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Creating Competitive Creating Competitive AdvantageAdvantage
Chapter 18Chapter 18
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Objectives• Learn how to understand competitors Learn how to understand competitors
as well as customers via competitor as well as customers via competitor analysis.analysis.
• Learn the fundamentals of competitive Learn the fundamentals of competitive marketing strategies based on creating marketing strategies based on creating value for customers.value for customers.
• Realize the need for balancing customer Realize the need for balancing customer and competitor organizations in order to and competitor organizations in order to become a truly market-centered become a truly market-centered organization.organization.
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• Has dominated Has dominated the chip industrythe chip industry
• Success is directly Success is directly related to Intel’s related to Intel’s competitive competitive strategystrategy
• Strategy focuses Strategy focuses on superior value on superior value and product and product leadershipleadership
• Heavy focus on Heavy focus on product and product and advertising advertising innovation and R&D innovation and R&D investmentsinvestments
• Changing market Changing market needs have needs have challenged Intel to challenged Intel to adaptadapt
• Intel is now Intel is now capitalizing on the capitalizing on the InternetInternet
IntelIntel
Case Study
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Definition
•Competitive AdvantageCompetitive Advantage An advantage over An advantage over
competitors gained by competitors gained by offering consumers greater offering consumers greater value than competitors value than competitors offer.offer.
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Definition
•Competitive AnalysisCompetitive Analysis The process of identifying key The process of identifying key
competitors; assessing their competitors; assessing their objectives, strategies, objectives, strategies, strengths and weaknesses, strengths and weaknesses, and reaction patterns; and and reaction patterns; and selecting which competitors selecting which competitors to attack or avoid.to attack or avoid.
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Competitor Analysis
• Identifying Identifying CompetitorsCompetitors
• Assessing Assessing CompetitorsCompetitors
• Selecting Selecting Competitors to Competitors to Attack or AvoidAttack or Avoid
• Firms face a wide Firms face a wide range of competitionrange of competition
• Be careful to avoid Be careful to avoid “competitor myopia”“competitor myopia”
• Methods of identifying Methods of identifying competitors:competitors: Industry point-of-viewIndustry point-of-view Market point-of-viewMarket point-of-view
Competitor maps can Competitor maps can helphelp
Steps in the Steps in the Process: Process:
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Competitor Analysis
• Identifying Identifying CompetitorsCompetitors
• Assessing Assessing CompetitorsCompetitors
• Selecting Selecting Competitors to Competitors to Attack or AvoidAttack or Avoid
• Determining Determining competitors’ objectivescompetitors’ objectives
• Identifying Identifying competitors’ strategiescompetitors’ strategies Strategic groupsStrategic groups
• Assessing competitors’ Assessing competitors’ strengths and strengths and weaknessesweaknesses BenchmarkingBenchmarking
• Estimating Estimating competitors’ reactionscompetitors’ reactions
Steps in the Steps in the Process: Process:
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Competitor Analysis
• Identifying Identifying CompetitorsCompetitors
• Assessing Assessing CompetitorsCompetitors
• Selecting Selecting Competitors to Competitors to Attack or AvoidAttack or Avoid
• Strong or weak Strong or weak competitorscompetitors Customer value analysisCustomer value analysis
• Close or distant Close or distant competitorscompetitors Most companies compete Most companies compete
against close against close competitorscompetitors
• ““Good” or “Bad” Good” or “Bad” competitorscompetitors The existence of The existence of
competitors offers competitors offers several strategic benefitsseveral strategic benefits
Steps in the Steps in the Process: Process:
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• Designing Competitive Intelligence Designing Competitive Intelligence SystemsSystems A Well-Designed CI System: A Well-Designed CI System:
Identifies types and sources of competitive Identifies types and sources of competitive information information
Continuously collects informationContinuously collects information Checks reliability and validity of informationChecks reliability and validity of information Interprets and organizes informationInterprets and organizes information Distributes information to decision makers Distributes information to decision makers
and responds to queriesand responds to queries
