Вы находитесь на странице: 1из 251


Eastern Institute of Management

2nd Year 2nd Semester
January 2010

• The basic objective of this course is to develop

skills for analyzing market competition and
design appropriate competitive marketing
strategies for higher market share
What’s expected during this
course ?
What we plan to do this term

• Understand some of the Key Concepts of

Strategic Marketing through examples
• Inputs in the form of Theory and Case Studies
• One Project that we will complete during the
term that will help in comprehending what we
have learnt
• Read references from what is taught in class
with selected reading list
Course Content
1. Market Situation Analysis
2. Analysis of Competitor’s Strategies and Estimating their
Reaction Pattern and Competitive Position
3. Market Leader Strategies – Expanding the Total Market,
Protecting Market Share, Expanding Market Share
4. Market Challenger Strategies – Choosing and Attack Strategy
for Emerging Industries, Declining Industries and Fragmented
5. Balancing Customer and Competitor Orientation
6. Industry Segmentation and Competitive Advantage
7. Product Differentiation and Brand Positioning
8. Competitive Pricing
9. Competitive Advertising
10.Role of Sales Promotion in Competitive Marketing
Selected Reading Material
1. Strategic Marketing – D W Cravens & Nigel F Piercy
2. Comparative Marketing Systems – Kaynak E and Savitt R
3. Marketing Management – Analysis, Planning,
Implementation and Control – Philip Kotler
4. Competitive Strategy : Techniques for Analyzing Industries,
Competitors– Michael Porter
5. Competitive Advantage : Creating and Sustaining Superior
Performance– Michael Porter
Any Questions ?
Please make suggestions at this stage before
we proceed further
Request : No mobile phones to be kept on
during class hours
Attendance is important if you want to learn
this subject
Will treat you as Managers in a Corporate
Expectations from you…
Ask Questions
Let’s discuss
More examples

Industry vs Corporation

Consumer vs Lifestyle Environment

Consumer vs Industry vs Mobility

Another real life example…

Category – Film Ghajini Brand – Aamir Khan

Consumer – Indian and NRI


Competition – Film Industry/Entertainment/Leisure

• Industry : Big opening weekends have become
essential for the films' financial success, one needs to
create an urgency in people to see the film in the first
couple of weeks.
• Social : Style, Trends, Fashion, Lifestyle, Health Fitness
8 packs
• Youth : Style Icons and technologically savvy
• Brand Experience : At the site and thereafter : post
sales of music CD’s, VCD’s DVD’s and merchandise
• Cross Promotion : Telecom Service, Retail Outlets,
What was Ghajini’s Marketing
– Ghajini producers conceptualized the film's marketing
strategy in a way that it targets maximum number of
people to spread awareness about the movie in an
engaging manner, where each touch-point with the
film is designed to occupy the mind-space of the
– Flaunting his pumped up body, clothes and hairstyle
that he sports in the movie, Khan has been out there
to woo audience well in advance before the movie hits
– Speaking to Businessofcinema.com about the hype
around Ghajini, producer Madhu Mantena said, "I think
at a time Our marketing strategies are focused on
creating this urgency."
What was Ghajini’s Marketing
• Assuming that the product and brand are good
– Media spend : 14 crores to promote the film
– Brand Experience : Life-size statues at multiplexes,
ushers at multiplexes sporting Ghajini hairstyles, a
special 3-D PC game, amongst others.
– Brand Tie-Ups : Tata Indicom voicemail using Aamir’s
voice, Samsung Handsets L700 & M200 models
preloaded with Ghajini songs, pictures and ringtones,
Van Heusen formal wear based on Aamir’s costumes in
the film, Indiagames : Ghajini games
– Merchandise : Produced and imported from China
• Sold for Rs.90 crores, Returns in the first week : Rs.100
crores, till date Rs.200 crores !
Is Ghajini a success ??

Sold for Rs.80 crores

– Domestic : Rs.40 crores to Studio 18,
– Overseas : Rs. 10 crores to Big Pictures,
– Satellite Rights : Rs. 10 crores to Studio 18
– Audio Rights : Rs.20 crores to T-Series
– Home Video Rights – Not sold as yet
Returns in the first week : Rs.100 crores
– Rs.30-32 crores alone on Christmas Day
What is Strategic Marketing ?
What is Strategic Marketing ?
• Strategy : Is the science and art of assessing your
organization's situation, setting goals and using
available resources to accomplish those goals
• Marketing : Is the aggregate of functions involved
in differentiating (branding), selling and moving
the goods from producer to consumer

• Strategic Marketing : Is using your strategy to

make your marketing totally effective
Strategic Marketing Helps
• Realize Market Opportunities
• Leverage the Organizations Strengths
• Stay on Target
• Stay on Budget

• Finally : Achieve the organizations goals

Keep in mind that Strategy does not have to

be complicated as long as it is effective.
Building A Strategy
What to address in your planning ?
• Your Organization (Corporation): Strengths,
Weaknesses, Opportunities and Threats
• Your Products/Services (Corporation) : Benefits,
Features, Strengths and Weaknesses
• Your Markets : (Consumer) Size, Attitude,
Consumers, Trends, Wants, Needs, Specifics
• Your Competition : Current, Possible, Future,
SWOT, Probable Responses
• In Your Environment : Government, Economy,
Technology, Others
Learning Objectives
• Recognize the three strategic “C’s”.
• Understand the importance of Strategic
• Determine the characteristics of Strategic
• Visualize the future of Strategic Marketing
• Comprehend the process of Strategic
Concept of Strategic
• Within a given environment, marketing strategy deals
essentially with the interplay of three forces known as
the strategic three Cs: the consumer, the competition,
and the corporation.
• Marketing strategies focus on ways in which the
corporation can differentiate itself effectively from its
competitors, capitalizing on its distinctive strengths to
deliver better value to its consumers.
Characteristics of Marketing

• A clear market definition;
• A good match between corporate strengths
and the needs of the market;
• And superior performance, relative to the
Importance of Strategic
• Marketing plays a vital role in the strategic
management process of the firm.
• The experience of companies well versed in
strategic planning indicates that failure in
marketing can block the way to goals
established by strategic planning.
Characteristics of Strategic
• Emphasis on Long-Term Implications.
– Strategic marketing is a commitment, not an act.
• Varying Roles for Different Products /Markets.
– Strategic marketing starts from the premise that different
products have varying roles in the company.
• Organizational Level.
– Strategic marketing is conducted primarily at the business
unit level in the organization.
Characteristics of Strategic
• Corporate Inputs:
– Corporate Culture ~ refers to the style,
whims, traits, taboos, customs, and rituals
of top management.
– Corporate Publics ~ are the various
stakeholders with governments and society
constitute and organization’s stakeholders.
– Corporate Resources ~ include the human,
financial, physical, and technological
assets/experience of the company.
Characteristics of Strategic
• Relationship to Finance.
– Strategic marketing decision making is closely
related to the finance function.
– Its very important of maintaining a close
relationship between marketing and finance,
and, with other functional areas of a business.
– In recent years, frameworks have been
developed that make it convenient to
simultaneously relate marketing to finance in
making strategic decisions.
Future of Strategic Marketing
• The battle for marketing share is intensifying
in many industries as a result of declining
growth rates.
• Deregulation in many industries is mandating
a move to strategic marketing.
• Many companies in hitherto non-marketing-
oriented industries are attempting to gain
market share through strategic marketing.
Future of Strategic Marketing
• Shifts in the channel structure of many
industries have posed new problems.
• More and more countries around the world are
developing the capacity to compete
aggressively in world markets.
• The fragmentation of markets - the result of
higher per capita incomes and more
sophisticated consumers.
Future of Strategic Marketing
• In planning an early entry in the marketplace,
strategic marketing achieves significance.
• To successfully develop corporate imagination,
companies need strategic marketing.
The Process of Strategic Marketing
Market Situation Analysis
Market Vision, Structure and
• Markets are becoming increasingly complex and
interrelated, creating challenges for managers
in regard to understanding market structure and
identifying opportunities for growth.
– Consider the impact of digital technology on
• Computers
• Telecommunications
• Photography
• Office Equipment
• Entertainment : Film making
Market Vision
• The importance of forming a vision about the
future can be understood with the help of the
following example
– Eastman Kodak : Conventional Film material
• Electronic imaging vs conventional film
• Compete aggressively in the conventional
film market Fuji
• New arena positions Kodak against Sony,
HP, Sanyo, Olympus – electronic imaging
Markets and Strategies
• Market knowledge is essential in guiding
businesses and market strategies.
• How do markets impact strategy ?
• What is the concept of value migration and
how does it effect market opportunities ?
• What is a shared vision about how the market
is expected to change in the future?
Strategies and Markets are
• Market changes often require altering business and marketing strategies
• Managers who do not understand their markets and how they will change
in the future may find the strategies they are using for competing
inadequate as buyers needs and wants change and alternative products
are available in the market place.
• Forces that precipitate change
– Deregulation – MNC’s, imports etc.,
– Excess Global capacity – Polymer products from China
– Global competition - Nike
– M&A’s – Steel Industry
– Changing customer expectations – Convergence of technology
– Technological discontinuities - Photography
– Disintermediation – Organised Retail
– Demographic and Changing Life styles – Indian Middle class
• EBI : Encyclopedia Britannia – 200 old publishing
• In 1990 the CD ROM technology impacted the
traditional encyclopedia market and EBI did not
respond to this challenge
• By 1994 - 16 million households had CD drives in US
homes : Encarta, Wikipedia
• EBI’s sales dropped and slaes force declined from 2300
to 1100
• CD ROMS priced at $100-400 while EBI at $ 1500
• In 1996 it eliminated its sales force and EBI was sold by
Scottish publishing house to Swiss billionaire Jacqui
• Where do you see the future of the print business going
20 years from now ?
Value Migration
• Value Migration is the process of customers
shifting their purchases away from products
generated by outmoded business designs to new
ones that offer superior value.
– Examples : Migration from Typewrites to Word
processing to computers
– Official memos and mail from conventional
print to electronic mailing via internet and
• What will be the impact of environment &
infrastructure on the auto industry ?
Shared Vision about the
• Organizations ability to develop a vision about the future
markets that they wish to be in and directions of change.
• Team work rather than an individual : Arcelor Mittal
• To develop a future vision one must
– Identify and analyse the forces of change that are
expected to transform industry boundaries and create
new competitive space eg : Nokia Health
– Form a vision about the future eg : Stress and Mortality
and Health consciousness
Mapping Product Markets
Mapping the Product Market

