LEARNING OBJECTIVES
In this chapter, we will address the following questions:
1. Why is it important for companies to grow the core of their business?
2. How can market leaders expand the total market and defend market share?
3. How should market challengers attack market leaders?
4. How can market followers or nichers compete effectively?
5. What marketing strategies are appropriate at each stage of the product life cycle?
6. How should marketers adjust their strategies and tactics during slow economic
growth?
SUMMARY
1. Growing the core or seeking organic growth—focusing on opportunities with existing
products and markets—is often a prudent way to increase sales and profits.
2. A market leader has the largest market share in the relevant product market. To remain
dominant, it looks to expand total demand and protect and perhaps increase its current
share.
3. A market challenger attacks the market leader and other competitors in an aggressive
bid for more market share. There are five types of general attack and specific attack
strategies.
4. A market follower is a runner-up firm willing to maintain its market share and not
rock the boat. It can be a cloner, imitator, or adapter.
5. A market nicher serves small market segments ignored by larger firms. The key is
specialization, which can command a premium price in the process.
6. Companies should maintain a good balance of consumer and competitor monitoring
and not overly focus on competitors.
7. Technologies, product forms, and brands exhibit life cycles with distinct stages,
usually introduction, growth, maturity, and decline. Most products today are in the
maturity stage.
8. The introduction stage is marked by slow growth and minimal profits. If successful,
the product enters a growth stage marked by rapid sales growth and increasing profits.
In the maturity stage, sales growth slows and profits stabilize. Finally, the product
enters a decline stage. The company’s task is to identify truly weak products and phase
them out with minimal impact on company profits, employees, and customers.
9. Like products, markets evolve through stages: emergence, growth, maturity, and
decline.
C H A P T E
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COMPETITIVE
DYNAMICS
10. In a slow-growth economy, marketers must explore the upside of increasing
investments, get closer to customers, review budget allocations, put forth the most
compelling value proposition, and fine-tune brand and product offerings.
OPENING THOUGHT
This chapter adds the additional element of the complexity of marketing—competitive
analysis. Care should be taken not to over dramatize the importance of monitoring
competition, however, many firms do not give competitors the attention they merit so some
emphasis is needed.
A key concept introduced in this chapter is that of market nicher—a specialist in small markets
underserved by larger corporations. Many large firms today started out as “nichers” and many
large firms of tomorrow are our “nichers” today. The concept of “nichers” and the potential of
growing them into larger firms can be exciting.
TEACHING STRATEGY AND CLASS ORGANIZATION
PROJECTS
1. At this point in the semester-long project, students should be prepared to present their
competitive analysis. Who are the market leaders for their chosen product or service?
What niche have they identified for their product/service? Is their product or service
going to be a leader, follower, or challenger to well-established products or brands?
2. Michael Porter’s Five Forces model is as applicable today as it was when it was
introduced. Have the students select a market or market segment (jeans, cell phones,
etc.) and using Michael Porter’s model, completely define these five forces for the
market or market segment. Who are the potential entrants, who are the suppliers (and
how much power do they have), who are the buyers (and what sort of buying power
do they have), what are the substitutes and how is the industry segmented (market
share is a good indicator of segmentation for this project)? Student’s analysis and
answers should be comprehensive.
3. Sonic PDA Marketing Plan: Competitive strategy analysis is an important part of two
areas within the marketing plan. First, in assessing the current situation, businesses
need to identify key competitors and learn about each rival’s strengths and
weaknesses. Second, competitive intelligence and analysis shapes the competitive
strategy that is supported by the marketing mix.
Sonic is a new entrant in an established industry that has competitors with relatively
high brand identity and strong market positions. As you assist Jane Melody in
development of the Sonic marketing plan, consider the following key issues that will
affect Sonic’s ability to introduce a new PDA successfully:
What is the strategic group for Sonic?
Which firm is the market leader, and what are its objectives, strengths, and
weaknesses?
What additional competitive intelligence is needed to answer the question about
the market leader more completely, and how should Sonic go about getting the
information?
Which competitive strategy should be most effective for Sonic?
Enter your answers in a written marketing plan or enter them into the Competition,
SWOT Analysis, and Critical Issues sections of Marketing Plan Pro.
ASSIGNMENTS
Identify the major competitors in the blue jeans market. Who has the leading market
share, whose shares have declined? What segmentation is (has) occurring/occurred in the
blue jeans market and why? Did demographic changes affect the market (from baby
boomers to Gen X or Gen Y)? What competitive signs, symbols, events, or occurrences
did Levi-Strauss miss? What current shifts in competition and channel power is occurring
and what can Levi-Strauss do to minimize the impact from these changes?
Have the students read: Tarum Khanna and Krishna G. Palepu, “Emerging Giants.”
Harvard Business Review, October 2006, Vol. 84, Issue 10, pp. 60-69 and comment on
the emerging competition from the “Third World” such as India and China on companies
in the United States. Specifically, ask the students to comment on whether or not they
believe that this 1) competition will increase in the future, and 2) how a U.S. company
should respond to this threat.
For a market leader, increased sales must come from expanding the total market through
adding new customers or increasing the usage of the product. Picking a market leader in
an industry (Dell computers for example) explain how your market leader can expand the
total market by adding new customers or increasing the usage of the product. Be as
specific as possible.
