978-0134492513 Chapter 18 Lecture Notes Part 1

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Chapter 18

CREATING COMPETITIVE ADVANTAGE

MARKETING STARTER: CHAPTER 18

MICROSOFT: A New Competitive Marketing Strategy for the Post-PC Era

Synopsis

Everyone is familiar with Microsoft, the technology giant that dominated the computer software world throughout

the 1990s and much of the 2000s. Its Windows and Office products have long been must-haves in the PC market.

But with the decline in standalone personal computers and the surge in digitally connected devices—everything

from smart-phones and tablets to internet-connected TVs—mighty Microsoft recently found itself struggling to

revamp its competitive marketing strategy in a fast-changing digital environment. The tech giant is now reinventing

itself as a relevant brand that consumers can’t live without in the post-PC era. Microsoft now wants to be a full-line

digital devices and services company that delivers “delightful, seamless technology experiences” that connect

people to communication, productivity, entertainment, and one another. More important is the way that these

software, hardware, and service offerings work together to deliver a full digital experience. Microsoft’s revamped

competitive strategy also plays to the company’s long-held competitive advantage in business markets as the

company plunges headlong into new business products and services. “The opportunity ahead for Microsoft is vast,”

says Microsoft’s CEO, “but to seize it, we must focus clearly, move faster, and continue to transform.”

Discussion Objective

A discussion of the Microsoft story provides an example of how an innovative idea can not only survive but thrive,

and how a company must adapt. From its beginnings providing the operating system software for the vast majority

of personal computers, Microsoft has grown and changed over the decades.

Starting the Discussion

To start the discussion, review Microsoft’s history. Go online and visit the Microsoft website at

http://www.microsoftsodastreamusa.com/. As a group, explore the company’s “About” and “Products” pages on its

website. The “About” page lets students learn about the company, its management, its philosophies and values. The

“Products” tab leads to the different kinds of Microsoft products, from software and devices to business

applications, and even student and education-focused products. Review the Microsoft timeline at

https://www.microsoft.com/about/companyinformation/visitorcenter/timeline.htm.

Discussion Questions

1. What is the Microsoft “product leadership” strategy? (This strategy means providing superior value by

offering a continuous stream of leading-edge products or services. It is open to new ideas, relentlessly

pursues new solutions, and works to get new products to market and expand its customer base. Look at the

products identified in the vignette, along with others noted on the company website.)

2. Ask students whether Microsoft can continue to be the leader it was for so long. Remember that at one time

it was the most valuable company in history. From a company that was so focused on one specific product,

and then two (Windows and Office), does Microsoft have the strength and products to appeal long-term to

an expanded customer base? Remember the quote at the end of the vignette that the opportunities are there,

but that the company must focus, move, and continue to transform. It knows it must change to remain

relevant and successful.)

3. How does the Microsoft story relate to the competitive strategy concepts in Chapter 178? (This chapter is

all about developing and creating competitive advantage. Microsoft has crafted a competitive marketing

strategy that is right for its customers and the competitive digital marketplace.)

CHAPTER OVERVIEW

Use Power Point Slide 18-1 here

This chapter pulls all of the marketing basics together. Understanding customers is an important

first step in developing profitable customer relationships, but it is not enough. To gain

competitive advantage, companies must use this understanding to design marketing offers that

deliver more value than the offers of competitors seeking to win the same customers.

This chapter looks at competitor analysis, the process companies use to identify and analyze

competitors. Then, the chapter moves to competitive marketing strategies by which companies

position themselves against competitors to gain the greatest possible competitive advantage.

CHAPTER OBJECTIVES

Use Power Point Slide 18-2 here

1. Discuss the need to understand competitors as well as customers through competitor

analysis.

2. Explain the fundamentals of competitive marketing strategies based on creating value for

customers.

3. Illustrate the need for balancing customer and competitor orientations in becoming a truly

market-centered organization.

CHAPTER OUTLINE

p. 516 INTRODUCTION

Microsoft began by providing the operating system software

for the vast majority of personal computers. It then added

Microsoft Office which became the standard office

productivity suite for the home and business world.