Market Structure Analysis

Market Forecasts

Future Vision About the Market

Question 1

• Who sells the largest number of cameras in India today ?

• Sony, Canon or Nikon ?

• The correct answer is Nokia whose main line of

business in India is not cameras but cell
• Reason being cameras bundled with cell
phones are outselling stand alone cameras.
Now, what prevents the cell phone from
replacing the camera outright? Nothing at all.
One can only hope the Nikon’s and Canon’s
are taking note.
Question 2

• Who is the biggest in the Music business in India today ?

• HMV, SaReGaMa or Sony ?

• The answer is Airtel. By selling caller tunes

(that play for 30 seconds) Airtel makes more
than what music companies make by selling
music albums (that run for hours).
• Incidentally Airtel is not in music business. It is
the mobile service provider with the largest
subscriber base in India . That sort of
competitor is difficult to detect, even more
difficult to beat (by the time you have
Question 3

• What Apple did to Sony, Sony did to Kodak. Explain.

• Sony earlier defined its market as ‘audio’

(music from the walkman). They never
expected an IT company like Apple to
encroach into their audio domain. Come to
think of it, is it really surprising? Apple as a
computer maker has both audio and video
capabilities. So what made Sony think he won't
compete on pure audio?
• So also Kodak defined its business as film
cameras, Sony defines its businesses as
Question 4
• In 2008 who was the toughest competitor for
British Airways in India?
• Singapore Airlines, Emirates or Air India ?

• The answer is videoconferencing and tele-

presence services of HP and Cisco. Travel
dropped due to recession. Senior IT executives
in India and abroad were compelled by their
head quarters to use videoconferencing to
shrink travel budget. So much so, that the mad
scramble for American visas from Indian
techies was nowhere in sight in 2008.
• Note : Prices of PC’s/Mobile
Point to Note - 1
• India has two passions. Films and cricket. The two markets
were distinctly different. So were the icons.
• That was, when cricket was fundamentally test cricket or at
best 50 over cricket. Then came IPL and the two markets
collapsed into one. IPL brought cricket down to 20 overs.
Suddenly an IPL match was reduced to the length of a 3 hour
movie. Cricket became film's competitor. On the eve of IPL
matches movie halls ran empty. Desperate multiplex owners
requisitioned the rights for screening IPL matches at movie
halls to hang on to the audience. If IPL were to become the
mainstay of cricket, as it is likely to be, films have to sequence
their releases so as not clash with IPL matches.
• As far as the audience is concerned both are what in India are
called 3 hour "tamasha" (entertainment) . Cricket season might
push films out of the market.
Point to Note - 2
• One last illustration. 20 years back what were Indians using to
wake them up in the morning?
• The answer is "alarm clock." The alarm clock was a monster
made of mechanical springs. It had to be physically keyed
every day to keep it running. It made so much noise by way of
alarm, that it woke you up and the rest of the colony.
• Then came quartz clocks which were sleeker. They were much
more gentle though still quaintly called "alarms."
• What do we use today for waking up in the morning?
Cellphone! An entire industry of clocks disappeared without
warning thanks to cell phones. Big watch companies like Ajanta
were the losers.
• You never know in which bush your competitor is hiding!
Case Study
Vivometrics California – Life Shirt
• Wants to manufacture shirts
• Not an ordinary shirt but embedded are 4
balck bands equipped with electrodes to
monitor more than 40 vital signs in your body,
fluid in the heart, oxygen consumption etc.,
• Blazing R&D on e-health
• Bathroom scales, blood sugar of diabetics,
portable BP machines, EKG’s
• Future : Electronic Care will will save lives –
future of medicine and technology
Case Study
Vivometrics California – Life Shirt
• Wants to manufacture shirts
• Not an ordinary shirt but embedded are 4
balck bands equipped with electrodes to
monitor more than 40 vital signs in your body,
fluid in the heart, oxygen consumption etc.,
• Blazing R&D on e-health
• Bathroom scales, blood sugar of diabetics,
portable BP machines, EKG’s
• Future : Electronic Care will will save lives –
future of medicine and technology
Matching Needs with Product
• Product Market – markets exist only when there are
buyuers with needs who have the ability to purchase
products and those that satisfy their needs.
• Have the ability and willingness to buy as they have a
• Needs that satisfies a benefit
– Benefit must satisfy otherwise only people with needs
• Alternatively they express a demand for that product and
can be substituted by other competitive brands
• Positioning strategy, substitutability,
• Eg : Campbell Soup : Discuss : Share of Throat in Summer
in India
Mapping Product Market
Boundaries and Structures
Start with the Generic Need satisfied by the product
category of interest to management
Perform various kitchen functions - appliances

Identify the product categories (types) that can

Satisfy the generic need
Heating, cooling, washing, drying, cooking

Form the specific product-markets within

the generic product market
Cooling : refrigerators

Frost free Double Door PUF, Freshness
Guidelines for Definition
• In mapping product markets it is helpful to
– The basis for identifying buyers in the
product market (geographical area, buyer
characteristics such as age etc.,)
– The market size and characteristics
– The brands/product categories that are
competing for needs and wants of the buyer
Forming Product Markets
• The factors that influence product market
boundaries must be determined in addition to the
rate of change in market composition over time
and the extent of market complexity

Example : If a company is deciding to exit from a

business it will look at financial performance and
competitive position
If the company wants to enter a new product
segment a much more detailed analysis is
Changing Composition of
• Product market composition may change as
new technologies become available, new
competition emerges, new customer needs
become evident due to change in lifestyle etc.,
• For example : Single unit families, they may
meet their needs for food from products from
different industries and not just from brands of
the same product category
Mapping Product Market
Boundaries and Structures

Supermarket Micro wave

Spencer Delis Ovens
Fast Food
Convenience Traditional
Food Stores Restaurants
prepared food Takeaways

KFC vs Mc Donalds
Extent of Market Complexity
• Three characteristics of markets capture a large
proportion of the variation of a market’s complexity
– Customer function considers what the product or
service does : Example : Desktop Computer at
– Different technologies may satisfy the use situation
of the customer : Example : Sending a letter
– Customer segment recognizes the diversity of the
needs of customers for a particular product
Example : Automobiles DISCUSS
Illustrative Product Market
Personal Care
Generic Product Class


Soaps Product Type

Lotions Shampoos


Paper Soaps Liquid Soaps Bar Soaps Variant A

Hygiene Freshness Beauty Variant B

Vivel Nirma Lux Brands

Identifying and Describing
Demographics Psychographics
Family Size, Age, Income, Attitude, Beliefs, Values,
Sex, Occupation

