COMPETITIVE DYNAMICS

Prof. Jacob Thomas

Christ University
 COMPETITION
• Competitors are firms competing in the same market, offering
similar products, and targeting similar customers.
• The competitive rivalry is the ongoing set of competitive actions
and competitive responses occurring between competitors as they
compete against each other for an advantageous market position.
• The outcomes of competitive rivalry influence the firm’s ability to
sustain its competitive advantages as well as the level (average,
below average, or above average) of its financial returns.
• The set of competitive actions and responses that an individual
firm takes while engaged in competitive rivalry is called
competitive behaviour.
• Competitive dynamics is the set of actions and responses taken
by all firms that are competitors within a particular market.
 Competitive Strategy Definition

• A competitive strategy is a comprehensive plan of actions a

company develops to defend its market position and gain a
sustainable competitive advantage in the industry.
• Most industries are competitive, and brands are vying for
the upper hand in concentrated markets.
• From product quality to superior customer service,
companies are fighting each other for every inch in the
race.
• A competitive strategy is developed by assessing your
competition's strengths and weaknesses and identifying
opportunities and threats in the market.
 Porter's Competitive Strategies
• 1. Cost leadership strategy
• Sell products/services at the lowest prices in the industry.
• Small-scale businesses cannot afford to follow this strategy because
it requires them to produce and offer products and services at a
lower price in the long term.
• They make less profit on one unit of a product, but as products are
sold at a lower price, consumers demand large volumes of their
products, thus learning to a large volume of sales and high revenues.
• A business needs to have an efficient operation and various
distribution channels. Being a low-cost provider leads to a
competitive advantage.
• Example: Walmart- It focuses on cutting costs during operations and
offers low-priced branded items.
 Porter's Competitive Strategies
• 2. Differentiation strategy
• Gain a competitive advantage by having a unique
identity in the market follow this strategy.
• It allows them to stand out among competitors.
There must be a unique selling point (USP) that a
company could use to attract more customers and
charge premium prices.
• Example: Tesla has surely made a name for itself. It
offers cars that are energy sustainable, high-tech,
and environment friendly.
 Porter's Competitive Strategies
• 3. Cost focus strategy
• It is like a cost leadership strategy, but the difference is that
it focuses on a specific market segment.
• It is used to offer low-priced items to a particular target
market.
• Companies assess the target segment's needs and offer
them the goods or services at a lower price. Since it focuses
on specific markets, it could increase customer satisfaction
and brand awareness.
• Example: An IT service provider could offer its services to a
market like India, where this industry is growing
exponentially.
 Porter's Competitive Strategies
• 4. Differentiation focus strategy
• Companies that focus on a specific market
while maintaining a standout position in the
market follow this strategy.
• The strategy involves offering goods and
services to a niche market and helps the
company keep its USPs intact.
 Competitive strategies:
Value Disciplines – a strategy tool
• Two marketing consultants, Michael Treacy
and Fred Wiersema explained competitive
strategies from a customer-centric approach.
• They suggested that companies can gain a
competitive advantage by delivering superior
value to customers.
• They called these strategies "value
disciplines".
 VALUE DISCIPLINE
• 1. Product leadership – is about giving
customers superior value through innovative
products.
• Companies that follow this strategy must work
hard on product development and innovation.
• It could be costly as it is a research and
development-intensive strategy.
 VALUE DISCIPLINE
• 2. Customer intimacy – This discipline creates
customer relationships through superior
customer service.
• Companies offer a wide range of solutions to
customers that are tailored to their needs.
• They try to gain customers' trust, which is
their competitive advantage.
 VALUE DISCIPLINE
• 3. Operational excellence – This discipline is
about making operations efficient by reducing
waste and production costs and improving
distribution channels to provide convenient
and economical products to customers.
 1. Market leader
• Market leader has the largest market share in the relevant
product in the industry. It has a dominant position in the
market. The leader may or may not be respected by other
firms, but other firms have to acknowledge its dominance.
Other firms can challenge, follow or avoid the market leader.
• In India, well-known market leaders are Maruti Suzuki in cars,
Hero Honda in two-wheelers, TCS in Information Technology,
HDFC in Banking, Hindustan Unilever in consumer goods,
Coca-Cola in soft-drink, McDonald’s in fast food, Life
Insurance Corporation in life-insurance etc.
• May enjoy monopoly in the market.
• Need to remain alert all the time for maintaining their
leadership position.
 Marketing Strategies for
Market Leaders

• A few market leaders have monopoly in the market.

