competitive advantate 22-1-13

7/28/2019 Competitive Advantate 22-1-13

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CREATING

COMPETITIVE ADVANTATE

COMPETITIVE STRATEGIES


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Session Coverage-

Identifying Company's Competitors

'

Identifying Competitor's Strengths and

Estimating Competitor's Reaction Patterns


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Session Coverage-Competitive

Leader Strategies

Market Follower Strategies

Balancing Customer and Competition

Competitive arena mapping


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e ntons

consumers greater value and satisfaction than

competitors offer.


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Competitive Advantage

Low cost structure and therefore low fares

Number one in selling tickets over internet, thus not only being convenient to customers but alsolower cost of operation

Only one type of planes (Boeing 737s), which are fuel efficient with standardized maintenance andoperational procedures (also low inventory of spares)

No servicing of meals during in-flight

Low turnover of man-power

The present Chairman believes that employees are more important than customers (due to lowercost the customers priority is after employees).

The airlines has best customer service record and has won industrys Triple Crown for bestluggage handling, on-time performance and lowest customer complaint statistics for many years in

. .

The employees wear casual dress and even shorts in summer

Re-usable plastic boarding passes are ample of examples to show low cost airlines image


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Competitive Analysis

The process of identifying key competitors; assessing theirobjectives, strengths and weaknesses, strategies and reaction

patterns; and selecting which competitors to attack or avoid.


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Who are the major competitors? What is your competition?

Why should they switch to you? Are your competitors satisfied with their present position? What likel moves or strate shifts will the com etitors make? Where are your competitors vulnerable? What are they doing right? What will provoke the greatest and most effective retaliation by the

compe ors How aggressive should you be towards your competitors? Who is your non-competitor? To whom are you the non-competitor?


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The companies today face tough

Development in technology Availability of technology

Customers getting wiser

Customers having higher disposable incomes and thereby the needs

Profile of the customers changing very fast

Globalisation of business sourcin from the best and chea est

suppliers and not restricting to own country only

Companies operating in markets and countries across the globe


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Generic Com etition:

All companies compete for same Disposable income. Eg:Honda competing with LG

Competition in sector for example: Transportation

Industry Competition: Hon a V/S TVS Pro uct Competton

Brand Competition: Honda onl com etin with com anies manufacturin fuel

efficient bikes

11-9


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1. How will you identify yourcompetitor?

An organization making similar product, which can satisfy the needs of thecustomer in the same or near the same price

The earlier camera manufacturers faced competition from other cameramanufacturers but today it is from a different product i.e. Digital camera

The digital camera manufacturers developed smaller cameras for ease ofhandling and now these small cameras face competition from hand phones

with cameras

Similarly though we call Coke and Pepsi are the toughest rival for cold drink,the other drinks likejuices, iced tea, lemon drink etc also serve the basicpurpose of thirst quenching


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How will you identify yourcompetitor?...............

Funds

Watch V/S Mobile Phone

Honda Entry and Bajaj

Radio, TV, Pager V/S Mobile


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2. Assessing Competitors

After identifying competitors the next step would be;

i . Determining objectives of the competitorsThe competitors will have different objectives, like

a. Profitability

b. Market share growthc. Cash flows

d. Leadership in technology

.f. Any other goals

,analyse and to know how he will react to different situations


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What companies want to know in

Sales Marketshare trends sales b units roduct lines

terms of competition?

Customers Profiles, buying motives,brand loyalty, satisfaction levels

Products Ran e com arative erformance new roducts

Distribution Network used, balance of power,terms offered, coverage, caliber/size of sales

force

Price Cost structure, discount structure

Advertising and Promotion Level, pattern, extent of promotion

Financials

Depth of resources,profitability Management

Short/long term objectives & goals, skills & competencies, Investment levels &plans

Type of plant & capacity utilization, labor relations, number of employees


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Industr Level Anal sisMichael Porters Analysis

(Com etition)Structural Analysis of Industry

11-14


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Mi h l E. P r r N w A r ho e o ra eg so e o ra eg s

To sustain lon -term rofitabilit in business, ou

must respond strategically to COMPETITION.

Michael Porter?Michael Porter?

11-15


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narrowly as if it occurred only among .

e , goes eyon n us ry rva s anincludes customers, suppliers, potential

en ran s an su s u e pro uc s.


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Michael Porters approach to Competitive

ana ys s

According to Michael Porter, there are two basic determinants ofcompetitive analysis

- Attractiveness of the industry

- Level of com etition

Awareness of the five forces help a company understand the structureof its industry and stake out a position that is more profitable andless rone to attack

Five forces Model

- Threat of new entrants

-- Bargaining Power of suppliers

- Threat of substitutes

- Extent of competitive rivalry


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IF THESE FIVE FORCES ARE

- east pro ta e

Airlines

Hotels

o company earns a rac ve re urns oninvestment.