Lifestyles Needs and Want Analysis

How they holiday, where they Convergence of technology,
eat, what types of clothes Experimental, Traditional,
they buy, what cars they Conservative
How Buyers Make Choices
• Problem recognition : Doesn’t like the sound
of this conventional magnetic tape music
system and desires a CD player
• Information Search : Uses past experience of
friends, ads, to seek information and discover
• Alternative Evaluation : Alternative players are
then decided based on attributes, price,
• Purchase Decision : Selected, bought and
installed in his room
• Post Purchase Behaviour : May be satisfied and
advocates or returns the same
Environmental Influences
• Analysis of the identify the external factors
that influence the buyers choice
– Government : Fuel prices
– Social Change : Big Bazaar
– Economic Shifts : PPP
– Technology : Convergence
Analyzing Competition
Define the competitive arena for generic, specific
and variant product markets

Identify and describe key competitors

Evaluate Key Competitors

Anticipate Action by Competitors

Identify Potential Competitors

Example : Competition for Diet

Lemon Limes
Ice Wine Colas
Cream Diet Lemon
Diet Pepsi Limes
Flavoured Coke
Fast Cola
Competition Product Product
Food Diet
Diet Cola Form Category Generic
Competition Rite
Product Budget
Soft Drinks Competition
Food & Ent
Coffee Tea


Film Candy
Industry Analysis
• Competitor analysis is conducted from the point of view
of the firm. However, with the example shown earlier, it
is necessary to now look at competition from the point
of view of competing industries and thus a need for an
industry analysis
– Profile of the industry
– Analysis of the value chain
• Horizontal analysis – similar types of firms
• Vertical Analysis - Different industries reaching
the same end user
Industry Analysis
• The industry analysis includes
– Industry characteristics and trends such as
sales, number of firms, growth rates
– Operating practices of firms in the industry,
including product mix, services provided,
barriers to entry and geographical scope
– Industry Size and Growth
– Marketing Practies
– Industry changes that are anitipated
– Strengths and Weaknesses
– Strategic Alliances amongst competitors
Industry Analysis
• Analysis of the Value Added Chain : Supplier and Distribution
channels is important to understanding and servicing product
markets. Example : ITC vs Coca Cola
• Competitive Forces : Need to recognize the five competitive
forces that affect industry performance
– Rivalry among existing firms Eg. Coke vs Pepsi
– Threat of New Entrants Eg. Kodak vs HP/Sony
– Threat of Substitute Products Eg. Ency. Brit vs CD Rom
– Bargaining Power of Suppliers Eg. Commercial Airlines
– Bargaining Power of Buyers Eg. Walmart with suppliers
Key Competitor Analysis
• Competitor analysis is conducted for firms that
compete directly with each other. Eg. Nike vs
Reebok, Unilever vs P&G
• The aspects of competitor analysis that is
important are
– Preparation of descriptive profile for each
– Evaluating the competitors strengths and
Describing the Competitor
• A key competitor is any organization going after
the same target market as the firm conducting
the analysis. Jet, Kingfisher and Air India are key
competitors on many Indian routes and certain
international routes.
• Key competitors are often brands that compete
in the same product market or in segments
within the market. Surf Excel and Ariel
• Different product types that satisfy the same
need or want may also actively compete with
each other. Sony Walkman and Apple i-pod
Information needed to Describe
Key Competitors
• Business Scope and objectives
• Management experience, capabilities and weaknesses
• Market position and trends
• Market target and customer base
• Marketing programme and positioning strategy
• Financial, technical and operating capabilities
• Key competitive advantage
– Sources : Annual Reports, Industry reports, Articles,
Interviews, etc.,
Evaluating the Competitor
Evaluation considers the strengths and weaknesses of each competitor
in the areas shown below :

Scope of
Market Share
Distinctive Past
Capabilities Performance

Perceptual Maps
Perceptual Maps are useful in analyzing the competitive positioning
of competing brands. Analgesics brand in the US
Tylenol o
o Extra Strength Tylenol
Area of
Aspirin Free Excedrin o

Bufferin o
Bayer o Advil o
Anacin o Nuprin o
Ecotrin o

o Extra Strength Bayer

o Extra Strength Anacin
Anticipating Competitors
• Estimating Competitors’ Future Strategies
– May be in the same direction. Assuming this
may not be wise as their current action may
signal probable future threats. Eg. Swatch
introduced the plastic lifestyle brands.
Timex licensed Nautica, Timeberland,
offered $40 Expedition range. Customers
moved to metal watches.
– Surf vs Nirma, Maruti vs Tata Motors
Anticipating Competitors’
• Identifying Potential Customers : May come from four
major sources a) companies competing in a related
market b) companies with related technologies c)
companies targeting similar customer groups with
other products d) companies competing in similar
geographical regions with similar products
• Market entry by new players is under the following
conditions a) High profit margins b) Future growth
opportunities c) No high market entry barriers d) Few
Strategic Vision about the
• Are industry boundaries clear and static ? Are
customers and competitors identifiable? Or are industry
boundaries blurring and evolving?
• Do firms compete as distinct entities or as families of
suppliers and end product firms ?
• Is there competition for managing migration paths ?
• Is competition taking place at product line, business
and corporate levels ? Do these levels influence each
• Can there be competition to influence industry
standards and evolutions?
Phases of Competition
• Phase 1 : Initial Stages : companies compete in
identifying product concepts, making technology
choices and building competencies. This phase
involves experimentation with ideas and the
path to market leadership is not clearly defined
• Phase 2 : Involves Partnering of companies to
controlling industry standards
• Phase 3 : As markets become clearly defined the
competitive process concentrates on market
share for end products and profits
Anticipating the Future
• Hamel and Prahalad Model
– What are the influences (discontinuities) present
in the product market that have the potential to
profoundly transform market/competitor structure
– Investigate each discontinuity in substantial depth
• Affect on customers
• Economic impact
• How fast, who is exploiting this trend
• Who gains, who loses
• New opportunities ??
Market Size Estimation
• Market Potential : is the maximum amount of
product sale that can be obtained from a defined
product market during a specific time period.
• Sales Forecast : expected sales for a defined
product market during a specified time period
• Market Share : Company sales divided by the total
sales of all firms for a specified time period.
• Forecasting
• See Handout
Internal Assignment
• Read the Hindustan Motors Case Study
• List the reasons and explanations of what you thought the
company did right and what they did wrong to end up in the
situation as they did by the early 2000’s
• In the current context of the Automobile Industry in India what
would be your advice to them for a revival and why?

• To be submitted before class on 23rd March 2010

• Marks – 30
• No copying from each other. Your own analysis. Please refer
books/internet for any help that you require.
• Handwritten/typed assignments on A4 sheets with name and
roll/registration number mentioned on top RHC
Assignment – Any 1
• Select an industry in India (Paint, Cement, Steel,
Detergents Aerated Drinks, etc. )and describe its
characteristics, participants and structure.
• Using the approach to product market definition and
analysis, select a brand and describe the generic,
product type and brand product markets of which the
brand is a part.

• Search the net, read but do not COPY directly !!!

Submission by 23rd March 2010
Analysis of Competitor’s
Strategies & Estimating their
Reaction Pattern and
Competitive Position
Identifying the Company’s
In the words of Albert W.
‘Marketing is merely a civilized form of warfare
in which most battles are won with words,
ideas and disciplined thinking’
What do organizations need
to know ?
• Who are our competitors ?
• What are their strategies ?
• What are their objectives ?
• What are their strengths and weaknesses ?
• What are their reaction patterns ?

