Creating

Competitive
Advantage

c
Intel

Has dominated the

chip industry
Success is directly
related to Intels
competitive
strategy
Strategy focuses
on superior value
and product
leadership

Heavy focus on
product and
advertising innovation
and R&D investments
Changing market
needs have
challenged Intel to
adapt
Intel is capitalizing on
the Internet now

Two Major Goals of

Marketing*
1. Design and Manage a Superior
Value-Delivery System to Reach
and Satisfy Target Customer
Segments.
2. Gain and Sustain Competitive
Advantage.

Defining Customer Value

Total Customer
Cost

(Product, Service,
Personnel, &
Image Values)
(Monetary, Time,
Energy, &
Psychic Costs)

Customer
Delivered Value

(Profit to the
Consumer)

Total Customer
Benefit

Value Chain Analysis**

Support Activities
Firm Infrastructure
Human Resource Management
Technology Development
Procurement
Inbound
Logistics

Operations

Outbound
Logistics

Primary Activities

Marketing
and
Sales

Service

Delivery
Delivery

Order

Producer (Levi)

Order

Vendor (Milliken)

Delivery

Order

Retailer (Sears)

Order

Raw Material
Supplier (Du Pont)

Delivery

Order

Customer (you)

Delivery

Customer Value-Delivery Network*

Definition
Competitive Advantage
An advantage
over competitors
gained by offering
consumers greater
value than
competitors offer.

Figure 18-1:

Steps in Analyzing
Competitors*

Competitor Analysis
Steps in the
Process:
Identifying
Competitors
Assessing
Competitors
Selecting
Competitors to
Attack or Avoid

Firms face a wide

range of competition
Be careful to avoid
competitor myopia
Methods of
identifying
competitors:
Industry point-of-view
Market point-of-view

Levels of Competition
Beer
Ice
cream

Tea

Regular
colas

Diet
lemon
limes

Diet-Rite
cola

Wine

Diet
Pepsi
Diet
Coke

Fast food

Bottled
water

Baseball
cards

Fruit
flavore
d colas

Lemon
limes

Coffee

Product form
competition:
Diet colas
Juices

Product
category
competition:
Soft drinks

Video
rentals

Generic
competition:
Beverages
Budget
competition:
Food and
entertainment

230-year-old
Encyclopedia
Britannica
viewed itself as
competing with
other publishers
of printed
encyclopedias.
Big mistake! Its
real competitors
were software
encyclopedias
and the Internet.

Discussion Question
Create a levels of
competition diagram
for one of the
following:

WalMart
McDonalds
Nike
Starbucks
Google

Competitor Analysis
Steps in the
Process:
Identifying
Competitors
Assessing
Competitors
Selecting
Competitors to
Attack or Avoid

Determining
competitors objectives
Identifying competitors
strategies
Strategic groups

Assessing competitors
strengths and
weaknesses
Benchmarking

Estimating competitors
reactions

Competitor Analysis
Steps in the
Process:
Identifying
Competitors
Assessing
Competitors
Selecting
Competitors to
Attack or Avoid

Strong or weak
competitors
Customer value analysis

Close or distant
competitors
Most companies compete
against close competitors

Good or Bad
competitors
The existence of
competitors offers several
strategic benefits

Customer Value Analysis (for

Competition)
Identify Attributes Customers Value
Assess Attribute Importance
Assess Company and Competitor
Performance
Examine Segments on Attribute-byAttribute Basis
Monitor Customer Values Over Time

Competitive Strategies*
Basic Winning Competitive
Strategies: Michael Porter
Overall cost leadership
Lowest production and
distribution costs
Differentiation
Creating a highly
differentiated product line
and marketing program
Focus
Effort is focused on serving
a few market segments

Attractiveness of an Industry
Threat of
Potential Entrants
Bargaining
Power of
Suppliers

Existing
Rivalry
Threat of
Substitutes

Bargaining
Power of
Buyers

Hohner has
successfully
implemented a
focus strategy to
capture an 85%
share of the
harmonica
market.

Competitive Strategies
Basic Competitive Strategies:
Value Disciplines*
Operational excellence

Superior value via price and convenience

Customer intimacy

Superior value by means of building strong

relationships with buyers and satisfying
needs

Product leadership

Superior value via product innovation

Discussion Question
Firms that follow a
customer intimacy
strategy are willing to
do almost anything for
their customers.

British Airways practices customer intimacy

with select frequent flyers

Does such a strategy

make sense for local
businesses, or only for
national / global
corporations?

Figure 18-3:

Hypothetical
Market Structure

Competitive Strategy
Competitive
Positions
Market Leader
Market
Challenger
Market
Follower
Market Nicher

Expanding the total

demand
Finding new users
Discovering and
promoting new product
uses
Encouraging greater
product usage

Protecting market share

Many considerations
Continuous innovation

Expanding market share

Profitability rises with
market share

Competitive Strategy
WD-40 has a knack
for developing new
uses for its product.

What other brands

have adopted a
similar strategy?

WD40

Competitive Strategy
Competitive
Positions
Market Leader
Market
Challenger
Market
Follower
Market Nicher

Option 1: challenge the

market leader
High-risk but high-gain
Sustainable competitive
advantage over the leader
is key to success

Option 2: challenge firms

of the same size, smaller
size or challenge
regional or local firms
Full frontal vs. indirect
attacks

Pepsi is an
example of
market
challenger
that has
chosen to use
a full frontal
attack

Competitive Strategy
Competitive
Positions
Market Leader
Market
Challenger
Market
Follower
Market Nicher

Follow the market

leader
Focus is on improving
profit instead of
market share
Many advantages:
Learn

from the
market leaders
experience
Copy or improve on
the leaders offerings
Strong profitability

Dial Corporation
successfully
uses a market
follower strategy

Competitive Strategy
Competitive
Positions
Market Leader
Market
Challenger
Market
Follower
Market Nicher

Serving market
niches means
targeting
subsegments
Good strategy for
small firms with
limited resources
Offers high margins
Specialization is key
By market, customer,
product, or marketing
mix lines

FedEx and
UPS are two
competitors
in the
package
delivery
business.
What
competitive
strategy
seems to
describe
each
company?

Balancing Customer and

Competitor Orientations
Companies can become so
competitor centered that they
lose their customer focus.
Types of companies:
Competitor-centered companies
Customer-centered companies
Market-centered companies

Figure 18-4:

Evolving Company
Orientations

Latest thinking on
Competition

Monopolist

Cooperative
Approach

Competitive
Approach

Co-opetition