6 - 1 Chapter Chapter 6 6 Market Market Structure Structure and and Competitor Competitor Analysis Analysis 6 - 2 Key Learning Points Key Learning Points   Performing a market structure Performing a market structure analysis, which identifies your major analysis, which identifies your major competitors. competitors.   Performing a competitor analysis. Performing a competitor analysis.   Alternative sources of information Alternative sources of information for analyzing competitors. for analyzing competitors.   Using game theory in the Using game theory in the development of competitive strategy. development of competitive strategy. 6 - 3 Product & Service Product & Service Decisions Decisions “ “ The purpose of a market structure The purpose of a market structure analysis is to enable the marketing analysis is to enable the marketing manager to understand who the manager to understand who the competition is. Misidentification of competition is. Misidentification of the competitive set can have a the competitive set can have a serious impact on the success of a serious impact on the success of a marketing plan, especially in the marketing plan, especially in the long run. long run. ” ” 6 - 3 - Russell S. Winer 6 - 4 Overview Overview   Importance of Market Structure and Importance of Market Structure and Competitive Analysis: Competitive Analysis: – – Allows firms to determine which other Allows firms to determine which other products are competing against their products are competing against their products for the same customer benefit. products for the same customer benefit. – – Crucial to understanding / developing a Crucial to understanding / developing a value proposition and appropriate value proposition and appropriate marketing implementation decisions. marketing implementation decisions. – – Allows firms to be proactive and Allows firms to be proactive and anticipate competitive actions. anticipate competitive actions. 6 - 5 Market Structure Analysis Market Structure Analysis   Identifying competition is critical Identifying competition is critical – – Failing to identify a competitive threat Failing to identify a competitive threat can have disastrous consequences. can have disastrous consequences. • • New product forms (e.g. electronic watches New product forms (e.g. electronic watches in the 1970 in the 1970 ’ ’ s) can become key competitors. s) can become key competitors. – – Competitors must be identified in order Competitors must be identified in order to properly compute market share. to properly compute market share. • • Market share = Market share = “ “ (us / us + them) (us / us + them) ” ” • • Unethical managers can manipulate market Unethical managers can manipulate market share computations by changing share computations by changing competitors included in calculation. competitors included in calculation. 6 - 6 Market Structure Analysis Market Structure Analysis   Methods of Identifying Competitors Methods of Identifying Competitors – – Supply Supply - - based approaches based approaches • • Classify competitors based on objective Classify competitors based on objective attributes. attributes. – – Demand Demand - - based approaches based approaches • • Classify competitors based on customer Classify competitors based on customer attitudes and behaviors. attitudes and behaviors. – – The Product The Product - - Industry Hierarchy Industry Hierarchy identifies four levels of competition. identifies four levels of competition. 6 - 7 Figure 6-1: Product-Industry Hierarchy 6 - 8 Market Structure Analysis Market Structure Analysis   Defining Competition: Defining Competition: Demand Demand - - Based Methods Based Methods – – Competition can be defined at every Competition can be defined at every level of the hierarchy (Figure 6.1) level of the hierarchy (Figure 6.1) • • This method fails to adequately get at the This method fails to adequately get at the heart of competition or market definition heart of competition or market definition • • Competition is best defined by the Competition is best defined by the customer, rather than by the marketing customer, rather than by the marketing manager, as implied in the following manager, as implied in the following definition. definition. 6 - 9 Product & Service Product & Service Decisions Decisions “ “ An industry should be An industry should be recognizable as a group of recognizable as a group of products that are close products that are close substitutes to buyers, are substitutes to buyers, are available to a common group available to a common group of buyers, and are distant of buyers, and are distant substitutes for all products not substitutes for all products not included in the industry. included in the industry. ” ” 6 - 9 -Joe S. Bain 6 - 10 Market Structure Analysis Market Structure Analysis   Defining Competition: Defining Competition: Demand Demand - - Based Based Methods Methods – – Figure 6.2 defines competition from the Figure 6.2 defines competition from the customer customer ’ ’ s perspective. s perspective. • • Product form competition: Product form competition: narrowest form, includes narrowest form, includes products of the same product type. products of the same product type. • • Product class/category competition: Product class/category competition: products with products with similar features that provide the same basic function. similar features that provide the same basic function. • • Generic competition: Generic competition: products that fulfill same basic products that fulfill same basic need. need. • • Budget competition: Budget competition: products that compete for the products that compete for the same discretionary budget dollars. same discretionary budget dollars. [...]... Objectives Strategy Strengths and Weaknesses Match Up Customer and competitor targets Product features Core strategies Supporting marketing mix: – – – – Price Distribution Product Communications 6 - 21 Product & Service Core strategies can be assessed Decisionsexamining by marketing communications The value proposition in this ad focuses on the power generated by the Big Bertha golf club 6 - 22 Competitive... product class, generic, and budget level competitors? 6 - 12 Market Structure Analysis Four-level model of competition implies different tasks for each competitive level: – Product form competition: aim marketing activities at direct competitors – Product class/category competition: convince customers that your product form is best in the category – Generic competition: convince consumers of the superiority... outcome for both competitors Game theory can be extended to incorporate the leader-follower concept – Typical in industries in which one company has traditionally been the first to change price or other marketing mix elements – Figure 6.8 illustrates a leader-follower price game 6 - 34 Figure 6-8: A Pricing Game 6 - 35 Game Theory Using Game Theory With New Product Entrants: – Key issues in new entrant . 6 - 1 Chapter Chapter 6 6 Market Market Structure Structure and and Competitor Competitor. The purpose of a market structure analysis is to enable the marketing analysis is to enable the marketing manager to understand who the manager to understand