We will now examine how this information helps

shape the organizations’ marketing strategy.
Competitor Myopia
• Four levels of competitors based on the concept of ‘product
substitution’ : Broader levels as we move down the list
– Companies offering a similar product and service to the
same customer at similar prices. Eg : Maruti Alto with
Tata Indica and not Tata Indigo
– Companies making the same product or a class of
products Eg : Maruti vs Tata Motors
– Companies manufacturing products that supply the
same service. Eg : Maruti vs 2 wheelers/3
wheelers/cycles/trains/airlines etc.,
– Companies that compete for the same consumer rupee.
Eg : Maruti vs Consumer Durable, foreign vacations, new
homes, home repairs and uplift etc.,
Industry Concept of
• An industry is defined as a group of firms that
offer a product or class of products that are close
substitutes of each other.
• Auto industry, Steel Industry, Pharmaceutical
Industry etc.
• Economists define ‘close substitutes’ as
products with ‘high cross elasticity of demand’
• Coffee vs tea
• A company must strive to undertsand the
competitive pattern of its industry if it hopes to be
an effective player.
Model of Industrial Organizational
Basic Conditions
Supply Demand
Raw Materials, Technology, Price Elasticity, Substitutes,
Unionizations, Product Durability, Rate of Growth, Cyclical and
Public Policy, Business Attitudes,
Seasonality, Purchase
Method, Marketing Type

Industry Structure
Number of Sellers, Product
Differentiation, Entry and mobility
barriers, Exit and shrinkage barriers,
Cost Str, Global reach, Vertical

Pricing Behaviour, Product Strategy and
Advertising, Research and Innovation,
Plant Investment, Legal Tactics

Production and efficiency,
Progress, Full Employment,
Number of Sellers and Degree of
Product Differentiation : 5 Industry
Structure Types
One Seller Few Sellers Many Sellers

Undifferent Pure Pure

Product Oligopoly Competitive

Differentiat Differentiated Monopolistic

ed Product
Oligopoly Competitive
Number of Sellers and Degree of
Product Differentiation
• Pure Monopoly : When only one firm provides a certain
product or service in a certain country or area Eg : Indian
Post, CESC in WB etc.,
• Pure Oligopoly : Few companies producing the same
commodity Eg : Steel, Coal, Oil : lower costs high volume
• Differentiated Oligopoly : Few companies producing products
that are partially differentiated Eg : Automobile companies,
• Monopolistic Competition : Many competitors able to
differentiate their offers in whole or part Eg : Restaurants,
Beauty Salons,
• Pure Competition : Many competitors offering the same
product & service. No basis for differentiation. Eg : Telecom,
Example : Dynamism
One Seller Few Sellers Many Sellers

Undifferent Pure Pure

Product Oligopoly Competitive
Others enter
Walkman Differentiated Monopolistic
ed Product
Oligopoly Competitive
Shakeout happens
Other Industry Structure
• Entry & Mobility Barriers : Ease of entry into
industries prevents current firms from extracting
excess profits in the long run – however it is easier
to open a restaurant than to set up an automobile
plant. The reasons are as follows :
– High capital requirements
– Economies of scale
– Patents and licensing requirements
– Scarcity of locations, raw materials,
– Distribution network
Other Industry Structure
• Exit & Shrinkage Barriers : Ease of exit from
industries that provide low and unattractive profits.
Exit barriers could be due to the following reasons :
– Legal and moral obligations to customers,
creditors and employees
– Government restrictions
– Low salvage value of assets due to over
specialization or obsolescence
– Lack of alternative opportunities
They may ‘shrink’ in size if they cannot exit.
Other Industry Structure
• Cost Structures : Each industry will have a
certain cost mix that will drive much of its
strategic conduct. For example : making steel
involves heavy manufacturing and raw material
costs whereas an FMCG company will have high
distribution and marketing costs.
• Firms in an industry will pay great attention to
the high cost areas
• Thus a steel company with a most modern plant
and machinery and ownership of raw material
will be more competitive than others.
Other Industry Structure
• Vertical Integration : In some industries such as the
Oil Industry, companies will find it advantageous to
integrate backward and/or forward. Major oil producers
carry oil exploration, oil drilling, oil refining, and chemical
manufacture. Eg : Reliance Industries.
• Vertical Integration often effects lower costs and also
more control over the value added stream. In addition,
these firms can manipulate their prices and costs in
different segments of their business to earn profits
where taxes are the lowest.
Other Industry Structure
• Global Reach : Some industries are highly
local : Biscuits and Packaged Snacks and
others are highly global Automotive.
• Companies in the global market must compete
globally if they are to enjoy economies of scale
and keep up with the latest advances in
Market Concept of
• Instead of looking at companies making the same
product we can look at companies that are trying to
satisfy the same customer need or serve the same
customer group.
• In general, the market concept of competition opens
the company’s eyes to a broader set of actual and
potential competitors and stimulates more long-run
strategic market planning.
• The key is to link industry and market analysis
through mapping the ‘product/market battlefield’
Product Market Battlefield for
Colgate- Colgate- Colgate-
Plain Palmolive Palmolive Palmolive
Toothpaste P&G P&G P&G
Product Segmentation

Colgate- Colgate- Colgate-

Palmolive Palmolive Palmolive
with Flouride

Colgate- Colgate- Colgate-

Gel Palmolive Palmolive Palmolive
Toothpaste P&G P&G P&G
Unilever Unilever Unilever
Toothpaste Beecham Beecham

Topol Topol

Children/Teen Age 19 to 35 Age 35 plus

Customer Segmentation
Identifying the Competitors’
• There is a close relationship between who the
company’s competitors are and the strategies
that other firms are pursuing.
• The more that one firm’s strategy resembles
another firm’s strategy, the more they compete.
• In most industries, competitors can be sorted into
groups that pursue different strategies.
• A strategic group is a group of firms in an industry
following the same or a similar strategy along key
Strategic Groups in an Appliance
Group A
High Narrow line
Lower manufacturing cost
Very High Service
High Price
Group C
Moderate line
Med manufacturing cost
Medium Service
Quality Medium Price
Group B
Full line
Low manufacturing cost
Good Service
Medium Price
Group D
Broad line
Med manufacturing cost
Low Service
Low Low Price

High Vertical IntegrationLow (Assembler)

Determining the Competitors’
• What is each competitor seeking in the marketplace?
• What drives each competitor’s behaviour?
A useful initial assumption is that competitors strive to
maximize their profits and choose their actions accordingly.
• Long term vs short term
• Weights on current profitability, market share, technology,
cash flow etc.,
• Must monitor its competitors objectives with respect to
attacking new product/market segments.
Assessing the Competitors’
Strengths & Weaknesses
Competitors S&W
• Must gather data on
– Sales
– Market Share
– Profit Margin
– Cash Flow
– New Investments
– Capacity Utilization
• Often through secondary data, experience,
hearsay, Institutional bodies etc.,
Competitors S&W
• Market Share, Mind Share and Heart Share (Brands)
– A measure of the sales share
– A measure of the TOP awareness
– A measure of whom would you buy the product from
• Financial Parameters
– Liquidity Ratio : Short Term
– Leverage Capital Structure Ratio : Long Term
– Profitability Ratio : ROE, ROI
– Turnover Ratio : Assets being utilized well
Estimating the Competitors’
Reaction Pattern
Common Reaction Profiles
• The Laid Back Competitor : Do not react quickly or
strongly to a given competitor move. Loyal
Customers, Lack of Funds
• The Selective Competitor : Reacts only to certain
types of assaults and not others. Respond to price
cuts but not advtg expense increase.
• The Tiger Competitor : The competitor reacts
swiftly and strongly to any assault on its terrain.
• The Stochastic Competitor : Some competitors do
not exhibit a predictable reaction pattern. May or
may not react
Competitive Equilibrium
• Bruce Henderson one of the founding members of the
Boston Consulting Group thinks that much of
competitive spirit among organizations depends of the
industry’s ‘competitive equilibrium’
– If competitors are nearly identical and make their living in the same
way, then their competitive equilibrium is unstable
– If a single major factor is the critical factor, then competitive
equilibrium is unstable
– If multiple factors may be critical factors, then it is possible for each
competitor to have some advantage and be differentially attractive to
some customers. Relatively stable
– The fewer the number of competitive variables that are critical they
fewer the number of competitors
– A ratio of 2:1 of market share between any two competitors seems to
be the equilibrium point
Designing the Competitive
Intelligence System
Intelligence System
• Setting up the System : Calls for identifying vital
types of competitive information and assigning a
person who will manage the same
• Collecting the Data : Various Sources both Primary,
Secondary and Hearsay. Has to develop ways of
documenting the information
• Evaluating and Analyzing : Checked for validity and
• Disseminating and Responding : Sent to key
decision makers at appropriate intervals
Selecting Competitors to Attack
and Avoid
Customer Value Analysis
• Identify the major attributes that the customer values
• Assess the customers ratings of the importance of different
• Assess the company’s and competitors performances of
different attributes against each rated importance
• Examine how customers in a specific segment rate the
company’s performance against a specific major
competitor on an attribute by attribute basis
• Monitor changing customer attributes and importance
ratings over time
Classes of Competitors
• Strong vs Weak : Surf vs Ghari Detergent i/o
• Close vs Distant : Coke vs Mineral Water,
Museums vs Malls, Tata Steel vs
Hindalco/Reliance Petro
• Good vs Bad : Good ones play by same rules
where as Bad ones take short cuts etc. Q.
Infosys vs TCS or Satyam ???
Balancing Customer &
Competitor Orientations
Competitor Centred
• A competitor centred company is one whose
moves are basically dictated by competitors
actions and reactions. For example
• Competitor W is going all out to crush us in Mumbai
• Competitor X is improving distribution coverage in Nagpur and
hurting our sales
• Competitor Y is has cut its price in Pune and we lost share
• Competitor Z has introduced a new product feature in Ahmedabad
• We will withdraw from Mumbai as we cannot afford to fight them
• We will increase our advertising expenses in Nagpur
• We will match the price cut in Pune
• We will increase our sales promo budget in Ahmedabad
Customer Centred Company
• A company who would focus more on customer developments to
formulate its strategy
• The total market is growing at 4 % annually
• The fastest growing segment is the quality sensitive segment, growing 8% annually
• The deal prone customer segment also growing but do no loyalty
• A number of customers have expressed a 24 hr helpline no one has it as yet
• Focus more on quality, improve QC, buy better, advertise on the quality aspects
• Avoid cutting prices and making deals as we do not want such customers
• We will work on a Cost Benefit analysis before introducing the 24 hr helpline
Evolution of Orientations
No Yes
Competitor Centred