In challenging a market leader, the challenger has a number of differing strategies to
employ. Choosing the right one (or wrong one) could result in a larger market share and
increased profits (or disaster) for the challenger. In choosing a specific attack strategy, the
challenger must go beyond and develop specific strategies of price, lower price goods,
value priced goods and services, and so on. Students should explore these strategies and
come prepared to identify one company (or brand) that has chosen each of these
strategies to implement and defend their selection(s).
Market-nichers avoid large markets and try to be the leader in a small market or niche.
Nichers have three tasks: creating niches, expanding niches, and protecting niches.
Multiple niching is preferable to single niching. Students should identify three “nichers”
(firms and/or brands) and explain why they have identified these as “nichers” based upon
the criteria in the chapter.
END-OF-CHAPTER SUPPORT
MARKETING DEBATE—Do Brands Have Finite Lives?
Often, after a brand begins to slip in the marketplace or disappears altogether, commentators
observe, “all brands have their day.” Their rationale is that all brands, in some sense, have a
finite life and cannot be expected to be leaders forever. Other experts contend, however, that
brands can live forever, and long-term success depends as much on the skill and insight of the
marketers involved.
Take a position: Brands cannot be expected to last forever versus there is no reason for a brand
to ever become obsolete.
Pro: Brands can last forever as evidenced by a number of brands that are entering their one
hundredth year of existence. For a brand to have immortality, it must continue to have a
competitive advantage in its product differentiation dimensions (product, services, personnel,
channel, and symbols). The management of the brand, how well brand management monitors
changes in the environment, customer preferences, strategies, and technology to continue to
equip the brand with point-of-differences and/or points-of-parity is the key to the brand’s
ongoing success in the marketplace.
Con: Brands meet specific consumer needs and wants and provide specifics for these needs
and wants. As consumer needs and wants change, evolve, or disappear, brands must also
change, evolve, and finally expire. The loss of the brands point-of-difference in the
marketplace or its lack of point-of-parity with other brands will cause its demise. Firms can be
best served to understand and accept the inevitability of brand declines and plan for the
creation of and marketing of newer brands to replace declining brands quickly. If a brand is
designed to perform a specific function, the change in technologies may render that brand
obsolete and see its market decline. Consider the case of the IBM Selectric® typewriter as an
example where the new technology of computers rendered this brand obsolete. Every
manufacturer or service provider must be on the lookout for threats to their brand’s ongoing
effectiveness and applicability and develop appropriate replacement strategies.
DETAILED CHAPTER OUTLINE
Opening vignette: To be a long-term market leader is the goal of any marketer. Today’s
challenging marketing circumstances often dictate that companies reformulate their
marketing strategies and offerings several times, like UPS and FedEx. This chapter
examines growth, the role competition plays, and how marketers can best manage their
brands given their market position and stage of the product life cycle.
I. Growth
A. An important function of marketing is to drive growth in sales and revenue
for a company.
B. Growth Strategies
a. Grow by building your market share
b. Grow by developing committed customers and stakeholders
c. Grow by building a powerful brand
d. Grow by innovating new products, services, and experiences
e. Grow by international expansion
f. Grow by acquisitions, mergers, and alliances
g. Grow by building an outstanding reputation for social responsibility
h. Grow by partnering with government and NGOs
C. Growing the Core
a. Growing the core is focusing on a firm’s most successful existing products
and markets
b. Avoid the trap of thinking the “grass is always greener” and
overestimating the upside of new ventures that stretch the company into
uncharted territory.
c. Growing the core can be a less risky alternative than expansion into new
product categories.
d. It strengthens a brand’s credentials as a source of authority and credibility
and can yield economies of scale.
e. Through improved revenues and lower costs, growing the core can also
lead to greater profits.
f. Three main strategies:
i. Make the core of the brand as distinctive as possible.
ii. Drive distribution through both existing and new channels
iii. Offer the core product in new formats or versions
g. Growth strategies are not necessarily “either/or” propositions. A focus on
core businesses does not mean foregoing new market opportunities.
II. Competitive Strategies for Market Leaders
A. A market leader has the largest market share and usually leads in price changes,
new-product introductions, distribution coverage, and promotional intensity.
B. Although marketers assume well-known brands are distinctive in consumers’
minds, unless a dominant firm enjoys a legal monopoly, it must maintain constant
vigilance.
a. Find ways to expand total market demand
b. Protect its current share through good defensive and offensive actions
c. Increase market share, even if market size remains constant
C. Expanding Total Market Demand
a. When the total market expands, the dominant firm usually gains the most.
b. Attract New Customers
i. Those who might use it but do not (market-penetration strategy)
ii. Those who have never used it (new-market segment strategy)
iii. Those who live elsewhere (geographical-expansion strategy)
c. More Usage
i. Increase the amount, level, or frequency of consumption
ii. Boost the amount through packaging or product redesign
iii. Identify additional opportunities to use the brand in the same basic
way
iv. Identify completely new and different ways to use the brand
D. Protect Market Share
a. The front-runner should lead the industry in developing new products and
customer services, distribution effectiveness, and cost cutting.
b. Comprehensive solutions increase competitive strength and value to
customers so they feel appreciative or even privileged to be a customer as
opposed to feeling trapped or taken advantage of
c. In satisfying customer needs, we can draw a distinction between
responsive marketing, anticipative marketing, and creative marketing.
i. A responsive marketer finds a stated need and fills it.
ii. An anticipative marketer looks ahead to needs customers may have
in the near future.
iii. A creative marketer discovers solutions customers did not ask for
but to which they enthusiastically respond.