Creating Competitive Advantage

1
Creating Competitive Advantage

• Chapter 18

2
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.

3
c
Intel

• Has dominated the chip industry
• Success is directly related to Intels
  competitive strategy
• Strategy focuses on superior value and product
  leadership

• Heavy focus on product and advertising innovation
  and RD investments
• Changing market needs have challenged Intel to
  adapt
• Intel is capitalizing on the Internet now

4
Definition

• Competitive Advantage
• An advantage over competitors gained by
  offering consumers greater value than
  competitors offer.

5
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.

6
Figure 18-1 Steps in Analyzing Competitors
7
Competitor Analysis

• 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

Steps in the Process

• Identifying Competitors
• Assessing Competitors
• Selecting Competitors to Attack or Avoid

8
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.
9
Figure 18-2 Competitor Map
10
Discussion Question

• Create a competitor map for one of the following
  
• WalMart
• McDonalds
• Nike
• Starbucks
• Google

11
Competitor Analysis

• Determining competitors objectives
• Identifying competitors strategies
• Strategic groups
• Assessing competitors strengths and weaknesses
• Benchmarking
• Estimating competitors reactions

Steps in the Process

• Identifying Competitors
• Assessing Competitors
• Selecting Competitors to Attack or Avoid

12
Benchmarking In-Depth

• Types of Benchmarking
• Process searching for the best way to perform a
  process
• Internal enables users to compare similar
  activities within their own organization.

• Types of Benchmarking
• Competitive organization is compared to direct
  competitors or those who are selling to the same
  customer base.
• Functional or generic enables users to compare
  themselves to organizations that are recognized
  as the best, whether they are in the same
  industry or not.

13
Benchmarking In-Depth

• Sources of Information
• Competitive intelligence
• Relevant industry publications
• Electronic databases
• Internal company experts

• Sources of Information
• Industry observers such as professors or
  consultants
• Industry participants, such as suppliers and
  customers
• Competition itself

14
Competitor Analysis

• 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

Steps in the Process

• Identifying Competitors
• Assessing Competitors
• Selecting Competitors to Attack or Avoid

15
Competitor Analysis

• Designing Competitive Intelligence Systems
• A Well-Designed CI System
• Identifies types and sources of competitive
  information
• Continuously collects information
• Checks reliability and validity of information
• Interprets and organizes information
• Distributes information to decision makers and
  responds to queries

16
Competitive Strategies

• Approaches to Marketing Strategy
• No single strategy is best for all companies
• Marketing strategy and practice often passes
  through three stages
• Entrepreneurial marketing
• Formulated marketing
• Intrepreneurial marketing

17
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

18
Hohner has successfully implemented a focus
strategy to capture an 85 share of the harmonica
market.
19
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

20
Discussion Question
Firms that follow a customer intimacy strategy
are willing to do almost anything for their
customers. Does such a strategy make sense for
local businesses, or only for national / global
corporations?
British Airways practices customer intimacy with
select frequent flyers
21
Figure 18-3 Hypothetical Market Structure
22
Competitive Strategy

• 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

Competitive Positions

• Market Leader
• Market Challenger
• Market Follower
• Market Nicher

23
Competitive Strategy
WD-40 has a knack for developing new uses for its
product. What other brands have adopted a
similar strategy?
WD40
24
Competitive Strategy

• 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

Competitive Positions

• Market Leader
• Market Challenger
• Market Follower
• Market Nicher

25
Pepsi is an example of market challenger that has
chosen to use a full frontal attack
26
Competitive Strategy

• Follow the market leader
• Focus is on improving profit instead of market
  share
• Many advantages
• Learn from the market leaders experience
• Copy or improve on the leaders offerings
• Strong profitability

Competitive Positions

• Market Leader
• Market Challenger
• Market Follower
• Market Nicher

27
Dial Corporation successfully uses a market
follower strategy
28
Competitive Strategy

• 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

Competitive Positions

• Market Leader
• Market Challenger
• Market Follower
• Market Nicher

29
FedEx and UPS are two competitors in the package
delivery business. What competitive strategy
seems to describe each company?
30
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

31
Figure 18-4 Evolving Company Orientations