The Competitive Market
BMI3CC
4 Ps and 2 Cs of Marketing
■ The study of marketing can be narrowed down to the 4 Ps and 2 Cs
■ 4 Ps:
■ Product
■ Price
■ Placement
■ Promotion
■ 2 Cs:
■ Customer/Consumer
■ Competition
■ We spent a few days studying consumers, now we will learn about
competition
The Benefits of Competition
■
BRAINSTORM –
■
Why is competition good for consumers?
■
Why is competition good for companies?
The Benefits of Competition
■
■
■
■
■
■
Increased Selection
Alternative Choices – i.e. bad service
Better Prices
Increased Productivity
Product Improvements
Technology Advancements
Competition in a Free Market
■
■
In a free market, businesses can make
a profit. Profit drives business; the more
successful a business becomes, the
more profit the owner keeps. (private
property)
Competition is allowed and defines the
structure of market
Four major market structures
■
Perfect competition - large # of small companies;
nobody controls market
■
■
Monopolistic Competition – large # of companies;
each of them has an opportunity for market control
■
■
Most products e.g. detergent, fast food
Oligopoly - small # of large companies, each with a
substantial amount of market control
■
■
Agricultural Market, eBay
Banking Industry, Apple, Microsoft, Android
Monopoly – a single company has complete market
control
■
Hydro, LCBO
Types of Competition
■
Direct competition
■
■
■
Products that are similar
Consumers choose among products in the same
category
Indirect competition
■
Every business is in competition with every other
business for consumers’ discretionary income.
Example:
INDIRECT COMPETITION
DIRECT COMPETITION
In-Class Task – 10 minutes
■
Pg. 88  3 b & c
Competitive Advantage
■
■
Businesses look for advantages over
their competition. A true advantage is
one that is sustainable over the long
term.
Sustainable competitive advantages:
methods by which a business holds on
to its customers, in spite of the
competition (ideas?)
Under the influence
■
“Tales of customer service”
■ Read the article
■ Answer the following questions:
1.
2.
3.
4.
5.
List three extraordinary examples of customer service.
What was the point of Nancy writing the letters? What did
the results show?
How does a restaurant that is rated 10th best food, and
worse for decore, end up rated 3rd best restaurant in
Manhatten?
What happened when a Chevy dealership matched the
Disney model of customer service?
Summarize this article in 5 or fewer words.
Sustainable competitive advantages
■
■
■
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Create a unique selling proposition (USP) –
patented design, licensed products
Lowering production costs: cost-efficient, high
technology manufacturing systems
Servicing a niche market – keep competitors
out of that market
Create customer loyalty – relationship
marketing
Non-sustainable competitive
advantages
■
Non-SP used by competitors to shift sales in
their direction
■
■
■
■
■
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Promotion: “top of mind”
Placement: more placement=more competitive
(Chapters – category killer)
Quality
Benefits of use: do more and better than other
products
Price: all features being equal…
Design features: catch consumers’ interest –
product design
Activity!
Before entering a market, marketers
must study the competition. One way of
doing so is by preparing a competitive
analysis of the sustainable and nonsustainable advantages that the major
competitors have. In this activity, you
will develop a comparative analysis for
a marketer in the video game market.
Activity Time – try it for yourself!
Competitive Advantages
Sustainable
Unique Selling Position
Niche
Cost Advantage
Customer loyalty
Non-sustainable
Promotion
Placement
Quality
Benefits of Use
Price
Product’s design features
Sony Play Station 4
Microsoft’s Xbox One
Competitive Advantages
Sony Play Station 2
Microsoft's Xbox
Sustainable
Unique Selling Position
Yes. System doubles as a CD and DVD player.
Yes. Ethernet port for rich, fast-action online
gaming via a broadband connection.
Niche
No. Video game systems are very popular.
No. Video game systems are very popular.
Cost Advantage
No. All manufacturers of video game systems have access
to inexpensive electronic components produced in
countries with cheaper labour costs.
No. All manufacturers of video game systems
have access to inexpensive electronic
components produced in countries with
cheaper labour costs.
Customer loyalty
Yes. Sony Play Station is better known. Consumers are
familiar with it. Many have used Sony Play Station 1
for years.
No. This is Microsoft's first venture into this
market.
Promotion
Yes. Sony promoted its new product in time for Christmas
gift giving.
Yes. Introduced and well promoted by Bill
Gates.
Placement
Yes. In stores and online at the Sony Store.
Yes. In major stores and online.
Quality
No. Both products have equally high quality.
No. Both products have equally high quality.
Benefits of Use
Yes. Games for Play Station 1 can be used as well as a
wide selection of new games for this system.
Doubles as a DVD and CD player.
Yes. 67 games now available. Many games
are educational in nature.
Price
Yes. U.S. $299.99.
No. Introductory price was much higher.
Product's design features
No. 128 bit, 300 Mhz processor.
No. Video system delivers the most realistic
games.
Non-sustainable
Service Competition
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■
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Some Businesses offer services: Fed Ex,
Moving companies)
Others offer Value – Added
Services:support the sale of a product or
other service.
