Competitive Analysis: Market Leader strategy

1. Competitive Analysis
Dr. Gopal Thapa
Tribhuvan University

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
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
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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
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
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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-intensive service
companies that may not experience many
economies of scale.
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