University of Washington EMBA Program Regional 20 Marketing Management “Competitive Analysis” Instructor: Elizabeth Stearns Course Structure The Marketing Framework/Concept Analysis 5C’s Opportunity Analysis Marketing Strategy & Customer Strategy Goal Setting, Segmentation, Targeting, and Positioning Implementation/Action Plans Marketing Mix (4 P’s) Marketing Research “How Competitive Forces Shape Strategy” Industry Forces Suppliers New Directly Competitive Entrants Foreign Low Priced Different Industries Michael Porter Direct The Firm Competitors Buyers Indirect Competitors Substitute Products Technologies Competitor, Collaborator, and Company Analysis Competitor: Any organization whose goods and services could provide the same benefits to your customers Collaborator: Any organization who assists your own in the delivery of benefits to your customers Company: Your organization Competitor, Collaborator, and Company Analysis Key Questions – Who are they? – What capabilities/skills/assets do they have? – How can/will they go to market? • • • • Past behavior Strategic signals Optimal behavior, both strategies and reactions Mission and objectives Might organize your thoughts in a SWOT analysis. Competitors: Definition • Any organization whose goods and services could satisfy the same needs or wants of your customers – Define competition broadly • Actual competitors (in the market now) • Potential competitors (may enter the market) • Direct competitors (offer similar products or services) • Indirect competitors (offer substitute products or services) • Business units within our firm The Broad View of the Soft Beverage Market* Strong Taste Iced Tea & Coffee Club Sodas Sports Bottled & Drinks Mineral Waters Fruit Juices Fruit Flavor Bitter Tasting *Roger Best Noncola Soft Drinks Cola Soft Drinks Fruit Drinks Sweet Tasting Competitors: Definition – Anticipate future competition – Consider not only product/market competition, but also competition between organizations Analyzing Competitors Objectives Strategies Competitor Actions Reaction Patterns ©2000 Prentice Hall Strengths & Weaknesses Industry Competition • Number of Sellers - Degree of Differentiation • Entry, Mobility, Exit barriers • Cost Structure • Degree of Vertical Integration • Degree of Globalization ©2000 Prentice Hall Structural Determinants of Entry • • • • • • Economies of Scale and Scope Capital Requirements Government Regulations Technology & Patents Threat of Competitive Retaliation Other Market-oriented Characteristics “A pictorial view of the Competitive Frame… in the minds of the customer” USA: BEER CATEGORY MAP Miller Lite Amstel Light Light Coors Lite Bass Samuel Adams Corona Pete’s Wicked Ale Rolling Rock Becks Molson Ice Michelob Specialty Budweiser Guinness Red Dog Foster’s Source: Simmons SMM 1998 Busch Traditional Positioning and Perceptual Maps • Useful to provide pictorial view of competitive situation. • Information revealed: – What are the major perceptual dimensions underlying the map? • e.g. When customers were judging the similarities of ten brands, what were the most important attributes underlying their perceptual decisions? • Subjective/subject to argument Positioning and Perceptual Maps • What brands are perceived as similar to others? – Deals with issue of substitutability. – if customer’s brand is not available, what brand is most likely to be purchased? – Unique Position » Or – Easy switching Positioning and Perceptual Maps • What holes exist for repositioning an old, or new product introduction? (Point on map where no competitive brands exist) – Opportunity or not? • Ideal points = Preference maps – If customer could have any product they wished. Brand Development Index & Category Development Index (or using sales information that most companies have!) Brand Development Index (BDI) Market (1) % U.S. Population (2) % Brand Sales A 10 11 B 15 15 C 20 18 D 25 30 E 30 26 Total 100 100 BDI (2 ÷ 1) * 100 100 (Average) Brand Development Index (BDI) Market (1) % U.S. Population (2) % Brand Sales BDI (2 ÷ 1) * 100 A 10 11 110 B 15 15 100 C 20 18 90 D 25 30 120 E 30 26 87 Total 100 100 100 (Average) Brand Development Index (BDI) Market (1) % U.S. Population (2) % Brand Sales BDI (2 ÷ 1) * 100 A 10 11 110 B 15 15 100 C 20 18 90 D 25 30 120 E 30 26 87 