Both service businesses and businesses that
offer value-added services market
intangibles. (hair salons, dentists, personal
trainers)
Service Competition
Service companies are in competition with other
companies that perform the same service.
e.g., UPS vs. FedEx
1. Convenience
•
2.
Degree of service
•
3.
4.
5.
Internet shopping, ease of use
e.g., Barber vs. Hair Salon
Selection
Reputation
Price
Convenience
■
Making some activity
easier or more
comfortable. Some
services actually sell
convenience.
Degree of Service
■
offers more services (full service salon/spa) or
fewer services (West Jet, Ikea)
Selection
■
Offering a greater selection of services
■
■
■
Wide – a store carries a wide array of
different brands of types of merchandise or
it can be
Deep – a store carries a large quantity of
one specific product or type of product.
See page 103
Reputation
■
Important for a service
business to maintain a
good reputation because
it does not have a
tangible product to show
the customer (word of
mouth, professional
reviews)
Price
■
■
■
If two services are similar, the
business with the lower price has
the competitive edge.
However, in some cases,
consumers may question services
with prices that seem ‘too low’.
Price depend on supply &
demand
Product/Service Mix
■
Retail & wholesale businesses are part
of the service sector, providing a service
to both the consumer and to the
manufacturer…
Measuring Results
■
We compare within certain market segments to
understand how a company performs vs. the
competitive set. (Direct Competition)
■ How it is Measured:
■
■
Market Share – what % of the category or
sector sales is a certain brand
BRAND
MARKET SHARE
Example:
Ready to
Drink,
Chilled
Fruit Juice
Market
Tropicana
58%
Private Label
17%
Minute Maid
7%
All Other
18%
Example:
■
■
59% market share
Market leader – how
to sustain position
over compeititors?
■
■
18% market share
Market follower –
how to increase
market share from
leader?
Competing within Sectors
■
How can a company improve MARKET
SHARE?
■
A company can increase market share
in one of two ways:
■
increase the size of the overall market
■
■
E.g. Drink more juice
take sales away from its competitors.
■
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Other promotion effort
School Cafeteria, etc.
International Competition
■
■
What do you think the impact has been
of the internet with international
competition?
Multinational Corporations
■
■
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Does business in more than one country
Some large MNCs have budgets greater
than an entire country’s wealth!
Trend of “micro-multinationals” = small
businesses enabled by technology
International Competition
■
■
DOMESTIC
Canadian products
Domestic production
or international
production
May want to expand internationally
for future growth
■
■
INTERNATIONAL
International-based
products/companies
Produced outside of
North America
Factors to consider with
International Competition
Factors to consider with
International Competition
■
Regulations
■
■
Research
■
■
How will it be sold? Local partners?
Pricing
■
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Consumer preferences / consumer needs
Distribution
■
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Promotion restrictions / local laws
Covering expenses, plus tariffs
Design
■
Legal standards + local taste
Competing in International
Markets
■
■
Businesses use the same methods to
compete in international markets that
they use in domestic markets:
promotion, placement, quality,
benefits of use, price & design
Business must tailor its competitive
efforts to the foreign market customs
and preferences.
Culture
■
■
It is important to consider factors such as
climate and religious beliefs when considering
entering a foreign market.
For example, there is no market for Canadian
pork in Israel, as Jewish culture forbids eating
this product.
The name Coca-Cola in
China was first rendered as
Ke-ke-ken-la.
Unfortunately, the Coke
company did not discover
until after thousands of
signs had been printed that
the phrase means "bite the
wax tadpole" or "female
horse stuffed with wax"
depending on the dialect.
Coke then researched
40,000 Chinese characters
and found a close phonetic
equivalent, "ko-kou-ko-le,"
which can be loosely
translated as "happiness in
the mouth."
Volkswagen
Named the sedan version of Golf the Jetta.
However, the letter "J" doesn't exist in the
Italian alphabet, so Jetta is pronounced
"Ietta", which means Misfortune...
IKEA
Sells this workbench as the FARTFULL.
Swedish is a Germanic language, and "Fährt" is
German for travel, so "fartfull" is being used here to
suggest mobility. Swedish has several words for fart,
but one of them is "Fjärt", which strikes as close
enough that their marketing department knew what it
was doing. If even bad press is good public relations,
then this is a case of allowing an ill wind to blow some
good.
Pepsi
In Taiwan, the translation of the Pepsi slogan
"Come alive with the Pepsi Generation"
came out as "Pepsi will bring your
ancestors back from the dead."
■
■
Promotion is challenging in international
markets. In many cases, a Canadian
promotion may not translate well in other
countries
Distribution of products in other countries
can also be difficult. Canadian firms may set
up their own offices in other countries, or
they may enter into joint ventures.
Joint Venture
■
A Canadian firm and a foreign business with
similar goals combine resources (money,
facilities, distribution networks) to make or sell a
specific product in another country
■
■
Tariffs are taxes placed on goods
being imported into a country in order
to protect the local industries from too
much foreign competition.
Marketers must also be able to calculate
the landed cost of the product which
takes into account the shipping costs
and the currency exchange as well as
tariff rates.