No Product Customer
Orientation Orientation

Competitor Market
Orientation Orientation

Customer Centred
Designing Competitive

Part 2
Classification of Roles in Target

40% Market Leader

30% Market Challenger

20% Market Follower

10% Market Nichers

Classification of Strategies

Market LeaderExpand the Market New Users, More Usage, New Use

40% Position, Flank, Preemptive,

Defend & Protect
Counteroffensive, Mobile & Contracti
Increase Market Share

Market Challenger Frontal, Flank,

Attack to gain share
30% Encirclement,
Bypass, Guerrilla
Not attack

Market Follower Counterfeiter, Cloner,

Imitation vs Innovation
20% Imitator,
Market Nichers Adapter
10% Specialization
Market Leader Strategies
Who is a Market Leader
• Many industries contain one company that is the acknowledged market leader
• This company has the largest market share in the relevant product market and
usually leads the other firms in prices changes, new product introductions,
distribution coverage and promotional intensity
• Example : Photography Material : Kodak
– Computer Software : Microsoft
– Microprocessor : INTEL
– FMCG : P&G
– Soft Drinks : Coca Cola
– Earth Moving Equipment : Caterpillar
– Fast Food : Mc Donalds’s
• Unless the dominant firm is vigilant it can be hurt due to the following reasons
– Product Innovation : Motorola (Analog Phones) to Nokia (Digital)
– Challenger Spends : Pepsi to Coca Cola (India only)
– Changing Customer Styles : Levis to Tommy Hilfiger/Calvin Klein/GAP
• To remain number one calls for action on three fronts
– Expand Market Demand
– Defend/Protect Current Share : Defensive and Offensive Actions
– Increase Market Share
Expanding the Total Market
• Dominant firm gains the most when the total
market expands Eg : Surf vs Nirma in the 80’s
• Market Leader needs to look for New Users,
New Uses and More Usage of its products
Expanding the Market through
New Users
• Markets can be expanded through discovering
and promoting new uses for the current
• Eg : Cereals into Energy Bars and Snacks,
Vaseline from lubricant in machine shops to
personal moisturizer
• Any other examples ??
Expanding the Market through
More Usage
• Convince people to use more product per use of the
• Eg : Shampoo : Typically in their communication
‘Lather, Rinse and Repeat’ – are we sure of the
benefits of shampooing our hair twice??
• Eg : Michelin Tyres : French Tyre Company : Michelin
• Eg : Gillete Mach 3 Blades : Blue Strip fades after 12
shaves ‘alerts consumers that they are getting the
most optimal Mach 3 shaving experience’…they
more they change the more we sell
Expanding through New Uses
• New Users : Market Penetration Strategy: those
who may use it but do not
• New Market Segment Strategy : those who have
never used it
• Geographical Expansion Strategy : those who
live elsewhere

• Eg : Colgate Toothpaste
• Eg : Khadim’s Footwear
Defending Market Share
• While trying to expand the total market size,
the dominant market leader must also protect
its own turf and current share.
• Coca Cola vs Pepsi, Gillete vs Bic, Hertz vs
Avis, Mc Donalds vs Burger King, GM vs
Ford/Toyota, Kodak vs Fuji
• Sometimes the competitor is domestic and
sometimes foreign
• ‘The best defense of good offense’ – Art of War
by Sun Tsu Chinese Military Strategist
• Eg : Johnson and Johnson – cardiac stent from
90% share dropped to 8% - why ?
The 6 Defense (Leader)


(3) Preemptive

The 6 Defense Strategies (Position
& Flank)
• Position Defense : Building superior brand power,
making the brand almost impregnable : Eg :Heinz
(50%) vs Hunt (17%) Ketchup market in the US
• Flank Defense : Instead of building fortifications around
its product, it should erect outposts to protect a weak
front.: Eg. Smirnoff Vodka (23%) vs Wolfschmidt who
lowered $1 per bottle, What was Smirnoff’s strategy ?
Goodyear vs Michelin/Bridgestone – product innovation
Extended Mobility tyre, Aquatred Tyre and Dunlop
The 6 Defense Strategies (Pre
• Pre emptive Defense : A more aggressive
maneuver is to attack before the enemy starts
its offensive. Can be done in the following way
– Guerrilla Attack : attacking different
competitors in different markets and keep
everyone off balance.
– Grand Market Envelopment : Seiko has done
with 2300 watch models available worldwide
– Sustained Price Attacks
– Sending out Market Signals : Eg : Chrysler
Minivan price vs lower price minivan
The 6 Defense Strategies (Counter
• Counter Offensive Defense : When attacked,
most market leaders will respond with a
counter attack. It can be frontally (head on),
hit competitors flanks or launch a pincer
• Eg : Northwest Airline Minneapolis – Atlanta :
most profitable, smaller airline cut fares, NW
cut fares on Minneapolis-Chicago route hurting
the smaller airline so that they cam back to
normal pricing
The 6 Defense Strategies (Mobile
• Mobile Defense : The leader stretches its
domain over new territories that can serve as
future centres for defense and offense. It
spreads through market broadening and
market diversification.
– Market Broadening : Focus on R&D and
product based on the technology that
addresses the need : Refrigerators not just
cooling but bio fresh, etc.
– Market Diversification : Into unrelated
industries is another alternative : Eg : ITC
The 6 Defense Strategies
• Contraction Defense : Large companies
sometime recognize that they can no longer
defend all of their territory. The best course of
action then appears to be planned contraction
(also known as strategic withdrawal). Planned
contraction means giving up weaker territories
and reassigning resources to stronger
• Eg : HUL moved out of Dalda, Hindustan
Motors exited Contessa etc.,
Increasing Market Share
• Market leaders can improve their profitability by
increasing their market share.
• A study by Strategic Planning Institute USA called
PIMS (Profit Impact of Market Strategy) found that a
company’s profitability, measured by pre tax return
on investment rises with its relative market share of
the markets served. It showed that companies with a
40% market share earned an average 30% ROI.
• Eg : GE strategy to exit out of businesses if they were
not No1 in market share. Divested it’s A/C and
computer businesses
• Profitability depends on the strategy to gain Market
Share and not an Increase in Market Share alone
Market Challenger Strategies
Who is a Market Challenger ?
• Companies that occupy second, third and lower ranks
in an industry are often called runner up or trailing
• 2nd run companies/brands such as Pepsi, Ford, Avis etc.,
are quite large in themselves. They can either attack
the leader aggressively to garner higher market share
or they can sit back and not ‘rock the boat’ (market
• Many challengers have overtaken the leaders
– Eg : Toyota over General Motors
– British Airways (then BOAC) over Pan Am (no longer
Market Challengers
• Competitive Rivalry and price cutting are most
intense in industries with high fixed costs, high
inventory costs and stagnant primary demand.
Eg : Steel, Auto, Paper, Chemicals etc.,
• The Challenger must decided its strategic
objective and whom does it wish to attack
– It can attack the market leader : High risk
but high potential payoff : Eg : Photocopying
Industry Xerox from 3M and then Canon
from Xerox
– It can attack firms of its own size and are
underfinanced :
– It can attack small local/regional firms
The 5 Attack (Challenger)
4) Bypass Attack

2) Flank Attack

Attacker 1)Frontal Attack

3) Encirclement Attack (Leader

5) Guerrilla Attack
The 5 Attack Strategies (Frontal)

