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Dealing with the Competition. Otterbein College Winter 2000. Objectives. Identifying Competitors Evaluating Competitors Competitive Intelligence Systems Competitive Strategies Customer vs. Competitor Orientation.
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Dealing with the Competition Otterbein College Winter 2000
Objectives • Identifying Competitors • Evaluating Competitors • Competitive Intelligence Systems • Competitive Strategies • Customer vs. Competitor Orientation
Induce your competitors not to invest in those products, markets and services where you expect to invest the most … that is the fundamental rule of strategy. Bruce Henderson, Founder of BCG There is nothing more exhilarating than to be shot at without result. Winston Churchill
Potential Entrants (Threat of Mobility) Suppliers (Supplier power) Industry Competitors (Segment rivalry) Buyers (Buyer power) Substitutes (Threats of substitutes) Five Forces Determining Segment Structural Attractiveness
Exit barriers Low High Low, stable returns Low, risky returns Low Entry Barriers High, stable returns High, risky returns High Barriers and Profitability
Industry Competition • Number of Sellers • Degree of Differentiation • Entry, Mobility, Exit barriers • Cost Structure • Degree of Vertical Integration • Degree of Globalization
Strategic Groups in the Major Appliance Industry High • Group A • Narrow line • Lower mfg. cost • Very high service • High price • Group C • Moderate line • Medium mfg. cost • Medium service • Medium price • Group B • Full line • Low mfg. cost • Good service • Medium price Quality • Group D • Broad line • Medium mfg. cost • Low service • Low price Low High Low Vertical Integration
Objectives Competitor Actions Strategies Reaction Patterns Strengths & Weaknesses Analyzing Competitors
Commercial & Industrial Individual Users Educational Personal Computers Dell Hardware Accessories Software Competitor’s Expansion Plans Markets Products
Market nicher MarketLeader Market Challenger MarketFollower 40% 30% 20% 10% Hypothetical Market Structure & Strategies Expand Market Attack leader Imitate Specialize Defend Market Share Status quo Expand Market Share
(2) Flank defense (3) Preemptive defense (4) Counter- offensive defense (5) Mobile defense Defense Strategies Attacker Defender (1) Position defense (6) Contraction defense
Optimal market share Profitability 0% 25% 50% 75% 100% Market share Optimal Market Share
(4) Bypass attack (2) Flank attack Attacker Defender (1) Frontal attack (3) Encirclement attack (5) Guerilla attack Attack Strategies
Specific Attack Strategies • Price-discount • Cheaper goods • Prestige goods • Product proliferation • Product innovation • Improved services • Distribution innovation • Manufacturing cost reduction • Intensive advertising promotion
“Nichemanship” • End-user specialist • Vertical-level specialist • Customer-size specialist • Specific-customer specialist • Geographic specialist • Product or product-line specialist • Product-feature specialist • Job-shop specialist • Quality-price specialist • Service specialist • Channel specialist
Balance Customer Competition + ID opportunities + Fighter orientation + Long-run profit + Alert + Emerging needs & groups + Exploit weaknesses - Reactive
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