1. Dealing with the Competition Otterbein College Winter 2000

2. Objectives • Identifying Competitors • Evaluating Competitors • Competitive Intelligence Systems • Competitive Strategies • Customer vs. Competitor Orientation

3. 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

4. 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

5. Exit barriers Low High Low, stable returns Low, risky returns Low Entry Barriers High, stable returns High, risky returns High Barriers and Profitability

6. Industry Competition • Number of Sellers • Degree of Differentiation • Entry, Mobility, Exit barriers • Cost Structure • Degree of Vertical Integration • Degree of Globalization

7. 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

8. Objectives Competitor Actions Strategies Reaction Patterns Strengths & Weaknesses Analyzing Competitors

9. Commercial & Industrial Individual Users Educational Personal Computers Dell Hardware Accessories Software Competitor’s Expansion Plans Markets Products

10. 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

11. (2) Flank defense (3) Preemptive defense (4) Counter- offensive defense (5) Mobile defense Defense Strategies Attacker Defender (1) Position defense (6) Contraction defense

12. Optimal market share Profitability 0% 25% 50% 75% 100% Market share Optimal Market Share

13. (4) Bypass attack (2) Flank attack Attacker Defender (1) Frontal attack (3) Encirclement attack (5) Guerilla attack Attack Strategies

14. Specific Attack Strategies • Price-discount • Cheaper goods • Prestige goods • Product proliferation • Product innovation • Improved services • Distribution innovation • Manufacturing cost reduction • Intensive advertising promotion

15. “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

16. Balance Customer Competition + ID opportunities + Fighter orientation + Long-run profit + Alert + Emerging needs & groups + Exploit weaknesses - Reactive

17. Next... Market Segments and Target Markets