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Chapter 11

MKT 702 Chapter 11 Notes.docx

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Ryerson University
MKT 702
John Peco

MKT 702 Chapter 11 Notes Competitive Strategies For Market Leaders Market Leader – Has majority of market share Market Follower – Anyone that is competing behind market share of the leader More Usage – Increasing frequency of consumption, on the other hand: requires either 1) Identifying additional opportunities to use the brand in the same basic way 2) Identifying completely new and different ways to use the brand Additional Opportunities to Use the Brand Consumers may fall to replace a short-lived product when they should, because they overestimate how long it stays fresh New Ways to Use the Brand Increase frequency of consumption is to identify completely new and different applications Protecting Market Share The front-runner should lead the industry in developing new products and customer services, distribution effectiveness, and cost cutting. Comprehensive solutions increase its competitive strength and value to customers. Proactive Market A responsive marketer finds a stated need and fills it. An anticipative marketer look ahead to the needs customer may have in the near future. A creative market discovers solutions customers did not ask for but to which they enthusiastically respond. Creative marketers work proactive market-driving firms, not just market-driven ones. A company needs two proactive skills 1) Responsive anticipation to see the writing on the wall, as when IBM changed from a hardware producer to a service business 2) Creative anticipation to devise innovative solutions, as when PepsiCo introduced H20H Proactive Firms 1) Are ready to take risks and make mistakes 2) Have a vision of the future and of investing in it 3) Have the capabilities to innovate 4) Are flexible and non- bureaucratic 5) Have many managers who think proactively, companies that too risk-averse won’t be winners. Defensive Marketing MKT 702 Chapter 11 Notes 1) Position defense. Position defence means occupying the most desirable market space in consumers’ minds, making the brand almost impregnable 2) Flank defence. The market leader should erect outposts to protect a weak front or support a possible counterattack 3) Pre-Emptive Defence – A more aggressive manoeuvre is to attack first, perhaps with guerilla action across the market – hitting one competitor here, another there –and keeping everyone off balance. Another is to achieve broad market envelopment that signals competitors not to attack. 4) Counteroffensive defence – A counteroffensive, the market leader can meet the attacker frontally and hit its flank, or launch a pincer movement so it will have to pull back to defend itself 5) Mobile Defence – The leader stretches its domain over new territories through market broadening and market diversification. Market broadening shifts the company focus from the current product to the underlying generic need. 6) Contraction defense – Sometimes large companies can no longer defend all their territory. In planned contraction (also called strategic withdrawal). Increasing Market Share 1) The possibility of provoking antitrust action. Frustrated competitors are likely to cry “monopoly” and seek legal action from the Canadian competition bureau if a dominant firm makes further inroads. 2) Economic cost – Figure 11.3 shows that profitability might fall with market share gains after some level. 3) The danger of pursuing the wrong marketing activities. Companies successfully gaining share. Companies successfully gaining share typically outperform competitors in three areas; new- product activity, relative product quality, relative product quality, and marketing expenditures. 4) The effect of increased market share on actual and perceived quality. Having too many customers can put strain on the firm’s resources, hurting product value and service delivery. 5) The effect of increased of increased market share on actual and perceived quality. Having too many customers can put a strain on the firm resources, hurting product value and service delivery. Market-Challenger Strategies Challengers set high aspirations while market leaders can fall prey to running business. Defining the Strategic Objective and Opponents 1) It can attack the market leader. 2) It can attack firms its own size that not doing the job and are underfinanced. 3) It can attack small local and regional firms. MKT 702 Chapter 11 Notes Defining The Strategic Objective And Opponents ( s) 1) It an attack the market leader 2) It can attack firms its own size that are not doing the job and are underfinanced. 3) It can attack small local and regional firms. Several major banks grew to their present size by gobbling up smaller regional banks; “ guppies” Choosing A General Attack Strategy 1) Frontal Attack – In a pure frontal attack, the attacker matches its opponents product, advertising, price, and distribution. The principle of force says the side with the greater resources will win. 2) Flank attack – A flanking strategy is another name for identifying shifts that are causing gaps to develop 3) Encirclement attack – Encirclement attempts to capture a wide slice of territory by launching a grand offensive on several fronts. 4) Bypass attack. Bypassing the 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) Geurilla attack. Guerilla attacks consist of small, intermittent attacks, conventional and unconventional, including selective price cuts, intense promotional blitzes, and occasional legal action Market-Follower Strategies In “innovative imitation”, as he calls , the innovator bears the expense of developing the new product, getting it into distribution, and informing and educating the market. The Reward for all this work and risk is normally market leadership. 1. Counterfeiter – The counterfeiter duplicates the leader’s product and packages and sells it on the black market or through disreputable dealers. 2. Cloner – The cloner emulates the leader’s products, name, and packaging, with slight variations. 3. Imitator – The imitator copies some things from the leader but differentiates in packaging, advertising, pricing or locations. The leader doesn’t mind as long as the imitator doesn’t attack aggressively. 4. Adapter – The adapter takes the leaders products and adapts or improves. The adapter may choose to sell to different markets, but often it grows into a future challenger, as many Japanese firms have done after improving products deve
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