Competitor Analysis
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• Approaches to Marketing Approaches to Marketing StrategyStrategy No single strategy is best for all No single strategy is best for all
companiescompanies Marketing strategy and practice Marketing strategy and practice
often passes through three stages:often passes through three stages: Entrepreneurial marketingEntrepreneurial marketing Formulated marketingFormulated marketing Intrepreneurial marketingIntrepreneurial marketing
Competitive Strategies
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• Basic Competitive Strategies: PorterBasic Competitive Strategies: Porter Overall cost leadershipOverall cost leadership
Lowest production and distribution costsLowest production and distribution costs DifferentiationDifferentiation
Creating a highly differentiated product line Creating a highly differentiated product line and marketing programand marketing program
FocusFocus Effort is focused on serving a few market Effort is focused on serving a few market
segments segments
Competitive Strategies
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• Basic Competitive Strategies: Value Basic Competitive Strategies: Value DisciplinesDisciplines Operational excellenceOperational excellence
Superior value via price and convenienceSuperior value via price and convenience Customer intimacyCustomer intimacy
Superior value by means of building strong Superior value by means of building strong relationships with buyers and satisfying relationships with buyers and satisfying needsneeds
Product leadershipProduct leadership Superior value via product innovationSuperior value via product innovation
Competitive Strategies
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Competitive Strategy
• Market LeaderMarket Leader
• Market Market ChallengerChallenger
• Market FollowerMarket Follower
• Market NicherMarket Nicher
• Expanding the total Expanding the total demanddemand Finding new usersFinding new users Discovering and promoting Discovering and promoting
new product usesnew product uses Encouraging greater Encouraging greater
product usageproduct usage
• Protecting market shareProtecting market share Many considerationsMany considerations Continuous innovationContinuous innovation
• Expanding market shareExpanding market share Profitability rises with Profitability rises with
market sharemarket share
Competitive Competitive Positions Positions
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Competitive Strategy
• Market LeaderMarket Leader
• Market Market ChallengerChallenger
• Market FollowerMarket Follower
• Market NicherMarket Nicher
• Option 1: challenge the Option 1: challenge the market leadermarket leader High-risk but high-gainHigh-risk but high-gain Sustainable competitive Sustainable competitive
advantage over the advantage over the leader is key to successleader is key to success
• Option 2: challenge Option 2: challenge firms of the same size, firms of the same size, smaller size or smaller size or challenge regional or challenge regional or local firmslocal firms
• Full frontal vs. indirect Full frontal vs. indirect attacksattacks
Competitive Competitive Positions Positions
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Competitive Strategy
• Market LeaderMarket Leader
• Market Market ChallengerChallenger
• Market FollowerMarket Follower
• Market NicherMarket Nicher
• Follow the market Follow the market leaderleader Focus is on Focus is on
improving profit improving profit instead of market instead of market shareshare
Many advantages:Many advantages: Learn from the market Learn from the market
leader’s experienceleader’s experience Copy or improve on Copy or improve on
the leader’s offeringsthe leader’s offerings Strong profitabilityStrong profitability
Competitive Competitive Positions Positions
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Competitive Strategy
• Market LeaderMarket Leader
• Market Market ChallengerChallenger
• Market FollowerMarket Follower
• Market NicherMarket Nicher
• Serving market niches Serving market niches means targeting means targeting subsegmentssubsegments
• Good strategy for Good strategy for small firms with small firms with limited resourceslimited resources
• Offers high marginsOffers high margins• Specialization is keySpecialization is key
By market, customer, By market, customer, product, or marketing product, or marketing mix linesmix lines
Competitive Competitive Positions Positions
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• Companies can become so Companies can become so competitor centered that they competitor centered that they lose their customer focus.lose their customer focus.
• Types of companies:Types of companies: Competitor-centered companiesCompetitor-centered companies Customer-centered companiesCustomer-centered companies Market-centered companiesMarket-centered companies
Balancing Customer and Competitor
Orientations
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