Chapter 8

Competitive Dynamics
by

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Designing Competitive Strategies

Market-Leader Strategies
Expanding the Total Market
New Users
Market-penetration strategy (Those who might use it but do not)
New-market segment strategy (Who never use it)
Geographical-expansion strategy (Those who live elsewhere)

New Uses (Hot tea to ice Tea)

More Usage (By quantity of consumption or frequency of consumption)

Defending Market Share (Continuous Innovation)

Premium Performance: CAT produces high quality of pdts

Extensive dealership: Largest number of dealership
Superior service: World wide parts and service system
Full-line strategy: Full line of construction equipment
Good financing: Offering good terms to their customers
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Designing Competitive Strategy

Analyzing the latent demand and satisfying the
customer needs (Proactive Marketing):
Responsive Marketer (Find stated need and fills it)
Anticipative Marketer (Looks ahead into what needs
customers)

Creative Marketer (Discovers and produces solutions

of customer did not ask)

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Designing Competitive Strategies

Defense Strategies (Defensive Marketing)
Position Defense (Most desirable market space; Crest for cavity)
Flank Defense (Protect the weak front or sides for counter attack)
Preemptive Defense (Attack before enemy start its offense; like
guerilla attacking)

Counteroffensive Defense (When attack the respond with counter

attack; FedEx and UPS..UPS for Airborne..FedEx..Ground Delivery)

Mobile Defense
Market broadening (Oil company for coal, nuclear, hydroelectric
etc.)
Market diversification (Shifting to unrelated industry)

Contraction Defense
Planned contraction
(Strategic withdrawal, giving up weaker territory and invest stronger
one)
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Designing Competitive Strategies

Market-Challenger Strategies
Defining the Strategic Objective and Opponent(s)
It can attack the market leader (Canon grabbed Xerox with desk
copier)
It can attack firms of its own size that are not doing the job and
are underfinanced (firms charging excessive price or not satisfying
customers)
It can attack small local and regional firms

Choosing a General Attack Strategy

9-5
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By passing enemy attacking easier markets

(Coke bought Tropicana; orange juice)
Geographic or
segmental
Attackers matches
opponents products,
advertising, price and
distribution

With superior
resources and
believes to break the
will of opponent
Selective price cut, Intense promotional
blitzes and occasional legal 9-6
action
Copyright 2003 Prentice-Hall, Inc.

Designing Competitive Strategies

Choosing a Specific Attack
Strategy
Price-discount
Lower price goods (Lower quality goods sells much lower price)
Prestige goods (Toyota Century)
Product proliferation (larger product variety) Baskin
Robbins Ice Cream

Product innovation; 3M
Improved services
Distribution innovation (Avon door to door selling)
Manufacturing cost reduction (Lower labor costefficient
purchasing, mordern production equip)

Intensive advertising promotion

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Designing Competitive Strategies

Market-Follower Strategies
Innovative imitation
(Product imitation)
Product innovation
Four Broad Strategies:
Counterfeiter (duplicates the leaders product and sell in
black market)
Cloner (Pdts, name and packaging with slight variation)
Imitator (copies something from the leader but maintains
differentiation in packaging, advertising, pricing and
location)
Adapter (takes leaders products and adapts or improves
them) Most of the Japanese Firms had done it before.

9-8
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Designing Competitive Strategies

Market-Nicher Strategies
High margin versus high
volume
Nicher Specialist Roles
End-user specialist
Value-added reseller

Vertical-level specialist
Customer-size specialist
Specific-customer specialist
Geographic specialist
Product or product-line
specialist

Product-feature
specialist
Job-shop specialist
Quality-price specialist
Service specialist
Channel specialist

9-9
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Product Life Cycle

Copyright 2003 Prentice-Hall, Inc.

Facts about Life Cycles

Products have a limited life.
Product sales pass through distinct
stages.
Profits rise and fall at different stages.
Products require different marketing,
financial, manufacturing, purchasing,
and human resource strategies in each
stage.
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Style, Fashion, and Fad Life Cycles

Copyright 2003 Prentice-Hall, Inc.

Product Life-Cycle Marketing Strategies

Marketing Strategies: Introduction Stage

The Pioneer Advantage
Inventor (First to develop patent in a new product
category)
Product pioneer (First to develop working model)
Market pioneer (First to sell in the new-product
category)
Market pioneer gains most advantage:
Campbell, Coca-Cola, Hallmark, Radhuni
in BD, Flexiload by Grameen
Figure
Long-Range Product Market Expansion
Strategy (P = Product; M = Market)

Copyright 2003 Prentice-Hall, Inc.

Product Life-Cycle Marketing Strategies

Marketing Strategies: Introduction Stage
Inform potential consumers
Induce product trial
Secure distribution in retail outlets
Focus on those buyers who are ready to buy,
usually high income group, due to high price.
Speeding up innovation time is essential in an
age of shortening product life cycles.

Copyright 2003 Prentice-Hall, Inc.

Product Life-Cycle Marketing Strategies

Marketing Strategies: Growth Stage
Improve product quality and add new product features and
improved styling
Add new models and flanker products (products of
different sizes, flavors and protect the main line product)
Enter new market segments
Increase distribution coverage and enter new distribution
channels
Shift from product-awareness advertising to productpreference advertising
Lower prices to attract next layer of price-sensitive buyers

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Product Life-Cycle Marketing Strategies

Marketing Strategies: Maturity Stage

Market Modification

Expand number of brand users by:

Increase sales volume: (users* usage rate per user)
1. Converting nonusers
2. Entering new market segments
3. Winning competitors customers
Convince current users to increase usage by:
1. Using the product on more occasions
2. Using more of the product on each occasion
3. Using the product in new ways

Copyright 2003 Prentice-Hall, Inc.

Product Life-Cycle Marketing Strategies

Marketing Strategies: Maturity Stage

Product Modification

Quality improvement (new and improved product)

Feature improvement (size, weight, materials,
additives etc.)
Style improvement (Esthetic appeal; new model car is
appearing into the market)

Marketing Program Modification

Price: Would price cut attracts new buyers?

Distribution: More outlets? New distribution
channel?
Advertising: Advertising expenditure be increased?
Sales promotion: trade deals, cents off coupons,
rebates, warranties, gifts and contests
Personal selling: Personal selling need to modify?
(territory, personnel etc.)
Service: Speed up delivery service?
Copyright 2003 Prentice-Hall, Inc.

Product Life-Cycle Marketing Strategies

Marketing Strategies: Decline Stage

1.
2.
3.

4.
5.

Increase firms investment (to dominate the market and

strengthen its competitive position)
Maintain the firms investment level until the
uncertainties about the industry are resolved.
Decrease the firms investment level selectively by
dropping unprofitable customer groups, while
simultaneously strengthening the firms investment in
lucrative niches
Harvesting (milking) the firms investment to recover
cash quickly
Divesting the business quickly by disposing of its assets
as advantageously as possible.

Copyright 2003 Prentice-Hall, Inc.

Table 11.5: Summary of Product Life-Cycle

Characteristics, Objectives, and Strategies
Introduction

Growth

Maturity

Sales

Low sales

Rapidly rising
sales

Peak sales

Costs

High cost per

customer

Average cost per

customer

Low cost per

customer

Profits

Negative

Rising profits

High profits

Customers

Few

Growing Number

Stable number
beginning to
decline

Characteristics

Copyright 2003 Prentice-Hall, Inc.