Competitive analysis

Competitive Analysis: Market Leader strategy

1. Competitive Analysis
Dr. Gopal Thapa
TribhuvanUniversity

2. Competitor Analysis
Competitive analysis is the assessment of the
strengths and weaknesses of competing firms
A competitor is a firm in the market selling a
product which is perceived as substitute by buyers
Competitor analysis is the processing of
analyzing information about competitors and their
products in order to build up a picture of where
their strengths and weaknesses lie.
-Dictionary of Marketing
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3. Competitor Analysis
Competitor analysis is second phase of external
analysis.
The analysis should focus on the identification of
threats, opportunities, or strategic uncertainties
created by emerging or potential competitor
moves, weaknesses or strengths.
Competitor analysis starts with identifying current
and potential competitors.
There are two different ways of identifying current
competitors.
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4. Competitor Analysis
The first examines the perspective of the customer
who must take choices among competitors.
This approach groups competitors according to the
degree they compete for a buyer’s choice.
The second approach attempts to place
competitors in strategic groups on the basis of
their competitive strategy.
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5. Industry Concept of Competition
An industry is a group of firms that offers a
product or class of products that are close
substitutes for each other.
Industries are classified as follows:
Number of sellers and degree of differentiation
Entry, mobility and exit barriers
Cost structure
Degree of vertical integration
Degree of globalization
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6. Number of sellers and degree of
differentiation
Pure monopoly –regulated and unregulated
monopoly
Oligopoly–pure oligopoly (a few companies
produce same commodity), differentiated
oligopoly (a few companies produce partially
differentiated product)
Monopolistic competition: Many Competitors
offer differentiated product
Pure competition –many competitors offer
undifferentiated product
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7. Entry, mobility and exit barriers
Entry barrier: high capital requirement,
economies of scale, patent and licensing
requirement, scarce location, raw material or
distributor and reputation requirement
Mobility barrier: shifting to more profitable
segments
Exit barrier: legal or moral obligation to
consumers, creditors, and employees, government
restrictions, low asset salvage value, lack of
alternative opportunities, high vertical integration,
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8. Cost structure
Certain cost burden that shapes much of its
strategic conduct such as heavy manufacturing and
raw material cost, heavy distribution and
marketing cost.
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9. Degree of vertical integration
Vertical integration often lowers cost and the firm
gains a large share of value-added stream.
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10. Degree of globalization
Some industries are highly local ;
others are global.
Companies in global industries need to compete
on a global basis if they are to achieve economies
of scale and keep up with the latest advances in
technology.
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11. Market Concept of Competition
Using the market approach, competitors are
companies that satisfy the same customer need.
For example, a customer who buys word
processing software really want “writing ability” –
a need that can be satisfied by pencils, pens, or
typewriter.
The market concept of competition reveals a
broader set of actual and potential competitors.
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12. Competitor Analysis
Helps to avoid surprises
Helps to gain competitive advantages
Helps to plan better
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13. Market Position of Competitors
MarketLeader–Thefirminanindustrywith
thelargestmarketshare.
MarketChallenger–Arunnerupfirmthatis
fightinghardtoincreaseitsmarketshareinand
industry.
MarketFollower-Arunner-upfirmthatwants
toholditsshareinanindustrywithoutrocking
theboat.
MarketNicher–Afirmthatservessmall
segmentsthattheotherfirmsinanindustry
overlookorignore.
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14. Hypothetical Market Structure
Market
Leader
40%
Market
Challenger
30%
Market
Follower
20%
Market
Nicher
10%
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15. Market-Leader
Most industries contain an acknowledged market
leader
The leader has the largest market share in the
relevant product market
Usually leads the other firms in:
• Price changes
• New product introduction
• Distribution coverage
• Promotion spending
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16. Market-Leader
The leader may or may not be admired or
respected
But other firms concede its dominance
Competitors focus on the leader as a company to
challenge, imitate or avoid.
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17. Market Leaders
CompanyProductCompanyProduct
Wall-martretailingCoca-colaSoftdrinks
General
motors
Autos GilletteRazor
blades
IBM ComputersVisa Creditcard
MicrosoftSoftwareSurva
Nepal
Cigarettes
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18. Market-Leader Strategies
They can find ways to expand total demand.
They can protect their current market share
through good offensive and defensive actions.
They can try to expand their market share
further, even if market size remains constant.
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19. Expanding the Total Demand
(Market)
New users
New uses
More uses
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20. New Users
A company can search new users among three
groups:
Those who might use it but do not –market
penetration strategy
Those who have never used it –new market
segment strategy
Those who live elsewhere –geographical
expansion strategy
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21. New Uses
Marketers can expand markets by
discovering and promoting new uses for the
product.
Use of computer for:
Desk top publishing
Entertainment
Communication
Use of Dettol for :
Antiseptic
Anti dandruff
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22. More Usage
Market leaders can encourage more usage by
increasing the level or quantity of consumption or
increasing the frequency of consumption.
Eg. Glucose twice a day,
Dabur honey twice a day etc.
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23. Market Defense Strategy
Position defense
Flank defense
Preemptive defense
Counteroffensive defense
Mobile denfense
Contraction defense
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24. Expanding Market Share
Market leaders can improve their profitability by
increasing their market share. In many markets,
small market share increases mean very large sales
increases.
 For example: in US digital camera market, one
percent increase in market share is worth $60
million, in soft drinks $340 million.

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25. Expanding Market Share
Generally, profitability rises with the increasing
market share. Thus, many companies have sought
expanded market shares to improve profitability.
 Gaining increased share in the served market,
however, does not automatically produce higher
profit –especially for labour-intensiveservice
companies that may not experience many
economies of scale.
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