As times changed, Microsoft has changed as well. It went

from being the most valuable company in history to lagging

behind Google, Apple, Samsung, Amazon, and even

Facebook.

Microsoft now wants to be a full-line digital devices and

services company that delivers “delightful, seamless

technology experiences” that connect people to

communication, productivity, entertainment, and one

another.

It has moved further into hardware (Surface) and software

for numerous devices, and new business products and

services that maintain its competitive advantage in business

markets.

p. 517

Photo: Microsoft

Opening Vignette Questions

1. What unique competitive strategy decisions has

Microsoft made that have allowed it to grow and

prosper in such a competitive market, even

though much of its current focus does not

directly involve end-user customers?

2. What kind of companies is Microsoft competing

with now vs. the companies it competed with

earlier in its history? What kinds of strategic

changes has Microsoft had to make as its

competitors have changed?

3. What is Microsoft’s next marketing move at this

stage? What might you envision for them

moving forward?

p. 518

PPT 18-3

PPT 18-4

Discuss the need to understand competitors as well as

customers through competitor analysis.

Today’s companies face their toughest competition ever.

To win in today’s marketplace, companies must become

adept not just in managing products, but in managing

customer relationships in the face of determined

competition.

Building profitable customer relationships and gaining

competitive advantage requires delivering more value and

satisfaction to target consumers than competitors do.

Customers will see competitive advantages as customer

advantages.

The first step is competitor analysis—the process of

identifying, assessing, and selecting key competitors.

The second step is developing competitive marketing

strategies that strongly position the company against

competitors and give it the greatest possible competitive

advantage.

Learning Objective

p. 518

Key Terms:

Competitive

advantage,

Competitor

analysis,

Competitive

marketing strategies

Troubleshooting Tip

It is important for students to really understand what

competitive advantage and competitor analysis

mean. Be sure to carefully cover the introduction to

the chapter so these concepts are fully understood.

p. 518

PPT 18-5

p. 519

PPT 18-6

p. 521

COMPETITOR ANALYSIS

As shown in Figure 18.1, competitor analysis involves first

identifying and assessing competitors and then selecting

which competitors to attack or avoid.

Identifying Competitors

At the narrowest level, a company can define its

competitors as other companies offering similar products

and services to the same customers at similar prices.

But companies actually face a much wider range of

competitors. The company might define competitors as all

firms making the same product or class of products.

Even more broadly, competitors might include all

companies making products that supply the same service.

Finally, and still more broadly, competitors might include

all companies that compete for the same consumer dollars.

Companies must avoid “competitor myopia.” A company is

more likely to be “buried” by its latent competitors than its

current ones.

Companies can identify their competitors from the industry

point of view. A company must understand the competitive

patterns in its industry if it hopes to be an effective “player”

in that industry.

Companies can also identify competitors from a market

point of view. Here they define competitors as companies

that are trying to satisfy the same customer need or build

relationships with 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.

Assessing Competitors

Determining Competitors’ Objective

Each competitor has a mix of objectives.

p. 519

Figure 18.1: Steps

in Analyzing

Competitors

p. 519

Photo: Cinnabon

p. 520

Photo: Kodak

PPT 18-7

p. 521

p. 522

PPT 18-8

The company wants to know the relative importance that a

competitor places on current profitability, market share

growth, cash flow, technological leadership, service

leadership, and other goals.

Knowing a competitor’s mix of objectives reveals whether

the competitor is satisfied with its current situation and how

it might react to different competitive actions.

A company must also monitor its competitors’ objectives for

various segments.

Identifying Competitors’ Strategies

The more that one firm’s strategy resembles another firm’s

strategy, the more the two firms compete. A strategic

group is a group of firms in an industry following the same

or a similar strategy in a given target market.

Some important insights emerge from identifying strategic

groups. For example, if a company enters one of the groups,

the members of that group become its key competitors.

Although competition is intense within a strategic group,

there is also rivalry among groups.

Some of the strategic groups may appeal to

overlapping customer segments.

The customers may not see much difference in the

offers of different groups.

Members of one strategic group might expand into

new strategy segments.

The company needs to look at all of the dimensions that

identify strategic groups within the industry.

