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Chapter 11 Competitive Dynamics.docx

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MKT 702
Rob Wilson

MKT702 Marketing Management CHAPTER 11 Competitive Dynamics COMPETITIVE STRATEGIES FOR MARKET LEADERS  To stay number one, firm must find ways to expand total market demand, protect current share through defensive and offensive action, and increase market share even if size remains consistent Expanding Total Market Demand  New users among three groups: those who might use it but do not (market-penetration strategy), those who have never used it (new-market segment strategy), or those who live elsewhere (geographical-expansion strategy)  Marketers can try to increase amount, level, or frequency of consumption o Boost amount through packaging or product redesign (i.e. larger package size) o Increasing frequency of consumption requires either:  Identifying additional opportunities to use the brand in the same basic way  Identifying completely new and different ways of using the brand Protecting Market Share  Defend current business through continuous innovation by being a front-runner lead in the industry in developing new products and customer services, distribution effectiveness, and cost cutting  Proactive marketing o Responsive marketer finds stated need and fills it o Anticipative marketer looks ahead to needs customers may have in the near future o Creative marketer discovers solutions customers did not ask for but to which they enthusiastically respond o Company needs two proactive skills: 1. Responsive anticipation to see the writing on the wall which is performed before a given change 2. Creative anticipation to devise innovative solution o Companies need to practice “uncertainty management”  Defensive marketing reduces probability of attack, divert attacks to less-threatened areas, and lessen their intensity o Six defence strategies 1. Position defence – occupying the most desirable market space in consumers’ minds, making the brand almost impregnable 2. Flank defence – erect outposts to protect a weak front or support possible counterattack 3. Pre-emptive defence – broad market envelopment that signals competitors not to attack; introduce stream of new products and announce them in advance; attack first with guerrilla action across the market 4. Counteroffensive defence – meet attacker frontally and hit its flank, or launch a pincer movement so it will have to pull back to defend itself 5. Mobile defence – leader stretches its domain over new territories through market broadening and market diversification  Market broadening shifts company’s focus from current product to underlying generic need  Market diversification shifts company’s focus into unrelated industries 6. Contraction defence – large companies can no longer defend all their territory  Planned contraction (or strategic withdrawal) gives up weaker markets and reassign resources to stronger ones Increasing Market Share  Cost of buying higher market share through acquisition may far exceed its revenue value, company should consider four factors: 1. Possibility of provoking antitrust actions  Frustrated companies likely to cry “monopoly” and seek legal action if dominant firm makes further inroads 2. Economic cost  Profitability might fall with market share gains after some level; seek optimal market share  Pushing for higher shares is less justifiable when there are unattractive market segments, buyers who want multiple sources of supply, high exit barriers, and few scale or experience economies 3. The danger of pursing the wrong marketing activities MKT702 Marketing Management  Gain market shares by outperforming competitors in three areas: new-product activity, relative product quality, and market expenditures 4. The effect of increased market share on actual and perceived quality  Too many customers can put a strain on firm’s resources, hurting product value and service delivery OTHER COMPETITIVE STRATEGIES Market-Challenger Strategies  Market challenger must first define strategic objective, usually to increase market share, and decide who to attack: attack the market leader; attack firms its own size that are not doing the job and are underfinanced; or attack small local and regional firms  Five general attack strategies 1. Frontal attack – attacker matches its opponent’s product, advertising, price, and distribution 2. Flank attack – identifying shifts that are causing gaps to develop, and then rushing to fill the gaps either through underperforming geographic areas or undercover market needs 3. Encirclement attack – launching grand offensive on several fronts 4. Bypass attack – bypassing enemy altogether to attack easier markets instead offers three lines of approach (diversifying into unrelated products, diversifying into new geographical markets, and leapfrogging into new technologies) 5. Guerrilla attack – small, intermittent attacks, conventional and unconventional, including selective price cuts, intense promotional blitzes, and occasional legal action, to harass the opponent and eventually secure permanent footholds Market-Follower Strategies  Strategy of product imitation might be as profitable as a strategy of product innovation  Opportunities for product differentiation and image differentiation are low, service quality is comparable, and price sensitivity runs high  Each follower tries to bring distinctive advantages to target market – location, services, financing – while defensively keeping its manufacturing costs low and product quality and services high  Four broad strategies 1. Counterfeiter – duplicates leader’s product and packages and sells it on the black market or through disreputable dealers 2. Cloner – emulates leader’s products, name, and packaging, with slight variations 3. Imitator – copies some things from leader but differentiates in packaging, advertising, pricing, or location 4. Adapter – takes leader’s product and adapts or improves them Market-Nicher Strategies  Market nichers serve small segme
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