They have to remain alert all the time leadership to
maintain their leader-position.
• Other firms are constantly challenging leadership
position. A little mistake can plunge the leader into
second or third position.
• It has to adopt innovative practices in all the
marketing areas.
• Sometimes, it has to incur excessive costs to
maintain the number-one position.
 Marketing Strategies for
Market Leaders

• The firm desiring to maintain market- leader

position has to adopt one or more of following
three major strategies:
• 1. Expanding Total Market
• 2. Defending Current Market Share
• 3. Expanding Market Share
 Marketing Strategies for
Market Leaders

• 1. Expanding Total Market:

• The leader normally gains more when the total
market expands. Naturally, when total market or
the industry expands, major player will gain more.
• Total market can be expanded in four different
ways:
– i. Add New Users:
– ii. Discover New Uses:
– iii. More Usage per Occasion/Time:
– iv. More Frequent Uses:
 Marketing Strategies for
Market Leaders:

• 2. Defending (Maintaining) Current Market Share:

• This strategy is based on the theme: ‘Customer-retention is
more profitable than customer- creation.’ At any cost, the
current market share must not be endangered. While expanding
total market, a market leader must continuously defend its
current market share against rivals’ attacks.
• For example, Coca-Cola guards its market share against Pepsi-
Cola. Hindustan Unilever protects its share against Procter and
Gamble.
• Maruti Suzuki India tries to protect its market against Tata
Motors and Hyundai Motors.
• Continuous innovation, better customer service, distribution
effectiveness, and cost-cutting can increase competitiveness.
• It has to ‘plug holes’ to keep the enemy away.
 Marketing Strategies for
Market Leaders:

• 3. Expanding Market Share:

– i. Adding New Product Lines:
– ii. Expanding Existing Product Lines:
– iii. Improving Product Qualities:
– iv. Increasing Promotion Efforts:
– v. Improving Distribution System:
– vi. Deploying Aggressive Sale Force:
– vii. Applying Price-cut:
– viii. Improving Production Efficiency:
 2. Market challenger:
• Market challengers are known as runner-up firms.
They occupy second, third or lower ranks in an
industry.
• Bajaj Auto in two-wheelers, Tata Motors and
Hyundai in cars, Reliance Petro and Essar Oils in
refineries challenging ONGC, Pepsi-Cola in soft-
drink, Procter and Gamble in consumer goods,
Vodafone in cellular service providers, Sony and
Samsung in cell-phone instruments, etc., are some
of the market challengers in India.
• Market challengers are capable to attack the leader
and other competitors.
 Marketing Strategies for
Market Challengers:
• Three stage marketing strategies for market
challengers
• The challenger can exercise following strategies:
• A market challenger can attack any of the
following opponents:
– i. Attacking the market leader.
– ii. Attacking the firms of its own size that are not
doing the job well and are underfinanced.
– iii. Attacking the small local and regional firms that
are not doing the job well and are underfinanced.
 Marketing Strategies for
Market Challengers:
• i. Frontal Attack:
• A frontal or “head-on” attack is an aggressive
attack strategy.
• A challenger attacks the opponent’s strengths
rather than its weaknesses.
• The outcomes depend on who has more
strengths and endurance.
• This option is preferred by the firm with
greater resources, otherwise it is proved as a
suicide mission.
 Marketing Strategies for
Market Challengers:
• ii. Flank Attack:
• The challenger concentrates on opponent’s
less-secured, rear-side or weak spots to attack.
• It is a side-attack rather than a front attack
strategy.
• This option is particularly attractive to an
aggressor with less resources than opponents.
 Marketing Strategies for
Market Challengers:
• iii. Encirclement (All-round) Attack:
• Encirclement attack is a form of all-rounded
and comprehensive attack.
• It involves launching a grand offensive attack
on several fronts, so that the opponent must
protect its fronts, sides, and rears
simultaneously.
 Marketing Strategies for
Market Challengers:
• iv. Bypass Attack:
• It is the most indirect attacking option to harm
others.
• It indicates bypassing (i.e., ignoring or
avoiding) the enemy and attacking easier
markets to broaden one’s resource base.
• This is the easiest way to face the leader.
 Marketing Strategies for
Market Challengers:
• v. Guerrilla Attack:
• This type of warfare contains making small
and intermittent (sudden and irregular)
attacks on enemy’s different territories.
• A firm may undertake a few major attacks or
continuous minor attacks for longer time.
• It is more preparation for war than war itself.
 3. Market follower:
• These firms prefer to follow leader rather than to use new
strategies and waste energy and resources. They do not face the
leader directly.
• Some followers are capable to challenge but they prefer to
follow.
• In some capital goods industries like steel, cement, chemical,
fertilizer, etc., product differentiation is low, service qualities are
similar, and price sensitivity is high.
• Prefer to follow the leader
• Require specific market strategies to hold current customers and
win a fair share of new customers.
• The market followers: Snapdeal, Flipkart, Jabongg have all
started one after the other.
 Marketing Strategies for
Market Followers:
• They have following strategic options:
• 1. Counterfeiter or Fraudster:
• It is a simple way to follow the leader. The
follower who wants to be counterfeiter duplicates
the leader’s product as well as package and sells
it in the market through disrepute distributors.
• Products are marketed secretly to avoid legal
complications.
• The product seems exactly similar to original
product except basic quality and features.
 Marketing Strategies for
Market Followers:
• 2. Cloner or Emulator:
• The cloner clones (emulates) the leader’s products,
distribution, advertising and other aspects.
• Here, product and packaging may be identical that
of leader, but brand name is slightly different, such
as “Colgete” or “Colege” instead of “Colgate” and
“Coka-Cola” instead of “Coca-cola.”
• This strategy is widely practiced in computer
business also. The cloned products are openly sold
in the market due to different brand names.
 Marketing Strategies for
Market Followers:
• 3. Imitator:
• Some followers prefer to imitate/copy some aspects
from the leader, but maintain differentiation in
terms of packaging, advertising, sales promotion,
distribution, pricing, services, and so forth.
• Customers can easily distinguish imitated product
from original one. The leader doesn’t care for
imitator until imitator attack the leader aggressively.
• Quite obviously, such products are sold at low price.
 Marketing Strategies for
Market Followers:
• 4. Adaptor:
• Some followers prefer to adapt the leader’s products and
improve them.
• They make necessary changes/improvements in the
original products and develop little different products.
• The adapter may choose to sell the products in different
markets (country or area) to avoid direct confrontation
with the leader.
• Many Japanese companies have practiced this strategy
and developed superior products.
• However, to be follower of a leader is not always better
option to pursue.
 4. Market specialist or Nicher:
• A niche is a more narrowly defined small market (limited number
of buyers) whose needs are not being well-served by existing
sellers.
• It is a small segment that has distinctive needs and is, mostly,
ready to pay high price. Marketers can identify niches by dividing a
segment into sub-segments or by dividing a group with a
distinctive set of traits.
• They may seek a special combination of benefits. Niches (small
groups of buyers) are fairly small and normally attract a few
competing firms.
• A nicher is the small firm serving only small specific groups of
customers. The firm’s marketing efforts to serve the niches
successfully is called nichemanship.
 Marketing Strategies for
Market Nichers (Tiny Firms):