Assessing Competitors’ Strengths and Weaknesses

Marketers need to assess each competitor’s strengths and

weaknesses carefully to answer the critical question: What

can our competitors do?

As a first step, companies can gather data on each

competitor’s goals, strategies, and performance over

the last few years.

Companies normally learn about their competitors’

strengths and weaknesses through secondary data,

personal experience, and word of mouth.

p. 521

Key Term: Strategic

group

p. 522

Photo: Ford

p. 522

They can conduct primary marketing research with

customers, suppliers, dealers, and social networking

sites.

They can benchmark themselves against other

firms, comparing the company’s products and

processes to those of competitors or leading firms in

other industries to find ways to improve quality and

performance.

Estimating Competitors’ Reactions

Next, the company wants to know: What will our

competitors do?

A competitor’s objectives, strategies, strengths, and

weaknesses go a long way toward explaining its

likely actions. They also suggest its likely reactions

to company moves such as price cuts, promotion

increases, or new-product introductions.

Each competitor has a certain philosophy of doing

business, a certain internal culture, and guiding

beliefs.

Each competitor reacts differently.

p. 522

Key Term:

Benchmarking

p. 523

Photo: Competitor

reactions, T-Mobile

Assignments, Resources

Use Real Marketing 18.1 here

Use Discussion Question 18-1 here

Use Marketing by the Numbers here

Use Small Group Assignment 1 here

Use Individual Assignment 1 here

Use Think-Pair-Share 1, 2, and 3 here

Troubleshooting Tip

Use Figure 18.1 to present the steps in analyzing

competitors. Once students are clear on the direction

of exploration, the path will be easier to follow. Use

the various student projects suggested in this

supplement to have students practice identifying

competitors (both direct and indirect). Once

identification has been accomplished, move students

to a discussion of how to assess competitors. For

many students, using an example from the sports

world or information technology will be appropriate

because students are generally familiar with the

various competitive environments in these two

fields.

p. 523 Selecting Competitors to Attack and Avoid

PPT 18-9

p. 523

PPT 18-10

p. 524

PPT 18-11

Strong or Weak Competitors

The company can focus on one of several classes of

competitors.

Most companies prefer to compete against weak

competitors. This requires fewer resources and less time.

But in the process, the firm may gain little.

A useful tool for assessing competitor strengths and

weaknesses is customer value analysis.

The aim of customer value analysis is to determine the

benefits that target customers’ value and how customers rate

the relative value of various competitors’ offers.

The key to gaining competitive advantage is to take each

customer segment and examine how the company’s offer

compares to that of its major competitor. The company is

searching for that “strategic sweet spot.”

Good or Bad Competitors

The existence of competitors results in several strategic

benefits:

They may share the costs of market and product

development and help to legitimize new

technologies.

They may serve less-attractive segments or lead to

more product differentiation.

Competitors may help increase total demand.

However, a company may not view all of its competitors as

beneficial. An industry often contains “good” competitors

and “bad” competitors.

Good competitors play by the rules of the industry.



Bad competitors break the rules. They try to buy

share rather than earn it, take large risks, and in

general, shake up the industry.

Finding Uncontested Market Spaces

Rather than competing head to head with established

competitors, many companies seek out unoccupied

positions in uncontested market spaces. They try to create

p. 523

Key Term:

Customer value

analysis

p. 524

Photo: Good and

bad competitors

p. 525

PPT 18-12

products and services for which there are no direct

competitors. Called a “blue-ocean strategy,” the goal is to

make competition irrelevant.

Designing a Competitive Intelligence System

The competitive intelligence system:

Identifies the vital types of competitive information

and the best sources of this information

Continuously collects information from the field and

from published data

Checks the information for validity and reliability,

interprets it, and organizes it in an appropriate way

Sends relevant information to decision makers and

responds to inquiries from managers about

competitors

This process ensures that company managers receive timely

intelligence about competitors.

Review Learning Objective 1: Discuss the need to

understand competitors as well as customers through

competitor analysis.

p. 524

Photo: Blue ocean

strategy, Cirque du

Soleil

Assignments, Resources

Use Discussion Question 18-2 here

Use Critical Thinking Exercise 18-6 and 18-8 here

Use Additional Project 1 here

Use Outside Example 1 here