Strategies for Dealing with Strategies for Dealing with CompetitionCompetition

Dr rushdy wady Dr rushdy wady

ObjectivesObjectives

• Identifying Competitors

• Evaluating Competitors

• Competitive Intelligence Systems

• Competitive Strategies

• Customer vs. Competitor Orientation

Induce your competitors not to invest in Induce your competitors not to invest in those products, markets and services those products, markets and services where you expect to invest the most … where you expect to invest the most … that is the fundamental rule of strategy.that is the fundamental rule of strategy. Bruce Henderson, Founder of BCGBruce Henderson, Founder of BCG

There is nothing more exhilarating than There is nothing more exhilarating than to be shot at without result.to be shot at without result. Winston ChurchillWinston Churchill

Five Forces Determining Segment Five Forces Determining Segment Structural AttractivenessStructural Attractiveness

Potential Entrants(Threat ofMobility)

Potential Entrants(Threat ofMobility)

Buyers(Buyer power)

Substitutes(Threats ofsubstitutes)

Suppliers(Supplier power)

Suppliers(Supplier power)

IndustryCompetitors

(Segment rivalry)

Barriers and ProfitabilityBarriers and Profitability

Low, stablereturnsLowLow

High, stablereturnsHighHigh

LowLow

Low, riskyreturns

High, riskyreturns

HighHigh

En

try

Bar

rier

sE

ntr

y B

arri

ers

Exit barriersExit barriers

Industry CompetitionIndustry Competition

• Number of Sellers - Degree of Differentiation

• Entry, Mobility, Exit barriers

• Cost Structure

• Degree of Vertical Integration

• Degree of Globalization

HighHigh

LowHigh

LowLow

Qu

alit

yQ

ual

ity

Vertical IntegrationVertical Integration

Strategic Groups in the Major Strategic Groups in the Major Appliance IndustryAppliance Industry

Group A•Narrow line•Lower mfg. cost•Very high service•High price

Group D•Broad line•Medium mfg. cost•Low service•Low price

Group C•Moderate line•Medium mfg. cost•Medium service•Medium price

Group B•Full line•Low mfg. cost•Good service•Medium price

Analyzing CompetitorsAnalyzing Competitors

CompetitorCompetitorActionsActions

ObjectivesObjectives

Strengths &Strengths &WeaknessesWeaknesses

ReactionReactionPatternsPatterns

StrategiesStrategies

Competitor’s Expansion PlansCompetitor’s Expansion Plans

Markets

Pro

duct

s

IndividualUsers

Commercial & Industrial Educational

PersonalComputers

HardwareAccessories

Software

Dell

Hypothetical Market Structure & Hypothetical Market Structure & StrategiesStrategies

40%

Marketleader

30%

Marketchallenger

20%

Marketfollower

Expand MarketDefend Market Share

Expand Market Share

Attack leaderStatus quo

Imitate

10%

Marketnicher

Special-ize

Market Leader Market Leader StrategiesStrategies

Expanding the Total MarketExpanding the Total Market

•New Users

• New Uses

• More Usage

Protecting Market ShareProtecting Market Share

•Innovation

• Fortification

• Confrontation

• Harrassment

Expanding Market ShareExpanding Market Share

•Product Innovation

• Market Segment Innovation

• Distribution Innovation

• Promotion Innovation

Defensive StrategiesDefensive Strategies

•Flanking

• Preemptive

• Counteroffensive

• Mobile

• Contraction

Defense StrategiesDefense Strategies

Attacker

(3) Preemptivedefense

(4) Counter-offensivedefense Defender

(1)Positiondefense

(5)Mobile

defense

(2) Flank defense

(6) Contractiondefense

Optimal Market ShareOptimal Market SharePro

fita

bili

ty

Market share0% 25% 50% 75% 100%

Optimal market share

Market Market Challenger Challenger StrategiesStrategies

Market Challenger StrategiesMarket Challenger Strategies

•Direct Attack

• Backdoor Attack

• Guppy Attack

Attack StrategiesAttack Strategies

•Frontal Attack

• Flank Attack

• Encirclement Attack

• Guerilla Attack

• Bypass Strategy

Attack StrategiesAttack Strategies

AttackerDefender

(3) Encirclement attack

(4) Bypass attack

(2) Flank attack

(5) Guerilla attack

(1) Frontal attack

Specific Attack StrategiesSpecific Attack Strategies

•Price-discount•Cheaper goods•Prestige goods

•Product proliferation•Product innovation•Improved services

•Distribution innovation•Manufacturing cost reduction

•Intensive advertising promotion

Market Follower Market Follower StrategiesStrategies

Market Follower StrategiesMarket Follower Strategies

• Found Where– Homogeneous Product– High Capital Intensity– Low Differentiation Options– High Price Sensitivity– Highly Competitive Industry

• Strategy of Conscious Parallelism

Market Follower StrategiesMarket Follower Strategies

• Strategic Considerations– Segment, Segment, Segment– Use R & D Efficiently– Think Small– Have an Energetic CEO Who is Everywhere

at Once

Market Nicher Market Nicher StrategiesStrategies

““NichemanshipNichemanship””

• End-user specialist• Vertical-level specialist• Customer-size specialist• Specific-customer specialist• Geographic specialist• Product or product-line specialist• Product-feature specialist• Job-shop specialist• Quality-price specialist• Service specialist• Channel specialist

BalanceBalance

CompetitionCustomer

+ Fighter orientation+ Alert+ Exploit weaknesses- Reactive

+ ID opportunities+ Long-run profit+ Emerging needs & groups