• Frontal Attack : In pure frontal attack, the

attacker matches its opponent's product,
advertising, price and distribution. The
principle of force says that the side with the
greater manpower (resources) will win.
• A modified frontal attack can work by cutting
prices, only if the leader does not counter the
move. Helene Curtis does it successfully for
lower priced products.
The 5 Attack Strategies (Flank)

• Flank Attack : The major principle of warfare is

concentration of strength against weakness. Find a
chink in the armour. The leader’s weak spots are the
challenger’s opportunity. This can be along two
strategic dimensions
– Geographical : Areas where leader is
underperforming. Eg : Honeywell focussed on
smaller markets where IBM was weak
– Segmental : Newer customer segments : Toyota
entered with more fuel efficient cars to counter GM
in US
The 5 Attack Strategies
• Encirclement Attack : Is an attempt to capture
a wide slice of the enemy’s territory through a
‘blitz’. Grand offensive on several fronts.
• Makes sense when the challenger commands
superior resources.
– Eg : Nestle vs Cadbury in India for the
chocolate market
The 5 Attack Strategies (Bypass)
• BypassAttack : The most indirect assault is the bypass strategy. It
is to bypass the leader and attack easier markets to broaden
one’s resource base. This strategy offers three lines of approach :
– Diversifying into unrelated products. Eg : Pepsi bought
Tropicana in 1998 (42% market share) over Minute Maid from
Coca Cola (24%)
– Diversifying into new geographical markets : Eg : Pepsi
entering India before Coke
– Leapfrogging into new technologies to supplant exisiting
products : Eg. SCA in Sweden over P&G for their Diaper market
through innovative interactive Web Site Strategy
The 5 Attack Strategies (Guerrilla)

• Guerrilla Attack : Consists of waging small,

intermittent attacks to harass and demoralize
the leader and eventually secure permanent
footholds. Eg : Kaplan Educational Centre
(Stanley Kaplan) vs Princeton Review. Ad
which said ‘Friens don’t let friends take
More Specific Challenger
• The challenger must go beyond the 5 broad strategies
and develop more specific strategies such as :
– Price Discount
– Lower priced goods
– Prestige Goods : Mercedes vs Cadillac GM
– Product Proliferation : Baskin Robbins 31 flavours
– Product Innovation : 3M
– Improved Services : Avis vs Hertz ‘We are No.2. We
try harder’
– Distribution Channel : Avon’s door to door selling over
conventional stores
– Manufacturing Cost Reduction : Tata Steel
– Intensive advertising : Miller Lite over Budweizer
Who is a Market Follower ?
• Theodore Levitt has coined the word ‘Innovative Imitation’
where he argued that a strategy of product imitation might be
as profitable as product innovation.
• Quite prevalent in capital intensive, homogenous-product
industries such as steel, fertilizer, cement, chemicals etc.,
• Product differentiation low, service comparable, price sensitivity
runs high
– Eg : Tata Steel innovated and launched TISON – TMT bars,
SRMB, TIMCON, Rathi TOR, Elegant
• 4 strategies : Counterfeiter, Cloner, Imitator, Adapter
4 Follower Strategies
• Counterfeiter : Duplicates the leader’s product and
package and sells it through disreputable dealers :
Rolex Watches, CD’s etc.,
• Cloner : Emulates the leaders products, name and
packaging with slight variations.
• Imitator : Copies from the leader but maintains a
differentiation in terms of packaging, price etc.,
• Adapter : Takes the leader’s products and adapts or
improves them significantly to offer a new product. Eg :
What Japanese Electronics Industry did to
Who is a Niche Player ?
• An alternative to being a follower in a large
market, is to be a leader in a small market – that
is the concept of a niche player.
• Eg : Logitech International : Specialist in
manufacture and variations of a ‘computer
mouse’ and then onto all computer peripherals
such as keyboards, speakers, joystick, webcams,
etc., - has become a US$ 750 billion company
• The key strategy for a niche player is
Niche Player Strategies
• End User Specialist : Logitech International
• Vertical Level Specialist : Making Copper Wires
• Customer Size Specialist : Minority Group Hotels
• Specific Customer Specialist : Sona Steering for Maruti
• Geographic Specialist : Sreeleathers
• Product or Product Line Specialist : Carl Zeiss Lenses
• Quality Price Specialist : Mont Blanc Pens
Product Life Cycle
Product Life Cycle
• Product Life Cycle – shows the stages that products go
through from development to withdrawal from the market
• Product Portfolio – the range of products a company has in
development or available for consumers at any one time.
Managing product portfolio is important for cash flow
Product Life Cycle
Product Life Cycle (PLC)
– Each product may have a different life cycle
– PLC determines revenue earned
– Contributes to strategic marketing planning
– May help the firm to identify when a product needs support,
redesign, reinvigorating, withdrawal, etc.
– May help in new product development planning
– May help in forecasting and managing cash flow
Product Life Cycle
The Stages of the Product Life Cycle
– Development
– Introduction/Launch
– Growth
– Maturity
– Saturation
– Decline
– Withdrawal
Product Life Cycle
The Development Stage
• Initial Ideas – possibly large number
• May come from any of the following –
– Market research – identifies gaps in the
– Monitoring competitors
– Planned research and development (R&D)
– Luck or intuition – stumble across ideas?
– Creative thinking – inventions, hunches?
– Futures thinking – what will people be
using/wanting/needing 5,10,20 years?
Product Life Cycle
Product Development: Stages
– New ideas/possible inventions
– Market analysis – is it wanted? Can it be produced at a
profit? Who is it likely to be aimed at?
– Product Development and refinement
– Test Marketing – possibly local/regional
– Analysis of test marketing results and amendment of
product/production process
– Preparations for launch – publicity, marketing campaign
Product Life Cycle
– Advertising and promotion campaigns
– Target campaign at specific audience?
– Monitor initial sales
– Maximise publicity
– High cost/low sales
– Length of time – type of product
Product Life Cycle
– Increased consumer awareness
– Sales rise
– Revenues increase
– Costs - fixed costs/variable costs, profits
may be made
– Monitor market – competitors reaction?
Product Life Cycle
– Sales reach peak
– Cost of supporting the product declines
– Ratio of revenue to cost high
– Sales growth likely to be low
– Market share may be high
– Competition likely to be greater
– Price elasticity of demand?
– Monitor market –
changes/amendments/new strategies?
Product Life Cycle
• New entrants likely to mean market is ‘flooded’
• Necessity to develop new strategies becomes more
– Searching out new markets:
• Linking to changing fashions
• Seeking new or exploiting market segments
• Linking to joint ventures – media/music, etc.
– Developing new uses
– Focus on adapting the product
– Re-packaging or format
– Improving the standard or quality
– Developing the product range
Product Life Cycle
Decline and Withdrawal:
– Product outlives/outgrows its
– Fashions change
– Technology changes
– Sales decline
– Cost of supporting starts to rise too far
– Decision to withdraw may be dependent on
availability of new products and whether
fashions/trends will come around again?
Product Life Cycle
Development Introduction Growth Maturity Saturation Decline