Total 100 100 100 (Average) Markets “C” & “E need support, “A”, “B”, and “D” seem OK BDI Compared to CDI % Sales Index Index (% Sales / % Population) (BDI/CDI) Market % Population Category Brand Category A 10 12 11 B 15 15 15 C 20 16 18 D 25 30 30 E 30 27 26 Total 100 100 100 Brand BDI Compared to CDI % Sales Index Index (% Sales / % Population) (BDI/CDI) Market % Population Category Brand Category Brand A 10 12 11 120 110 92 B 15 15 15 100 100 100 C 20 16 18 80 90 113 D 25 30 30 120 120 100 E 30 27 26 90 87 96 Total 100 100 100 BDI Compared to CDI % Sales Index Index (% Sales / % Population) (BDI/CDI) Market % Population Category Brand Category Brand A 10 12 11 120 110 92 B 15 15 15 100 100 100 C 20 16 18 80 90 113 D 25 30 30 120 120 100 E 30 27 26 90 87 96 Total 100 100 100 Consider possible different conclusions: Market “D” is only average, “C” & “E” probably don’t need support, “A” probably does. Differential Advantage Differential Advantage: Definition • A Differential Advantage is a benefit or cluster of benefits that customers value and believe they cannot obtain elsewhere • (Acid test: they are willing to pay more for your product or service) Designing Offers for Customers Product Delivery Technical Innovation Services Sales Relationship Brand Equity Value Price Time Effort Risk Cost Offer Differential Advantage: Shift Over Time Psychological Functional Economic • Differential advantage sustained by focusing on functional or psychological values • Tends to erode over time in the direction of economic advantages • Competition drives offers from specialty to commodity Differential Advantage: Discussion • The question that is answered is “do we deliver that which our customer/prospect values”, “by what means”, and “how well” (is it superior to our competition). it is NOT • “what do we do well” as a stand alone question. This concept is difficult for companies to integrate into the selling mode especially when they pride themselves in what they do well and/or are considered the gold standard. Differential Advantage: Discussion • While a company may have excellent strengths and assets, these are only important if they satisfy a customer need. (this is the Marketing concept) • Differential Advantage analysis raises the bar for understanding what a customer needs and the priority/importance of that need to his/her organization. – If a company does not know this, they proceed to sell what they do well, and not what the customer values. Sources of Differential Advantage Business strengths, often defined as assets and skills, provide the basis for differential advantage. • An asset is something a firm possesses such as a brand name, a retail location, human capital, a philosophy, etc., which is superior to that of competition. • A skill is something that a firm does better than its competitors, such as advertising, merchandising, efficient manufacturing, etc. Differential Advantage Matrix • Tool for matching a segment’s required benefits with our organization’s ability to deliver those benefits more effectively than competitors 1. Identify the segment for which this matrix will apply 2. List the priority-ordered benefit requirements for this segment as the row headings in the matrix 3. List the relevant business strengths that a “generic” organization would require to deliver these benefits as the column headings of the matrix Differential Advantage Matrix • Assessment Diagnostics (presuming that this business strength is relevant to providing this benefit—if not leave blank or use NA) – Do we have the capability to deliver the required customer benefit? (1 or Y) – Do we have significantly greater capabilities than competitors? (1 or Y) – Would it be difficult for competitors to match us? (1or Y) – (if you get to 0, or No, you stop) Differential Advantage Matrix • Implications – Do we have a differential advantage, i.e., (1,1,1) or (Y,Y,Y)? • If so, where, and through what strengths? Our organization has a differential advantage in delivering benefit X to segment Y because of business strengths A, B, and C. Differential Advantage Matrix Relevant Business Strengths Segment ID/Description Opportunistic, solo, weekend leisure travelers Priority Benefit Ranking Low out-of-pocket 1 Price allows add ons 2 3 4 5 6 1,1,1 1,0 Thank you!