Transcript
Analyzing Competition
Lesson objectives
Understand and analyze competitionMichael Porter’s Five forces modelBook Review Corporate examples – Hero Honda , P&G ,
Reliance,Maruti True Value outlets, Kodak ………….
Competition
An Industry is a group of firms that offer a product or class of products that are close substitutes for each other
Competitors are companies that satisfy the same customer need
It opens up a broader vista of actual and potential competitors
Classes of competitors
Generic: companies competing for the same disposable income of the consumer e.g. Hero Honda and LG
Form competition: same kind of benefit e.g. cars ,buses Vs Hero Honda
Industry Competition: similar kind of products e.g. Two wheeler mfgg-Hero Honda ,Bajaj, Kinetic
Brand competition: similar products targeting same consumer segments
e.g. Splendor Vs Caliber, CD Dawn Vs CT100
Classification of Industry
On the basis of the following parametersNo of sellers and degree of differentiationEntry , exit and mobility barriers Cost structure Degree of vertical integration
No of sellers and degree of differentiation
Monopoly Oligopoly Monopolistic Pure competition
Entry ,exit ,mobility barriers
Entry barriers : high capital reqt ,scarce raw material,economiesof scale, reputation
Mobility barriers: when business tries to enter more attractive segments ,e.g : coke to Diet coke
Exit barriers : legal , moral obligations, law of the land,Govt policies
Cost structure
Total Manufacturing ,distribution, and promotional costs
Firms will strategize to reduce these costs
Degree of vertical integration
Backward :HPCL has its own oil exploration , drilling , refining facilities. Integrating backwards helps an organization eliminate suppliers , control quality very closely.
Forward integration : own petrol pumps to get closer to the end consumer .
Vertical integration lowers costs
Degree of globalisation
‘Glocal’ firms: think global ,act localRate of change of technology ,catering to the
global customer
Analyzing Competition
On the basis of Strategies of the competitorsObjectivesStrengths and weaknessesReaction patterns
Analyzing competition …..
Strategies A company must monitor its competitor’s
strategiesResourceful competitors revise their
strategies with timeA group of firms that follow the same strategy
– strategic group e.g. : Sinhgad , Aditya Birla Group
Analyzing Competition….strategies
Japanese automobile firms compete on sensory quality like the speed of power window, turn signal that doesn't wobble
Analyzing competition …..
On the basis of objectives1. What is each competitor seeking in the
market place?2. What drives a competitor’s behaviour ?-
current profitability ,service leadership, technical leadership, market share growth
3. Objectives are shaped by –history, resource capability and management of the competitor
Analyzing competition …..
On the basis of strengths and weaknessesWhether competitors can pursue their strategies and reach their goals depends on resources and capabilitiesWhile analyzing competitor’s share of market , it is important to study share of mind & share of heart
Analyzing competition …..
Share of mind : % of customers who named competitor in response to : “name the first company that comes to your mind in the industry?”
Share of heart: % of customers who named competitor in response to : “name the company from whom you would prefer to buy the product or service ? ”
Reaction patterns
Laid back/slow competitorDoes not react quickly or stronglyLacks funds to react Thinks customers are loyalMust be milking its businessE.g. . Iodex green pain reliever was a late
move against ‘Moov’
Reaction patterns
Selective competitorOnly reacts to certain type of strategies E.g. may only react to price cuts not ad
expenditures
Reaction patterns
Tiger competitorReacts swiftly and strongly to any assault P&G does not allow any new detergent to
enter into the market easily in the ultra segment Vs Surf
Pepsi and Coke
Reaction patterns
Stochastic /unpredictable competitorNo predictable reaction patternSmall firms exhibit such reaction patternReaction is determined by history ,economic
situation or anything
Porter’s five forces model
Barriers to entry : high capital costs, govt policies, economies of scale, access to distribution channels
Eg: Reliance –Jamnagar Plant -27MTpa-economies of scale and high capital costThreat of Substitutes: Coke faces threat from Coffee , tea, juices ,soft drinks
Porter’s five forces model
Rivalry among firms: price wars, advertising wars, differentiation,
use of innovative distribution channels, slotting allowances to get shelf space HLL & P&G, Ambush Marketing (Pepsi 1996 World cup)
Porter’s Five Force Model
Bargaining power of buyersFew buyers but large, buy in bulkBuyers may integrate backwardE.g. Automobile mfgg may integrate
backwards to mfgg subassemblies and components.
Bargaining power of suppliers
Few suppliers, few sst for productsExpensive to switch suppliersThreat of forward integrationIf Buying companies cannot go backwardIntel –powerful supplier-microprocessors
Porter’s generic competitive strategies
Cost leadership: offering products at lower prices by keeping cost of production low.
It envisages higher profits as margins increase due to lowered costs
Economies of scale , and increasing production efficiency would help
Arvind eye hospital ,performs cataract surgery at $10 vis –a –vis $1650 in US, Given the fact that 70%patients pay close to nothing .It enjoys 40% margin.
Porter’s generic competitive strategies
Differentiation strategiesDifferentiation on the basis of design ,brand
image Coca Cola), features (Santro) ,technology (Intel), customer service (Oberoi), quality
HLL –Modern Brand to Biscuits –differentiated on the basis of ingredients-Soya –health conscious customers
Porter’s generic competitive strategies
Focus strategyOnly a specific segment Special group of customers or a geographical
areaCustomers are loyalCan price products higherEntry of competitor- difficultE.g: Dosa Diners
Competitive strategies(VVIP que)
Market leader:A market leader has a considerable market share .It is acknowledged as a leader by other firmsStrategies: enter new markets or introduce new
productsIncrease usage of its products :Colgate –brush
twice daily Hero Honda-continuously innovates adds new
features and introduces new modelsIt has made tie ups with Chinese like quigqui and
jialing
Market Challenger :strategies
2nd ,3rd or 4th positionAttacks weak spots of the leaderAttacks firms of its own capacityEnter into markets where competitors do not
have presenceAgainst HLL ,Nirma low cost washing powder
has deep penetration
Market follower strategies
Prefer to follow the leader than to attack it Manufacturing products leveraging on
product innovations of leadersUnless market follower has strong armour it
will not dare to attack the leader
Market Nicher
Operates in small niches, where leader is not interested
Win customer loyaltyIncreased focus and attention
Book Review: Al Ries,Trout,Marketing Warfare, Plume publishers,U.S.A
DEFENSIVE WARA market leader engages in defensive
warIt strengthens its position by
introducing new products or services that obsolete the existing one
E.g.: Splendor Standard , NXG …,super blue blade replaced by its Twin trac II blade
Marketing warfare
OFFENSIVE WARFor the no 2 or no .3 ,Trout and Ries
advocate ‘offensive warfare’What a no 2 or no 3 should do is position
itself with reference to the leader“find a weakness in the leader’s strength
and attack at that point ,launching the attack on as narrow front as possible
Marketing warfare
Flanking warfareOccupy a segment or category that the leader
has neglectedE.g. Complan :health proposition, Complete
planned food
Marketing warfareGuerilla Warfare Smaller companiesGo for vacant positions in market too
small to attract the Market leader’s attention
Dog Biscuits neglected by major bakery and confectionary mfgg
E.g. regional pocketsNiches or specific positions where
their Brands will hold competitive advantage
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