Competition • A business’s attempt to get customers in the face of other businesses selling the same or similar products • Forces companies to become more efficient • Keeps prices down and quality up Identifying Competitors 8-2 Five Forces Determining Segment Structural Attractiveness • Threat of intense segment rivalry—cellular phone market 8-3 Five Forces Determining Segment Structural Attractiveness • Threat of new entrants—Can come from anywhere 8-4 Five Forces Determining Segment Structural Attractiveness • Threat of substitute products—Greyhound and Amtrak profitability threatened by rise of air travel 8-5 Five Forces Determining Segment Structural Attractiveness • Threat of buyers’ growing bargaining power— Wal-Mart buying power 8-6 Five Forces Determining Segment Structural Attractiveness • Threat of Suppliers’ growing bargaining power— ExxonMobil, Shell, BP, and Chevron-Texaco are at the mercy of oil-supplying cartels such as OPEC. 8-7 Analyzing Competitors Share of market—target market Share of mind--% of customers who names companies Share of heart--% of customers who prefer a company 8-8 Five Forces Determining Segment Structural Attractiveness • Threat of intense segment rivalry—cellular phone market • Threat of new entrants—Can come from anywhere • Threat of substitute products—Greyhound and Amtrak profitability threatened by rise of air travel • Threat of buyers’ growing bargaining power— Wal-Mart buying power • Threat of Suppliers’ growing bargaining power— ExxonMobil, Shell, BP, and Chevron-Texaco are at the mercy of oil-supplying cartels such as OPEC. 8-9 Five Forces Determining Segment Structural Attractiveness 8-10 Price vs. Non-Price Competition • Price • Established firms focus on keeping prices down • Revenue lost to lower prices is made up through higher sales • Non-price • Factors such as quality service, and reputation • Customers are willing to pay more Who are your Competitors? • First level • Specific brands which are direct competitors to your product or service, in your geographic locality • Second level • Competitors who offer similar products in a different business category or who are more geographically remote • Third level • Competitors who compete for the “same-occasion” dollars • Toots • 1st Other sports bars • 2nd Other sit down restaurants • 3rd Fast food or convenience stores Three Levels of Competition 1st, 2nd, 3rd Level Competitors Chris and Ben's Bookstore Phil ip's Bookstore Hastings HAS Bookstore Corner Bookstore Books-A-Mil ion Lifeway Christian Shop Barnes and Noble.com Blue Raider Bookstore Amazon.com Wal-Mart Hollywood Video Linebaugh Public Library Rhino Games Electronics Boutique CD Warehouse Competitors Competition Analysis Colorado Bearcats • 1st level competitors: Other professional sports teams • Denver Broncos • Denver Nuggets • Colorado Avalanche • 2nd level competitors: Collegiate sports and geographically remote professional teams • • • • Kansas City Chiefs University of Colorado athletics Air Force Academy athletics Colorado Springs Sky Sox • 3rd level competitors: Other businesses competing for money • Rocky Mountain Motorcycle Museum • Pro Rodeo Hall of Fame • World Figure Skating Hall of Fame Levels of Competition WE Are Boats West Marine Bass Pro REI Wal-Mart Dick’s Sporting Goods Academy Sports and Outdoors Murfreesboro Outdoors Hibbett Sports EBay Overtons Boatown ers.com Kmart Target Sams Club Boaterswor ld.com What Every Company Should Know About Their Competitors • • • • Who is the price leader? Who is the quality leader? Who has the largest market share? Why have certain companies recently entered or withdrawn from the market? Competition Analysis • Buy your competitors’ products • Frequent your competitors’ territory • Read industry publications • Don’t forget to focus on your own business Determine Competitors Strengths & Weaknesses • Why customers buy from them? • • • • • Value Service Convenience Reputation “Perceived” or “Actual” Strengths Competition: Common Mistakes to Avoid • Assuming you have no competition! • Demonstrates inexperience and minimal understanding of your business • Failing to identify both direct and indirect competitors • Underestimating the power and strength of competitors • Omitting the specific competitive advantages you hold over your competition • Demonstrating a lack of knowledge or strategy to combat changing competitive conditions • Failing to define and clarify you position, strength, and market niche focus Factors to Consider in Analyzing the Competition Product Line (Breadth) Pricing Advertising Supplier Advantage Product Line (Depth) Financial Resources Employee Morale Sales Force Uses of Technology Distribution Advantage Operational Efficiency Technology Competence Market Share Strengths Weaknesses Analyzing Consumer Perceptions of Competitions Quality Product Attributes Reliability Timely Service Friendly Service Knowledgeable Staff Convenient Location Store Hours Delivery Parking Guarantees Brand Recognition Credit Cards Image of Competitor Selection of Products Installation