Chapter 18 Marketing.docx

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17 Apr 2012
Chapter 18 Creating Competitive Advantage
Learning objectives:
1. Discuss the need to understand competitors as well as customers through competitor
2. Explain the fundamentals of competitive marketing strategies based on creating value
for customers
3. Illustrate the need for balancing customer and competitor orientations in becoming a
truly market-centred organization
Competitor analysis
Competitive advantage: an advantage over competitors gained by offering consumers
greater value than competitors do
Competitor analysis: the process of identifying key competitor; assessing their
objectives, strategies, strengths and weaknesses, and reaction patterns; and selecting
which competitors to attack or avoid
Competitive marketing strategies: strategies that strongly position the company against
competitors and give the company the strongest possible strategic advantage
Identifying competitors
Competitors can be identified as other organizations who are making the same product
or class of products
Companies need to be careful with competitor myopia; ignoring potential competitors
rather than current competitors
Companies can identify their competitors from two points of view: either from the
industry point of view or the market point of view. (i.e. Pepsi sees soft drinks as industry
competitors, while water, energy drinks, fruit juice are market competitors)
Assessing competitors
Determining competitors’ objectives
o The company wants to know the relative importance that a competitor places on
current profitability, market share growth, cash flow, technological leadership,
service leadership, and other goals
o Knowing a competitor’s mix of objectives reveals whether the competitor is
satisfied with its current situation and how it might react to different
competitive actions
o Opportunities to expand or monitor new/different segments
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Identifying competitors’ strategies
o Strategic group: a group of firms in an industry following the same or a similar
strategy in a given target market
o Although competition is most intense within a strategic group, there is also
rivalry among groups if the strategic groups may appeal to overlapping customer
Assessing competitors’ strengths and weaknesses
o As a first step, companies can gather data on each competitor’s goals, strategies,
and performance over the past few years. This is normally completed through
secondary data
o Benchmarking: the process of comparing the company’s products and processes
to those of competitors or leading firms in other industries to identify “best
practices” and find ways to improve quality and performance
Estimating competitors’ reactions
o A company’s objectives, strategies, and strengths and weaknesses go a long way
toward explaining its likely actions
Selecting competitors to attack and avoid
Strong or weak competitors
o Many companies prefer to compete with weak competitors as it requires less
resources, however strong competitors provide a high return
o Customer value analysis: analysis conducted to determine what benefits target
customers value and how they rate the relative value of various competitors’
o The key to gaining competitive advantage is to take each customer segment and
examine how the company’s offer compares to that of its major competitors
Close or distant competitors
o Close competitors those that resemble them most
o Too aggressive competition can lead to alliances with other rivals
“Good” or “bad competitors
o Competitors help share the costs of market and product development and help
to legitimize new technologies
Finding uncontested market spaces
o Called a blue ocean strategy, the goal is to make competition irrelevant
Designing a competitive intelligence system
All information must be collected, interpreted, distributed, and used
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