-2:
Competitor Map
18- 8
Discussion Question
Create a competitor
map for one of the
following:
•
•
•
•
•
WalMart
McDonald’s
Nike
Starbucks
Google
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Competitor Analysis
Steps in the
Process:
Identifying
Competitors
Assessing
Competitors
Selecting
Competitors to
Attack or Avoid
Determining
competitors’ objectives
Identifying competitors’
strategies
 Strategic groups
Assessing competitors’
strengths and
weaknesses
 Benchmarking
Estimating competitors’
reactions
18- 10
Competitor Analysis
Steps in the
Process:
Identifying
Competitors
Assessing
Competitors
Selecting
Competitors to
Attack or Avoid
Strong or weak
competitors
 Customer value analysis
Close or distant
competitors
 Most companies compete
against close competitors
“Good” or “Bad”
competitors
 The existence of
competitors offers several
strategic benefits
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Competitive Strategies
Basic Winning Competitive
Strategies: Porter
 Overall cost leadership
 Lowest production and
distribution costs
 Differentiation
 Creating a highly
differentiated product line
and marketing program
 Focus
 Effort is focused on serving
a few market segments
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Hohner has
successfully
implemented a
focus strategy to
capture an 85%
share of the
harmonica
market.
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Competitive Strategies
Basic Competitive Strategies:
Value Disciplines
 Operational excellence

Superior value via price and convenience
 Customer intimacy

Superior value by means of building strong
relationships with buyers and satisfying
needs
 Product leadership

Superior value via product innovation
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Figure 18-3:
Hypothetical
Market Structure
18- 15
Competitive Strategy
Competitive
Positions
Market Leader
Market
Challenger
Market
Follower
Market Nicher
Expanding the total
demand
 Finding new users
 Discovering and
promoting new product
uses
 Encouraging greater
product usage
Protecting market share
 Many considerations
 Continuous innovation
Expanding market share
 Profitability rises with
market share
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Competitive Strategy
WD-40 has a knack
for developing new
uses for its product.
What other brands
have adopted a
similar strategy?
WD40
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Competitive Strategy
Competitive
Positions
Market Leader
Market
Challenger
Market
Follower
Market Nicher
Option 1: challenge the
market leader
 High-risk but high-gain
 Sustainable competitive
advantage over the leader
is key to success
Option 2: challenge firms
of the same size, smaller
size or challenge
regional or local firms
Full frontal vs. indirect
attacks
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Pepsi is an
example of
market
challenger
that has
chosen to use
a full frontal
attack
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Competitive Strategy
Competitive
Positions
Market Leader
Market
Challenger
Market
Follower
Market Nicher
Follow the market
leader
 Focus is on improving
profit instead of
market share
 Many advantages:
 Learn
from the
market leader’s
experience
 Copy or improve on
the leader’s offerings
 Strong profitability
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Dial Corporation
successfully
uses a market
follower strategy
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Competitive Strategy
Competitive
Positions
Market Leader
Market
Challenger
Market
Follower
Market Nicher
Serving market
niches means
targeting
subsegments
Good strategy for
small firms with
limited resources
Offers high margins
Specialization is key
 By market, customer,
product, or marketing
mix lines
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Balancing Customer and
Competitor Orientations
Companies can become so
competitor centered that they
lose their customer focus.
Types of companies:
 Competitor-centered companies
 Customer-centered companies
 Market-centered companies
18- 23
Game playing industry
a.
Nintendo
a. Wii hyperlink
b.
Microsoft
a. Xbox 360
c.
Sony
a. Play Station
18- 24
18- 25
Threat of New Entry
the existence of barriers to entry
economies of product differences
brand equity
switching costs
capital requirements
access to distribution
absolute cost advantages
learning curve advantages
expected retaliation
government policies
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Competitive Rivalry
number of competitors
rate of industry growth
intermittent industry overcapacity
exit barriers
diversity of competitors
informational complexity and
asymmetry
brand equity
fixed cost allocation per value added
level of advertising expense
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Supplier Power
supplier switching costs relative to
firm switching costs
degree of differentiation of inputs
presence of substitute inputs
supplier concentration to firm
concentration ratio
threat of forward integration by
suppliers relative to the threat of
backward integration by firms
cost of inputs relative to selling price
of the product
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Buyer Power
buyer concentration to firm concentration
ratio
bargaining leverage
buyer volume
buyer switching costs relative to firm
switching costs
buyer information availability
ability to backward integrate
availability of existing substitute products
buyer price sensitivity
price of total purchase
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Threat of Substitution
buyer propensity to
substitute
relative price performance of
substitutes
buyer switching costs
perceived level of product
differentiation
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