Creating
Competitive
Advantage
Chapter 18
Objectives
Learn Major Goals of Marketing
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.
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
Two Major Goals of
Marketing*
1. Design and Manage a Superior
Value-Delivery System to Reach
and Satisfy Target Customer
Segments.
2. Gain and Sustain Competitive
Advantage.
18- 3
Defining Customer Value
Total Customer
Cost
(Product, Service,
Personnel, &
Image Values)
(Monetary, Time,
Energy, &
Psychic Costs)
Customer
Delivered Value
(Profit to the
Consumer)
Total Customer
Benefit
=
18- 4
Value Chain Analysis**
Support Activities
Firm Infrastructure
Human Resource Management
Technology Development
Procurement
Inbound
Logistics
Operations
Outbound
Logistics
Marketing
and
Sales
Service
Primary Activities
18- 5
Delivery
Delivery
Order
Producer (Levi)
Order
Vendor (Milliken)
Delivery
Order
Retailer (Sears)
Order
Raw Material
Supplier (Du Pont)
Delivery
Order
Customer (you)
Delivery
Customer Value-Delivery Network*
18- 6
Definition
Competitive Advantage
 An advantage
over competitors
gained by offering
consumers greater
value than
competitors offer.
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Figure 18-1:
Steps in Analyzing
Competitors*
18- 8
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
18- 9
Levels of Competition
Beer
Ice
cream
Tea
Regular
colas
Diet
lemon
limes
Diet-Rite
cola
Wine
Diet
Pepsi
Diet
Coke
Fast food
Bottled
water
Baseball
cards
Fruit
flavore
d colas
Lemon
limes
Coffee
Product form
competition:
Diet colas
Juices
Product
category
competition:
Soft drinks
Video
rentals
Generic
competition:
Beverages
Budget
competition:
Food and
entertainment
18- 10
230-year-old
Encyclopedia
Britannica
viewed itself as
competing with
other publishers
of printed
encyclopedias.
Big mistake! Its
real competitors
were software
encyclopedias
and the Internet.
18- 11
Discussion Question
Create a levels of
competition diagram
for one of the
following:
•
•
•
•
•
WalMart
McDonald’s
Nike
Starbucks
Google
18- 12
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- 13
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
18- 14
Customer Value Analysis (for
Competition)
Identify Attributes Customers Value
Assess Attribute Importance
Assess Company and Competitor
Performance
Examine Segments on Attribute-byAttribute Basis
Monitor Customer Values Over Time
18- 15
Competitive Strategies*
Basic Winning Competitive
Strategies: Michael 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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Attractiveness of an Industry
Threat of
Potential Entrants
Bargaining
Power of
Suppliers
Existing
Rivalry
Threat of
Substitutes
Bargaining
Power of
Buyers
Hohner has
successfully
implemented a
focus strategy to
capture an 85%
share of the
harmonica
market.
18- 18
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
18- 19
Discussion Question
Firms that follow a
customer intimacy
strategy are willing to
do almost anything for
their customers.
British Airways practices customer intimacy
with select frequent flyers
Does such a strategy
make sense for local
businesses, or only for
national / global
corporations?
18- 20
Figure 18-3:
Hypothetical
Market Structure
18- 21
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
18- 22
Competitive Strategy
WD-40 has a knack
for developing new
uses for its product.
What other brands
have adopted a
similar strategy?
WD40
18- 23
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
18- 24
Pepsi is an
example of
market
challenger
that has
chosen to use
a full frontal
attack
18- 25
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
18- 26
Dial Corporation
successfully
uses a market
follower strategy
18- 27
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
18- 28
FedEx and
UPS are two
competitors
in the
package
delivery
business.
What
competitive
strategy
seems to
describe
each
company?
18- 29
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- 30
Figure 18-4:
Evolving Company
Orientations
18- 31
Latest thinking on
Competition
Monopolist
Cooperative
Approach
Competitive
Approach
Co-opetition
18- 32