• Specialization is the basic idea to serve niches.

Nichers can apply specialization on various aspects.
• 1. End-user Specialist:
• It is very popular and widely used option to serve
niches. The firm prefers to operate one-type of end-
use customers
• For example, a legal advisory firm can handle only
criminal cases, or a fashion designer can work only
for a few film stars.
 Marketing Strategies for
Market Nichers (Tiny Firms):

• 2. Vertical Level Specialist:

• The firm can specialize at vertical level of
production or distribution.
• For example, producing only raw-materials for
specific companies, only warehousing
services, or it may concentrate only on
retailing. It can serve only a part of the total
process.
 Marketing Strategies for
Market Nichers (Tiny Firms):

• 3. Customer Size Specialist:

• The firm can sell products only to small,
medium, or large size customers.
• For example, a firm can supply one or two
components only to large companies.
 Marketing Strategies for
Market Nichers (Tiny Firms):

• 5. Geographic Specialist:
• The firm serves customers of only specific
region or area of the world.
• For example, specific need of the people living
in the hilly area.
 Marketing Strategies for
Market Nichers (Tiny Firms):

• 4. Specific Customer Specialist:

• A firm supplies its products only to distinct
group of buyers.
• For example, designing special two-wheeler
for handicapped people or serving special
foods to people who are suffering from certain
diseases like diabetes.
 Marketing Strategies for
Market Nichers (Tiny Firms):

• 6. Product or Product Line Specialist:

• The firm produces or sells only one product or
product line.
• For example, it sells only socks, ties, or tie
pins.
• A small finance company deals with only car
loans or personal loans.
 Marketing Strategies for
Market Nichers (Tiny Firms):

• 7. Event Specialist:
• The firm concentrates its efforts only on
particular events or occasions like marriage,
grand inauguration, birthday, anniversary, or
some festivals.
• It offers goods or services for celebrating the
events of target buyers.