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Competitor analysis

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Competitor analysis: Dr. Gopal Thapa

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Competitor analysis

  1. 1. Competitor Analysis Dr. Gopal Thapa Tribhuvan University
  2. 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 7/13/2020 Copy right reserved 2
  3. 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. 7/13/2020 Copy right reserved 3
  4. 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. 7/13/2020 Copy right reserved 4
  5. 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 7/13/2020 Copy right reserved 5
  6. 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 7/13/2020 Copy right reserved 6
  7. 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, emotional barriers7/13/2020 Copy right reserved 7
  8. 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. 7/13/2020 Copy right reserved 8
  9. 9. Degree of vertical integration  Vertical integration often lowers cost and the firm gains a large share of value-added stream. 7/13/2020 Copy right reserved 9
  10. 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. 7/13/2020 Copy right reserved 10
  11. 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. 7/13/2020 Copy right reserved 11
  12. 12. Competitor Analysis  Helps to avoid surprises  Helps to gain competitive advantages  Helps to plan better 7/13/2020 Copy right reserved 12
  13. 13. Market Position of Competitors Market Leader – The firm in an industry with the largest market share. Market Challenger – A runner up firm that is fighting hard to increase its market share in and industry. Market Follower - A runner-up firm that wants to hold its share in an industry with out rocking the boat. Market Nicher – A firm that serves small segments that the other firms in an industry overlook or ignore.7/13/2020 Copy right reserved 13
  14. 14. Hypothetical Market Structure Market Leader 40% Market Challenger 30% Market Follower 20% Market Nicher 10% 7/13/2020 Copy right reserved 14
  15. 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 7/13/2020 Copy right reserved 15
  16. 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. 7/13/2020 Copy right reserved 16
  17. 17. Market Leaders Company Product Company Product Wall-mart retailing Coca-cola Soft drinks General motors Autos Gillette Razor blades IBM Computers Visa Credit card Micro soft Software Surva Nepal Cigarettes 7/13/2020 Copy right reserved 17
  18. 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. 7/13/2020 Copy right reserved 18
  19. 19. Expanding the Total Demand (Market)  New users  New uses  More uses 7/13/2020 Copy right reserved 19
  20. 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 7/13/2020 Copy right reserved 20
  21. 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 7/13/2020 Copy right reserved 21
  22. 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. 7/13/2020 Copy right reserved 22
  23. 23. Market Defense Strategy  Position defense  Flank defense  Preemptive defense  Counteroffensive defense  Mobile defense  Contraction defense 7/13/2020 Copy right reserved 23
  24. 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.  7/13/2020 Copy right reserved 24
  25. 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 labor-intensive service companies that may not experience many economies of scale. 7/13/2020 Copy right reserved 25
  26. 26. Market Challenger Strategies  Attack to market leader  Attack to own size firms  Attack to small size firms 7/13/2020 Copy right reserved 26
  27. 27. Market Challenger Strategies (Broad Strategies)  Frontal Attack  Flank Attack  Encirclement Attack  By pass Attack  Guerrilla Attack 7/13/2020 Copy right reserved 27
  28. 28. Market Challenger Strategies (Specific Strategies)  Price cuts  Cheaper products  Prestige products  Product innovation  Better service  Distribution innovation  Aggressive promotion 7/13/2020 Copy right reserved 28
  29. 29. Market Follower Strategies  Counterfeiter Strategy  Cloner Strategy  Imitator Strategy  Adaptor Strategy 7/13/2020 Copy right reserved 29
  30. 30. Market Nicher Strategy  Customer size specialist  Specific customer specialist  Geographic specialist  Product-line specialist  Job-shop specialist  End-use specialist 7/13/2020 Copy right reserved 30