session 15 - mabd

7/30/2019 Session 15 - MABD

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Dealing With Competition

Competitive ForcesIdentifying Competitors

Analyzing Competitors

Competitive Strategies


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Competitive Forces


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Identifying Competitors

Industry Concept of Competition

Industry is a group of firms that offer a product or class of products

that are close substitutes for one another. Industry can be

classified on the following parameters:

Number of Sellers and Degree of Differentiation

Pure Monopoly

Oligopoly

Monopolistic Competition

Pure Competition

Entry, Mobility and Exit Barriers

Cost Structure

Degree of Vertical Integration

Degree of Globalization


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Industry Structures

Pure Monopoly

Pure Oligopoly

Differentiated Oligopoly


Pure Competition

Only one firm offers an

undifferentiated product or

service in an area

Unregulated

Regulated

Example: Most utility

companies


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A few firms produce

essentially identical

commodities and little

differentiation exists

Lower costs are the key to

higher profits

Example: Crude Oil

Industry Structures

Pure Monopoly

Pure Oligopoly



Pure Competition


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Industry Structures

Pure Monopoly

Pure Oligopoly



Pure Competition

A few firms produce

partially differentiated items

Differentiation is by key

attributes

Premium price may be

charged

Example: Mobile

Companies


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Industry Structures

Pure Monopoly

Pure Oligopoly



Pure Competition

Many firms differentiate

items in whole or part

Appropriate market

segmentation is key to

success

Example: Beer,

Restaurants


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Industry Structures

Pure Monopoly

Pure Oligopoly



Pure Competition

Many competitors offer the

same product

Price is the same due to

lack of differentiation

Example: Farmers selling

milk, crops


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Entry, Mobility and Exit Barriers - Industries differ greatly in the easeof entry, mobility and exit. Entry barriers include high capitalinvestments, requirement of patents and licenses, economies of scale,raw materials availability. A firm may face mobility barriers while trying toenter more attractive market segments such as local legislation,specialized requirements and so on. Exit barriers are in the form of legalor moral obligations to customers, creditors, employees, governmentregulations, low asset salvage value, high vertical integration.

Cost Structure Each industry has its associated cost structure and thecompanies strive to reduce their largest costs. E.g A steel manufacturingcompany has the largest cost in the form of manufacturing and rawmaterials. The integrated steel company with most cost efficientmanufacturing plan will have an advantage over other integrated steelmanufacturing companies.

Degree of Vertical Integration Backward or forward integrationdefines the competitive edge for the companies. Oil companies carry onoil exploration, drilling, refining and even retailing. These companies arein a better position to manipulate costs in different parts of the valuechain and earn profits where ever possible.

Degree of Globalization Companies in global industries need to

compete on a global basis if they are to achieve economies of scale andkeep up with the latest advances in technology.


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You &

Your Company

StrategiesService levels

Pricing

Line Length

Mix Width

Strengths & WeaknessesShare of Market

Share of Mind

Share of Heart

ObjectivesCurrent Profitability

Market Share

Cash Flow

Market Leadership

Long TermShort Term

ReactionsStrong vs Weak

Close vs Distant

Good vs Bad

Analyzing Competitors


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All the firms operating in the market can beclassified on the basis of the share they hold.This is described as follows:

10%

20%

30%

40% Market Leader

Market Challenger

Market Follower

Market Nichers


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Competitive Strategies for Market Leaders

Expanding the Total Market

New Customers

More Usage

Defending the Market Share

Position Defense

Flank Defense

Preemptive Defense

Counteroffensive Defense

Mobile Defense

Contraction Defense


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Defining Strategic Objective and

Opponents

Attacking the Market Leader

Attacking the firms of own size

Attacking the local and regional

firms

Choosing a General Attack Strategy

Frontal Attack

Flank Attack

Guerilla Warfare

Choosing a Specific Attack Strategy

Price Discount

Lower Price Goods

Value Priced Goods and Services

Prestige Goods

Product Proliferation

Product Innovation

Improved Services

Distribution innovation

Manufacturing-cost Reduction

intensive Advertising Promotion

Competitive Strategies for Market Challenger


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Competitive Strategies for Market Follower

Cloner

Imitator Adaptor


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Competitive Strategies for Market Nicher

Instead of following leaders in a large market,smaller firms try to be leader in smaller

markets or niche. Nichers have three tasks

Creating Niches

Expanding Niches

Protecting Niches


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session 15 - mabd

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