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-

-

on price.

deals.

lions share of airlines profits.

Substitutes: Train or car travel readily


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Five Forces Driving Industry Competition

Potential Entrants

Industry Bar ainin Power

arga nng ower

of Suppliers

CompetitorsSuppliers

Bu ers

of Buyers

Rivalry among

xstng rms

Threat of Substitute

Substitutes

ro uc s


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.

new players are free

scale, product differentiation, high capital

cost, overnment olic , access todistribution channels

If capital requirements are high, than there

will be less players entering industry


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-

Companies even used to get license from

For Example: Cement, edible oil etc Even the Quantity that they could produce

was also fixed by Government.

Subsidies, Funding Basic Research andmakin it available to all firms


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.

buyers-dealers, agents, distributors,, .

Bargaining power of buyers is high:

. ew uyers many supp ers.

2. Buyers purchase in large quantities

3. Buyers are concentrated: OEM orDefense.


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.

Weaker:.

diverse

. ro uc s are cr ca an s gn can obuyers eg: medical/pharma, aircraft

engnes e c


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3. Bargaining power of SuppliersPC Makers competing for customers have limited option because of near monopoly of Microsoft for

operating system

material, services, logistics, even manpower etc. Su liers can be owerful if: Ex: Intel

Suppliers are concentrated

Switching costs are high Suppliers product is an important input to the

company final product

armaceu ca s companes a o er pa en e rugs ohospitals

Pilot Unions-Exercise control over airlines arties.


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. Video Conferencing Substitute to Travel

as c su s u e o aumnumgass

E-mail substitute to express mail

Long distance telephone service sufferedfrom internet based phone service such asskype

Video rental outlets suffered because ofvideo on demand service or online videoren a servces.


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. Sometimes price that company can charge

can be restricted by prices of substitutes.

Threat of Substitutes depend on:

Customer awareness and ability to

m r tit t Switching Costs: The easier or lower the

,greater the threat.


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5. Intensity of rivalry between firms Mostly depend on number of players in industry.

Few firms enjoy large market share, rivalry will be less as compared.

Strategies to gain advantage: Product differentiation

Prce erentaton

Utilization of distribution channels effectively

Price Discounts Cash Discounts

Intensif Cost Reductionpromotional

activity


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5. Intensity of rivalry between firms

1. Market growth rate-When low it becomes

2. Higher fixed costs-puts pressure on firmo peruse saes vo ume s ra egy

3. Perishable Products: Hotel Room,

Aircraft seat etc.


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- , ,

Size and Growth indicator of health of

Growth of Competitator is larger threat than

Profitable business has access to capital


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Competitive Analysis-2

Ima e customer carries for its roducts

Share of market

Customers share in target market

Name the first company that comes to the mind in this industry.

%age of customers who named competitor

Name the company from which you prefer to buy the product?

%age of customers who named competitors co.

INTERESTING RELATIONSHIP BETWEEN ALLTHESE THREE MEASURES


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Customer Ratings of Competitors on Key

uccess ac ors

Competitor A: can be attacked on Product Availability and Tech. Assistance

Competitor B: Should not attack, as it does not have any highlighted weakness

Competitor C: Can be attacked almost on any aspect


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-

Past strategies that have failed should be

indicate that competitor will never try similar

strategies


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,

should be very sure about which

ones it wants to retain.

CUSTOMERS


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Profitable but not LOYAL & PROFITABLEcompletely happy withcompany Dont take them for granted

Maintain margins and reapn ou e reasons, an ry

to retain them.the benefit of theirsatisfaction

UNPROFITABLECUSTOMERS-These

THESE UNPROFITABLECUSTOMERS ARE HAPPY

LET THEM GO

EVEN ENCOURAGE THEIR

or Vulnerable

DEPARTURE


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Desi nin Com etitive Strate ies

Market Leader Strategies

Market Follower Strategies

Market Nicher Strategies


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10%

Market

20%

Market

30%

Market40%

Market

Nichers Follower Challenger Leader


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Market Leader

Microsoft, Sony, Intel

and or value (PIMS) Profit Impact on

MS has Correlation with Profitability but

GM, world largest auto company is

runnng n o osses


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.

2. Defend Market Share:

rea ea er a ways ac s se :

525 Rule, Improve Productivity andReduce costs

3. Increase Market share if that is

profitable


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Penetrate into those who might use it but do not e.g.

New users

Those who have never used it toothpowder among

In another geographical market use of paan inwestern markets

Expand total market New usesUse product development skype for computer

Increase quantity of consumption e.g. Vicks originall

More usage

On nose, later on chest and back

. .