Product Life Cycle

Effects of Extension

Generic Industry
Types of Industry
• Fragmented
• Emerging
• Declining
• Mature
• Global
Challenges for Fragmented
What is a Fragmented
• Is an industry where no particular firm or organization
has any significant market share and therefore
cannot strongly influence the industry outcome.
• No single precise quantitative definition of a
fragmented industry – but an industry that does not
have any significant leader
– Canned fruits
– Toilet and Tissue paper
– Machine Tools
– Costume Jewellery
What makes an Industry
• Low Overall Entry Barriers (not the most important one)
• Absence of Economies of Scale or Experience Curve
• High Transportation Costs
• Erratic Sales Fluctuations
• No Advantage of Size in Dealing with Buyers/Suppliers
• Diverse Market Needs (Uniforms for Local State/City Police)
• No Exit Barriers
• Local Regulation (Liquor Retailing : Goan Wine in Kolkata)
• Newness (Solar cookers)
How to overcome
• Create economies of Scale : eg : Kid’s Apparel
• Standardize diverse Market Needs : eg :
Modular Kitchens
• Make Acquisitions for critical Mass : Steel
• Recognize Industry Trends early if newness
was the cause : Dot Coms Amazon.com
How do your cope with
• Tightly Managed Decentralisation
• Formula Facilities (Common Warehousing)
• Increased Value Added
• Specialization by Product Type or Product Segment
• Specialization by Customer Type
• Specialization by Type of Order (Small Order/Custom
• Focussed Geographic Area
• Bare Bones/No Frills (Low Overhead Costs – Travel
Potential Strategic Traps
• Seeking Dominance
• Lack of Strategic Discipline
• Overcentralization
• Assumption that Competitors have the Same
Overhead and Objectives
• Overreactions to New Products
Formulating Strategy for
Fragmented Industries
• Step One : What is the structure of the industry
and the positions of competitors?
• Step Two : Why is the industry fragmented?
• Step Three : Can fragmentation be overcome?
• Step Four : Is overcoming fragmentation profitable?
Where should the firm be positioned to do so?
• Step Five : If fragmentation is inevitable, what is
the best alternative for coping with it?
Challenges for Emerging
What is an Emerging
• Emerging industries are newly formed or re-formed
industries that have been created by technological
innovations, shifts in relative cost relationships,
emergence of new consumer needs or other
economic or sociological changes that elevate a
product or service to the level of a potentially
viable business opportunity.
• Solar Heating
• Alternative Fuels
• Internet based services
• Fibre Optics
• Packaged Drinking Water
Common Structural
• Technological Uncertainty
• Strategic Uncertainty
• High Initial Costs Embryonic Companies
(Infosys at the time of launch)
• First Time Buyers
• Short Term Horizon
• Subsidy
Problems Constraining Emerging
• Inability to obtain Raw Material
• Absence of Infrastructure
• Absence of Product Standardization’
• Perceived likelihood of Obsolescence
• Customers Confusion
• Erratic Product Quality
• High costs
• Image and Credibility with Financial Community
Strategic Choices
• Shaping Industry Structure
• Changing Role of Suppliers and Channels
• Shifting Mobility barriers

• Timing Entry
• Coping with Competitors
• Forecasting
• Which emerging Industry to enter??
Challenges for Declining
What is a Declining Industry?
• Declining Industries can be described as those which
have experienced an absolute decline in unit sales
over a sustained period. Here the end game
strategies must be developed.
– Postal Services in Developed Nations
– Hand Driven Ploughs in India
– Magnetic Cassette Tapes in Developed Nations
– Glass containers for Milk and Packaged Water
– Propeller Engines to Jet Engines
Causes of Decline
• Technological Advancement and Substitution
• Demographics
• Shift in needs
Strategic Choices
Has Strength Relative Lacks Strength Relative
To Competitors for To Competitors for
Remaining Pockets Remaining Pockets

Favourable Industry Leadership Harvest

Structure for Or Or
Decline Niche Divest Quickly

Unfavourable Industry Niche

Structure for Or Divest Quickly
Decline Harvest
Strategy Analysis and Choice
Strategy Analysis and Choice

Strategic management is not a box of tricks or

a bundle of techniques. It is analytical
thinking and commitment of resources to
action. But quantification alone is not
planning. Some of the most important issues
in strategic management cannot be quantified
at all.
Peter Drucker
Strategy Analysis and Choice
 The Nature of Strategy Analysis and Choice
 Strategy analysis and choice seeks to
determine alternative courses of action
that could best enable the firm to
achieve its mission and objectives.
 During this process the idea is to
 establish long-term objectives
 generate alternative strategies
 select appropriate strategies to
Strategy Analysis and Choice

 Alternative strategies are derived from

 the firm’s vision
 the firm’s mission
 the firm’s objectives
 the external audit
 the internal audit
 past strategies that have worked well.
The Strategy-Formulation
Analytical Framework
Stage 1:
The Input Stage

Stage 2:
The Matching Stage

Stage 3:
The Decision Stage
Stage 1: The Input Stage

Internal Factor Evaluation

Corporation VMV, Objectives
And Resources (IFE)

Stage 1: External Factor Evaluation

The Input Stage (EFE), Industry Structure, PLC,
Environment, Market Mapping

Competitive Profile
(CPE), Key Competitor Analysis,
Competitive Strategy Anlysis
Stage 2: The Matching Stage

Porter’s 5 Forces Matrix (Industry)

SWOT Matrix (Corporation)

Porter’s Generic Strategy Matrix

Stage 2:
The Matching Stage

Ansoff’s Matrix (Market/Product)

BCG Matrix (Product/Brand Portfolio)

Porter’s 5 Forces Model
Five Forces Determining
Segment Structural
Potential Entrants
(Threat of
New Entrants)

Suppliers Industry Buyers

(Bargaining Power Competitors (Bargaining power
Of Suppliers) (Rivalry among Of Buyers)
Existing firms)

(Threat of Substitute
Threat of Entry
• Barriers to Entry
– Economies of Scale
– Product Differentiation (Strong Brands)
– Switching Costs (Buyers to buy the new product)
– Access to Distribution Channels
– Cost Disadvantage (Depreciated Assets)
– Government Policy (Airline to non metro routes)
Rivalry Among Existing Firms
• Numerous or equally balanced competitors
• Slow Industry Growth (Fight for market share)
• High Fixed Costs
• Lack of Differentiation (Coke vs Pepsi)
• Diverse Competitors
• High Exit Barriers
• Threat from Substitute Products (Sugar and
Sugar Free)
• Bargaining power of Buyers (Organized Retail)
• Bargaining Power of Suppliers (Steel pre
SWOT Analysis
The SWOT Matrix

In this Matrix we seek to match the

organization’s internal resources and skills
and the opportunities and risks created by
the industry’s external environment.
 S = Strengths
 W = Weaknesses
 O = Opportunities
 T = Threats
The SWOT Matrix
 A SWOT Matrix produces four types of strategies
 SO Strategy use a firm’s internal strengths to
take advantage of external opportunities.
 WO Strategy aim at improving internal
weaknesses by taking advantage of external
 ST strategy use a firm’s strengths to avoid or
reduce the impact of external threats.
 WT strategy are defensive strategies
directed at reducing internal weaknesses and
avoiding external threats.
Developing the SWOT Matrix
 List the firm’s key external opportunities.
 List the firm’s key external threats.
 List the firm’s key internal strengths.
 List the firm’s key internal weaknesses.
 Match internal strengths with external
opportunities, and record the resultant SO
strategy in the appropriate cell.
 Match internal weaknesses with external
opportunities, and record the resultant WO
 Match internal strengths with external threats,
and record the resultant ST strategy.
 Match internal weaknesses with external
threats, and record the resultant WT strategy.
SWOT Matrix
Leave Blank Strengths – S Weaknesses – W

List strengths List weaknesses

Opportunities – O SO Strategy WO Strategy

Overcoming weaknesses
List opportunities Use strengths to take by taking advantage of
advantage of opportunities opportunities

Threats – ST Strategy WT Strategy

Use strengths to Minimize weaknesses
List avoid threats and avoid threats
SWOT Matrix

 The purpose of each stage is to generate

feasible alternative strategies, not to select or
determine which strategies are best.
 Not all of the strategies developed in the SWOT
Matrix, therefore, will be selected for
Porter’s Generic Strategy
Porter’s Generic Strategy

Cost Leadership Differentiation

Strategy Strategy

Cost Focus Strategy
Porter’s Generic Strategy
• Cost Leadership : is a low cost competitive start
that aims at the broad mass market and requires
aggressive construction of efficient scale facilities,
cost reduction, and cost minimization in areas like
R&D, Sales force and Advertising
• Because of its lower cost, the cost leader is able to
charge a lower price for its products than its
competitors and still make a satisfactory profit. Gives
it a good defense against rivals.
• Eg : Dell Computers, Tata Steel
Porter’s Generic Strategy
• Differentiation : is a a generic strategy that involves
the creation of a slightly or significantly differentiated
offering for which the company may charge a
• This specialty can be associated with design, brand
image, technology feature, dealer network or
customer service.
• Differentiation is a viable strategy for earning above
average returns in a specific business because the
resulting brand loyalty lowers the customers
sensitivity to price
• Eg : Rolex Watches
Porter’s Generic Strategy
• Cost Focus : is a low cost strategy that
focuses on a particular buyer group or
geographic market and attempts to service
only this niche to the exclusion of others.
• Eg : Nokia – lower end handsets for India
Porter’s Generic Strategy
• Focussed Differentiation : like cost focus,
concentrates on a particular buyer group,
product line segment or geographic market.
Segment targets buyers with unusual needs
which are different from others in the industry.
Not necessarily on price.
• Eg : Beauty products that have collagen or
aloe vera…L’Occitane, Professional Cameras
from Nikon, Pentax
Ansoff’s Matrix
Ansoff’s Concepts
• Market Penetration : selling more of the companies products in
the existing market which means increasing the level of
penetration in these segments. Eg : P&G and HUL
• Product Development : developing additional or new products to
serve existing market segments. Eg : Coke into Minute Maid
• Market Development : concentrates on the present product
range by searches for new segments. Eg Telecom Sector
• Diversification : marketing of new products into new markets.
Eg : ITC : Apparel, Personal care from Cigarettes
Ansoff’s Matrix

