3-1

Chapter Two

Markets and
Competitive
Space

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.

 3-2

MARKETS AND
COMPETITIVE SPACE

 Markets and Strategies

 Product-Market Scope
and Structure
 Describing and
Analyzing End-Users
 Analyzing Competition
 Developing a Strategic
Vision about the Future
 Market Size Estimation
 MARKETS AND
3-3

COMPETITIVE SPACE
The Challenges ―
Markets are increasingly complex,
turbulent, and interrelated.
Importance of a broad view of the
market.
Essential to develop a vision about
how the market is likely to change in
the future.
Continuous Monitoring is Necessary to:
Find promising opportunities
Identify shifts in value requirements
Understand competitors’ positioning
Guide targeting and positioning
decisions
 3-4

Markets Impact
Strategies

 Market changes often

require altering strategies
 Forces of change create

both market opportunities

and threats
 Inherent danger in faulty

market sensing
 3-5

Value Migrations

 Customers shift
purchasing to new
business designs with
enhanced value offering
 Beware of disruptive

technologies and
commoditization
 3-6

Matching Needs
with Product
Benefits
 A product – market matches
people with needs to the
product benefits that satisfy
those needs

“A product – market is the set

of products judged to be
substitutes within those
usage situations in which
similar patterns of benefits
are sought by groups of
customers.”*
*Srivastava, et al. (1984) Journal of Marketing, Spring, 32.
 3-7

Defining and Analyzing

Product-Markets

Product – Market
Boundaries and Structure
 Determining Product-Market
Structure

1. Start with the generic need

satisfied by the product category
of interest to management
2. Identify the product categories
(types) that can satisfy the
generic need
3. Form the specific product –
markets within the generic
product – market
 Illustrative Fast-Food 3-8

Product-Market Structure

The consumption need satisfied is fast and

convenient preparation of food

SUPER MICROWAVE
MARKETS OVENS

FAST-FOOD
MARKET

CONVENIENCE TRADITIONAL
STORES RESTAURANTS
 3-9

Illustrative Product
– Market Structure
Food and beverages •Generic Product
for breakfast meal
Class

Cereals •Product Type

Ready to eat •Variant A

Regular
Natural •Variant B
Pre-sweetened
Nutritional

Life Product 19 Special K •Brands

 3-10

Identifying and
Describing Buyers (Family Size, Age, Income
Geography, Sex, Occupation)

How
Building DESCRIBING
Buyers
Customer AND Make
Profiles ANALYZING Choices
(Needs and END-USERS
wants, use
situations,
activities
interest,
opinions
Environmental
Influences (Government actions, Social
change, Economic shifts, technology)
 3-11

ANALYZING
COMPETITION
1. Define Industry
Structure and
Characteristics

2. Identify
5. Identify
and
New PRODUCT- Describe
Competitors MARKET Key
STRUCTURE Competitors
AND
MARKET
4. Anticipate SEGMENTS
Actions by 3. Evaluate
Competitors Key
Competitors
 3-12

Examples of Levels
of Competition
Baseball
cards

Bottle Video
water Games
Fast
Food

Regular Diet lemon Ice

colas limes Cream
Beer
Diet-Rite
Cola
Fruit
Diet Diet
flavored
Coke Pepsi Wine
colas
Product from
competition:
diet colas Lemon
limes
Juices Product category
competition:
soft drinks Coffee

Generic competition:
beverages
Budget competition:
food & entertainment
 3-13

Industry Analysis

 Industry size, growth,

and composition
 Typical marketing
practices
 Industry changes that
are anticipated (e.g.
consolidation trends)
 Industry strengths and
weaknesses
 Strategic alliances
among competitors
 3-14

Value Chain Analysis

SUPPLIERS

PRODUCERS

WHOLESALERS/
DISTRIBUTORS
Value
Added
RETAILERS/ Chain
DEALERS

CONSUMER/
ORGANIZATIONAL
END USERS
 3-15

Competitive
Forces
1. Rivalry among existing firms.

2. Threat of new entrants.

3. Threat of substitute products.

4. Bargaining power of
suppliers.

5. Bargaining power of buyers.

Source: Michael E. Porter, Competitive Advantage, Free Press, 1985, 5.

 3-16

Key Competitor
Analysis
 Business scope and
objectives
 Management experience,
capabilities, and
weaknesses
 Market position and trends
 Market target(s) and
customer base
 Positioning strategy for
each target
 Distinctive capabilities
 Financial performance
(current and historical)
 3-17
Key Competitor Analysis
 Business scope and
objectives
 Management experience,
capabilities, and weaknesses
 Market position and trends
 Market target(s) and customer
base (Market share and relative market
share measure)
 Positioning strategy for each
target
 Distinctive capabilities
 Financial performance
(current and historical)
(Competitor’s ratings)
 How well Competitors’ meet
value requirements (customer
surveys, loyalty measure, and relative market
share)
 3-18

Anticipate Competitor’s
Actions

 What are future trends in

industry
 Strategy shifts are possible ny
competitor
 3-19

MARKET SIZE
ESTIMATION
Product-Market Forecast
Relationships
(area denotes sales in $’s)
Market Potential Estimate
(production and distribution has no shortfalls)

Unrealized
Potential

Company Industry
Sales Sales
Forecast Forecast
 3-20

DEFINING AND
ANALYZING MARKETS
Define Product-Market
Boundaries and Structures

Identify and Describe End-Users

Analyze Competition

Forecast Market Size

and Growth Trends