Competitive Advantage

the power of buyers is increased

if there are fewer buyers or purchase in large volumes, the industry's products are standardized or undifferentiated, buyers face few switching costs in changing vendors

threat of substitutes

is high if it offers an attractive price performance trade off to the industry product or if the buyers cost of switching to the substitute is low

Some factors do not necessarily represent the underlying structure of an industry and should not be mistaken for forces

Industry growth rate, Technology and innovation, Government, and complementary products and services

Porter Competitive strategy

Competition for profits goes beyond established industry rivals to include customers, suppliers, potential entrants, and substitute products; aka, the Five Forces and industry structure drives competition and profitability (industry structure is manifested in the competitive forces)

rivalry among competitors is greatest if..

Competitors are numerous and roughly equal in size and power, Industry growth is slow which leads to fights for market share, Exit barriers are high, Rivals are highly committed to the business and have aspirations for leadership, and if Firms cannot read each other's signals well

Basic Competitive Strategies

Cost leadership (Value Chain focus, lower production costs, lowest distribution costs, low price=high share ex. Walmart and Dell), Differentiation (Highly differentiated line, category leader and preferred brand ex. IBM and Caterpillar) and Focus (Niche company serve few segments well Ritz-Carlton)

barriers to entry

High switch costs Government regulations High start-up costs Economies of scale, fixed costs, variable costs

Steps in Analyzing Competitors

Identifying the company's competition Assessing competitors objectives, strategies, strengths and weakness and reactions patterns Selecting which competitors to attack or avoid

a supplier group is more powerful if...

It is more concentrated than the industry it sells to, does not depend heavily on the industry for its revenues, Industry participants face switching costs in changing suppliers, Suppliers offer products that are differentiated, There is no substitute for what the supplier provides, The supplier group can credibly threaten to integrate forward into the industry

Competitive Market Positions, Roles and Strategies

Market Leader (40%)→ Expand the total market, protect market share and expand market share Market Challengers (30%)→full frontal attack and indirect attack Market Followers (20%)→follow closely and follow at a distance Market Nichers (10%)→by customer, market, quality-price, service and multiple niching

strategies in the competitive environment specific to industry

Positioning the company, Exploiting industry change and Shaping industry structure

price competition is most likely to occur if...

Products or services of rivals are nearly identical and there are few switching costs for buyers, Fixed costs are high and marginal costs are low, Capacity must be expanded in large increments to be efficient, and if the product is perishable

Red Ocean (Structuralist)

Red competes in existing market space, beat the competition, existing customers, and exploit existing demand (ex Ringling Barnum and Bailey Circus), create greater value at a higher cost or create reasonable value at a lower cost and align firm with strategic choice of differentiation or low cost

barriers to entry for new entrants

Supply-side economies of scale Firms that produce larger volumes enjoy lower costs because they can spread fixed costs over more units, employ more efficient technology or command better terms from suppliers Demand-side benefits of scale (network effects) Limits customer willingness to buy from a newcomer Customer switching costs Costs the customer incurs to change products or services that can deter such a switch Capital requirements The need to invest large financial resources in order to compete Incumbency advantages independent of size e.g. experience, preferential access, preemption of most favorable geographic locations, established brand identities, etc. Unequal access to distribution channels Restrictive government policy Also, expected retaliation from incumbents

simple model of the marketing process

Understand the marketplace and customer wants and needs Design a customer-driven marketing strategy Construct a marketing program that delivers superior value Build profitable relationships and create customer delight Capture value from customers to create profits and customer quality

competitive marketing strategies

competing against competitors' positioning

Blue Ocean Strategy (Restrictionist)

create uncontested market space, make the competition irrelevant, focus on non-customers, create and capture new demand, seek greater value to customers and low cost simultaneously, and align firm in pursuit of differentiation and low costs

assessing competitor's objectives, strategies, strengths and weaknesses, and reaction patterns includes

mix of objectives ( where can we find out information about these competitors? annual reports, marketing intelligence, profitability, cash flow, tech leadership etc.), strategic group (subgroup within an industry that pursue similar strategies in similar target markets), what can they do? (market intelligence) and what will they do? (actions and reactions)

Porter's Five Force Framework

rivalry among existing competitors, bargaining power of buyers, bargaining power of suppliers, threat of new entrants and threat of substitutes

recommended competitive strategy steps for Yellowtail in wine industry

step 1: look at factors of competition (price, terminology and marketing), step 2: blue ocean strategy actions (eliminate, reduce, raise and create)

selecting which competitors to attack and avoid includes:

strong or weak, close or distant and good or bad competitors (good share the cost of product and market development) bad (don't play well with others)

competitor analysis

who and what they are doing