Old New

Market Product

Penetration Development


BCG Matrix
The Boston Consulting Group
Growth/Share Matrix
 The Boston Consulting Group Matrix:
 A means of analyzing the product portfolio and
informing decision making about possible
marketing strategies
 Developed by the Boston Consulting Group – a
business strategy and marketing consultancy in
 Links growth rate, market share and cash flow
BCG Matrix
 When a firm’s divisions compete in different
industries, a separate strategy often must be
developed for each business.
 The BCG Matrix is designed to enhance a
multidivisional firm’s efforts to formulate
 Allows a multidivisional organization to
manage its portfolio of businesses
 Focuses on relative market share position
and the industry growth rate.
BCG Matrix

High Low

Stars Cash Cows


Problem Child/

Question Marks
BCG Matrix

Classifies Products into four simple categories:

 Stars – products in markets experiencing high
growth rates with a high or increasing share of
the market
- Potential for high revenue growth
BCG Matrix

 Cash Cows
– High market share
– Low growth markets – maturity stage of PLC
– Low cost support
– High cash revenue – positive cash flows
BCG Matrix

 Dogs
– Products in a low growth market
– Have low or declining market share (decline
stage of PLC)
– Associated with negative cash flow
– May require large sums of money to support
BCG Matrix
 Problem Child
- Products having a low market share in a high
growth market
- Need money spent to develop them
- May produce negative cash flow
- Potential for the future?
BCG Matrix

 Dogs
– Are they worth persevering with?
– How much are they costing?
– Could they be revived in some way?
– How much would it cost to continue to support
such products?
– How much would it cost to remove from the
BCG Matrix

 Problem Children:
 What are the chances of these products
securing a hold in the market?
 How much will it cost to promote them to a
stronger position?
 Is it worth it?
BCG Matrix

 Stars
– Huge potential
– May have been expensive to develop
– Worth spending money to promote
– Consider the extent of their product life
cycle in decision making
BCG Matrix
 Cash Cows
– Cheap to promote
– Generate large amounts of cash – use for further R&D?
– Costs of developing and promoting have largely gone
– Need to monitor their performance – the long term?
– At the maturity stage of the PLC?
BCG Matrix
(1) Cash atof ‘C’
‘A’ is from
Sales The product
maintaining a
used used
maturity to
to support
balance of –
(1) (2) (3) support
cash cow.‘C’‘D’
in the
four products
and growth
portfolio to
in the at
funds and to of
different the
the PLC ‘D’.
development ‘A’of
– Boston
helps ‘B’?
the analysis
dog? D


BCG Matrix

 The major benefit of the BCG matrix is that it

draws attention to the cash flow, investment
characteristics, and needs of an organization’s
various divisions.
 Over time, organizations should strive to
achieve a portfolio of divisions that are Stars.
BCG Matrix Limitations
 Viewing every business as a star, cash cow,
dog, or question mark is overly simplistic.
 Many businesses fall right in the middle of the
BCG matrix and thus are not easily classified.
 The BCG matrix does not reflect whether or
not various divisions or their industries are
growing over time.
 Other variables besides relative market share
position and industry growth rate in sales are
important in making strategic decisions about
various divisions.
Let’s discuss the Retail
Strategic Brand Positioning
Questions ?
• How can a firm choose and communicate
an effective positioning in the market?
• How are brands differentiated?
• What marketing strategies are
appropriate at each stage of the product
life cycle?
• What are the implications of market
evolution for marketing strategies?
• If your product is the same as your
competitors then you cannot win.
• Your product must be different. There must be
a remarkable difference otherwise you will
just compete on price with your competitors.
• Once you know that you are different then you
can advertise it.
• All marketing strategy is built on
Segmentation, Targeting and positioning (STP)
of ones product/service.
• If a company does a poor job on positioning its
product/service – the market will be confused.
What is Positioning?
• Positioning is the act of designing
the company’s offering and image to
occupy a distinctive place in the mind of
the target market.
Value Propositions
• Perdue Chicken
– More tender golden chicken at a
moderate premium price
• Domino’s
– A good hot pizza, delivered to your
door within 30 minutes of ordering, at
a moderate price
Defining Associations
Points-of-difference Points-of-parity
(PODs) (POPs)
• Attributes or benefits • Associations that are
consumers strongly not necessarily
associate with a unique to the brand
brand, positively but may be shared
evaluate, and believe with other brands
they could not find to
the same extent with
a competitive brand
Conveying Category
• Announcing category benefits
• Comparing to exemplars
• Relying on the product descriptor
Consumer Desirability Criteria
for PODs
• Relevance
• Distinctiveness
• Believability
Deliverability Criteria for
• Feasibility
• Communicability
• Sustainability
Examples of Negatively Correlated
Attributes and Benefits

• Low-price vs. High • Powerful vs. Safe

quality • Strong vs. Refined
• Taste vs. Low • Ubiquitous vs.
calories Exclusive
• Nutritious vs. Good • Varied vs. Simple
• Efficacious vs. Mild
Addressing negatively
correlated PODs and POPs
• Present separately
• Leverage equity of another entity
• Redefine the relationship
Differentiation Strategies
• Product
• Channel
• Personnel
• Image
Product Differentiation
• Product form • Style
• Features • Design
• Performance • Ordering ease
• Conformance • Delivery
• Durability • Installation
• Reliability • Customer training
• Reparability • Customer consulting
• Maintenance
Claims of Product Life Cycles
• Products have a limited life
• Product sales pass through distinct stages
each with different challenges and
• Profits rise and fall at different stages
• Products require different strategies in each
life cycle stage
Strategies for Sustaining
Rapid Market Growth
• Improve product quality, add new features,
and improve styling
• Add new models and flanker products
• Enter new market segments
• Increase distribution coverage
• Shift from product-awareness advertising to
product-preference advertising
• Lower prices to attract the next layer of price-
sensitive buyers
Stages in the Maturity Stage
• Growth
• Stable
• Decaying maturity
Marketing Product
• Quality improvements
• Feature improvements
• Style improvements
Marketing Program
• Prices
• Distribution
• Advertising
• Sales promotion
• Services
Ways to Increase Sales
• Convert nonusers
• Enter new market segments
• Attract competitors’ customers
• Have consumers use the product on more
• Have consumers use more of the product on
each occasion
• Have consumers use the product in new ways
Market Evolution Stages
• Emergence
• Growth
• Maturity
• Decline
Emerging Markets
• Latent
• Single-niche
• Multiple-niche
• Mass-market
Maturity Strategies

• Market fragmentation stage

• Market consolidation stage
Competitive Pricing
Pricing Situations
• Deciding on how to price a new product or line
of products
• Evaluating the need to adjust price as the
product moves through the product life cycle
• Changing the positioning strategy that
requires modifying the current price strategy
• Deciding on how to respond to the pressures
of competitiveness
• Gillette : Sensor Excel, Mach 3 (35% higher)
Mach 3 Turbo
• Nokia Handsets
• FMCG products
• Airline Fare
• Hotel Tariffs
• Steel
• Consumer Durables
Pricing Objectives
• Gain Market Position : Big Bazaar – low prices
• Achieve Financial Performance : Increasing
• Product Positioning :
Premium/Leisure/Designer Products
• Stimulate Demand : Discounts/Offers
• Influence Competition : Cartels
Factors Affecting Pricing
Price Sensivity

Legal & Competitor’s

Ethical Likely
Constraints Response

Product Cost
Pricing Strategy
Active Strategy
Low Relative Price


High Relative Price

Active Active
Strategy Strategy

Low High
Passive Passive
Strategy Strategy

Passive Strategy
Pricing Strategy
• High Active Strategy : Emphasizing High Price Product
Positioning/High Margin Low Volume, Less subject to
retaliation : High End Alcohol/Perfume/Apparel
• High Passive Strategy : Positioning focussing on non-price
factors such as esteem, prestige. BMW, Mercedes, Watches
• Low Active Strategy : Discount Stores, where price is an
important factor. Big Bazaar
• Low Passive Strategy : Products which have lower cost
features. Do not emphasize the low price as it may give a
wrong indication to quality.
• Neutral Pricing : Or at near the prices of the key competitor
All the best !!