Student Notes Pages Marketing

Chapter 1: Becoming Marketing Oriented

Introduction

Marketing

Second SA edition • Importance

Charles W. Lamb, Jr. – identify threats in good time
Joseph F. Hair, Jr. – probably the most important threat for all firms
Carl McDaniel – determines the firms entire business strategy
Christo Boshoff
Nic S. Terblanche • The industry concept of competition
Chapter • Industries are classified according to:
Chapter 4:
4:
– number of sellers, barriers, cost structure, degree of
Competitive
Competitive Analysis
Analysis vertical integration, degree of globalisation
• Gives rise to four industry structures

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The Economics of Competition Types of Competition

Type
Type Description
Description
• The four basic industry structures are:
–Monopoly One
One Seller,
Seller, Unique
Unique Product,
Product, No
No Competitors
Competitors or
or
Monopoly
Monopoly Close
Close Substitutes
Substitutes
–Monopolistic competition Large
Monopolistic Large Number
Number of of Sellers,
Sellers, Products
Products
Monopolistic
–Oligopoly Competition
Competition
Distinguishable,
Distinguishable, Sellers
Sellers believe
believe they
they have
have
competition - including substitutes
competition - including substitutes
–Pure competition
Few
Few Sellers,
Sellers, High
High Barriers
Barriers to
to Entry,
Entry, Inelastic
Inelastic
Oligopoly
Oligopoly Demand,
Demand, Seek
Seek Non-price
Non-price Advantage
Advantage

Pure Many
Many Buyers
Buyers and
and Sellers,
Sellers, Identical
Identical Products,
Products,
Pure Full
Full knowledge,
knowledge, Easy
Easy entry,
entry, Elastic
Elastic Demand,
Demand,
Competition
Competition Focus
Focus on
on Lower
Lower Costs
Costs
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Identifying Competitors Consumer-

Consumer-based Approaches to
Identify Competitors
• Consider both:
– current competitors; and
– potential new competitors • Primary competitors easy to identify
• Two ways – but competition is changing
– from a consumer’s perspective: what are the – new forms of competition are emerging
consumers’ options/choices? » customer choices
» who competes for a buyer’s choice - they are our
competitors » product-use associations
– from a firm-level perspective: what competitive
strategies are used by similar firms?
» result in groups of “similar” firms or strategic groups

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© 1997 South-Western College Publishing

Student Notes Pages Marketing
Chapter 1: Becoming Marketing Oriented

The Strategic Group Approaches Understanding Potential

to Identify Competitors Competitors

• Strategic groups are firms who: • Market expansion

– use similar strategies • Product expansion
– have similar strategies • Integration
– have similar assets – forward, backward, vertical
– have similar competencies
• Export of assets or competencies
– have similar mobility barriers that prevent firms
from moving from one group to another • Retaliatory or defensive strategies
• Competing against a group more • Entry barriers
manageable than individual firms
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Understanding Current Competitors Market Attractiveness

• Attractive market promises returns above

the cost of capital
• Must understand current competitors’
strengths and weaknesses • Two questions
– what factors account for the current level of
• Identify emerging threats and profitability?
opportunities – are the prospects better or worse in the future?
• Try to predict their actions • Answer depends on five factors
• Identify strategic uncertainties – (1) current direct rivalry (2) bargaining power of
• Competitor actions influenced by eight suppliers (3) bargaining power of customers (4)
threat of substitutes (5) potential threat of other
factors – next slide new competitors fm related industries

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Competitors’
Competitors’ Strengths and Competitive Reaction Patterns
Weaknesses

• Six competing positions to occupy in a • Not all firms respond to competition the
market: same. There are:
– the laid-back competitor
– dominant
– strong – the selective competitor
– favourable – the tiger competitor
– the stochastic competitor
– tenable
– weak
– nonviable

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© 1997 South-Western College Publishing

Student Notes Pages Marketing
Chapter 1: Becoming Marketing Oriented

Direct Rivalry Selecting Competitors to Attack/Avoid

• Competitive equilibrium is:

• Attacking weak competitors is cheaper
– unstable when competitors are almost identical
– but not much to be gained
– unstable when a single factor is likely to
determine success or failure • Benchmarking and competing with strong
– fairly stable if success is determined by a competitors may enhance the firm’s
variety of factors and different firms can excel capabilities and skills
in different areas
» the fewer the number of critical factors the • Good and bad competition
fewer the number of firms that can co-exist
– stable when one firm dominates and is not
challenged
– stable when customer switching cost is high

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Finding Attractive Segments Competitive Strategies in SA Retail

Market

• House brands
• Not all parts of a market are equally • No frills shopping
attractive • Extended services
• Attractive segments must be: • Credit facilities
– sufficiently distinctive • Loyalty cards
– substantial enough • Clubs for account-holders
– measurable • Use of technology
– durable • Smart cards
– identifiable

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© 1997 South-Western College Publishing