Pepsi / Coke as light user to medium and heavy user


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Market Leader Strategies-Defense Strategies

1. Position Defense-Strong Brand Portfolios

2. Flank Defense-Strengthening weak areas For Eg: Smirnoff inUS (23% MS)

3. Preemptive Defense-Attacking dominant firms into costlywars-Hitting one competitor here, another there eg.SBI

-. ,counter attack. Hero-Launch of 100cc pleasure scooter-bajajand TVS

5. Mobile Defense-Spreading into other areas. ar e roa enng

2. Principle of mass

3. Market diversification

- -,

Chaupal6. Contraction Defense-Exit a market

1. Planned contractionra egc w rawa


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-. .

2. Find weakness of Leader and attack at.

What challengers do:Price Discounts Cash Discounts

Intensif Cost Reductionpromotional

activity


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-

Defining the Strategic Objective and

It can attack the market leader

It can attack firms of its own size that are notdoing the job and are underfinanced

It can attack small local and regional firms

Choosing a General Attack Strategy


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-.

fronts2. Flank Attack-Where o onent is weak e .

Woodland v/s Bata, Liberty (Comfort, robust)

3. Encircle Attack- Attract substantial share ofnew customers in a variety of smallerspecialized segments

4. Bypass Attack-On easier market not servedby larger companies

5. Guerilla Attack-Small intermittent attacks

M k t F ll St t i


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Market-Follower Strategies

our roa trateges:

black market For Example: Music firms, Rolex etc

Cloner: Copies leaders name, products, packaging etc withslight variation For Eg: PC Market

Imitator: Copies some things of leader but maintainseren a on n erms o pac agng, a ver s ng, oca on,pricing etc

Ada ter:Take leaders roducts and ada ts or im rove

them. For eg: J apanese Companies, Sony innovates then LG,Samsung bring out improved versions


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11-46


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.

work in small segments where leader is.

2. Work on high end product and services

strategy

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Leader in a small market or niche.Better margin than mass marketer as end user needs served better by nicher.

ar e - c er

Strategies

volume

Nicher Specialist Roles Product-feature n -user spec a s

Value-added reseller

Customer-size specialist

specialist

J ob-shop specialist

Quality-price specialist -

specialist Geographic specialist

Service specialist Channel specialist

-specialist

D i i Th C titi I t ll i


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Designing The Competitive Intelligence

ys em

Four Main Steps Setting Up the System Collecting the Data va ua ng an na yz ng e a a Disseminating Information and Responding

Setting up of competitive


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nte gence system

Identify best sources and information

Such responsibility resides with marketing

Collecting data

us use orma an n orma sources Collected on continuous basis from field



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nte gence system-

Customers, sales force, channels, suppliers,,

Published data from annual report, trade

association, media interviews

Institutional visits

Internet, Blogs



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nte gence system-

Must be checked for validity and reliability

Disseminating information withinorganza on

Ensure decision makers within organizationrece ve me y n orma on

COMPETITIVE INTELLIGENCE (CI)


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COMPETITIVE INTELLIGENCE (CI)

1. Competitive Intelligence is about knowing what your competitorsare doing about their business and customers as well as yours.

They want your customers while you want to retain yours and gettheirs.

.intelligence.

3. Need for competitive intelligence is not felt very acutely today as

there is room for everyone. It will be felt after 8 to10 years whenmarket penetration is going to be deep leading to 90% saturation.After 20 ears, intelli ence based strate ic marketin andmanagement is the only that will save a company.


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How to Go About Getting competitive Intelligence.

1. Ask agencies to give you alerts.

2. Gather relevant information and analyze it.

3. Know what you want to achieve and gather informationaccordingly; be proactive.

4. Network and build contacts.

5. Dont rely on just one source of information.

6. The actionable information should be brief.

Watch your back; somebody else is eyeing your business

Getting Relevant Information


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Getting Relevant Information

1. CI is an on going process not a one time one.

2. Pick up information about customers, market movements,changes in technology and trends.

3. Gain & update about what your competitors are upto. Knowtheir strategy, their aim, customer feedback so on. 90% of

s s ava a e n u c oma n- roug me a, agencyservices and studies conducted by various organizationsperiodically.

4. Networking forms essential part of information gathering.

. .useless processed. Turn data into intelligence.

S E l


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Some Examples

.

situation where Middle east countries would cut/reducecrude supply. It devised a strategy to deal with it and wasrea y wt a pan w en t appene .

2. Motorola, a global leader in mobile technology fell to.

strong team working on CI. Motorola failed to see shiftfrom analog to digital. They failed to see that mobile

phones are not just a means of communication but muchmore.

competitive advantate 22-1-13

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