The competitive environment affects the number and types of competitors the marketing manager must face – and how they behave. Although he usually can’t control these factors, he can choose strategies to avoid competition and, where the competition is inevitable, he can plan for it.
The best work for the marketing manager to avoid head-on competition is to find new or better ways to satisfycustomers’ needs. The search for a breakthrough opportunity — or some sort of competitive advantage — requires an understanding not only of customers but also of competitors. That’s why marketing managers turn to competitor analysis — an organized approach for evaluating the strengths and weaknesses of current or potential competitors’ marketing strategies.
The basic idea is simple. You compare your current (or planned) target market and a marketing mix with what competitors are currently doing or are likely to do in response to your strategy. You also consider competitive barriers — the conditions that may make it difficult, or even impossible, for a firm to compete in a market. Such barriers may limit your own plans or, alternatively, block competitors’ responses to an innovative strategy. For example, Nutra Sweet’s soon-to-expire patent on its low-calorie sweetener effectively limited direct competitors from entering the market.
The initial step in competitor analysis is to identify potential competitors. It’s useful to start broadly — and from the viewpoint of target customers. Companies may offer quite different products to meet the same needs, but they are competitors if customers see them as offering close substitutes. For example, Dow ZipLock bags, Reynold’s aluminum foil, Sarah Wrap, and Tupperware containers compete in the same genetic market for food storageneeds. Identifying a broad set of potential competitors helps marketing managers understand the different ways customers are currently meeting needs – and sometimes points to new opportunities. Usually, however, marketing managers quickly narrow the focus of a competitor analysis to the set of rival firms who will be the closest competitors.
Even if no specific competitors can be identified, marketing managers must consider how long it might take for potential competitors to appear and what they might do. It’s easy to make a mistake of assuming that there won’t be competition in the future — or of discounting how aggressive competition may become. But a successful strategy attracts others who are eager to jump in for a share of the profit — even if profits only hold up for a short time. That is why it is important for firms to find opportunities where they can sustain a competitive advantage over the longer run.
Finding a sustainable competitive advantage requires special attention to competitor strengths and weaknesses. For example, it is very difficult to dislodge a competitor who is already a market leader simply by attacking with a strategy that has similar strengths. An established leader can usually defend its position by quickly copying the best parts of what a new competitor is trying to do. On the other hand, an established competitor may not be able to defend quickly if it is attacked where it is weak. For example, Right Guard deodorant built its strong position with an aerosol spray dispenser. But many consumers don’t like the messy aerosol cloud — or have become concerned about the effect of aerosols on the environment. That weakness provided Old Spice with a competitive opportunity for a deodorant in a pumpdispenser. Right Guard did not quickly fight back with its own pump. The company thought that promoting a pump could hurt sales of its established product — and might even help the competitor.
A marketing manager should actively seek information about current or potential competitors. Although most firms try to keep the specifics of their plans secret, much public information may be available. For example, many firms routinelymonitor competitors’ local newspapers. In one such case, an article discussed a change in the competitor’s sales organization. An alert marketing manager realized that the change was made to strengthen the competitor’s ability to take business from one of her firm’s key target markets. This early warning provided time to make adjustments. Other sources of competitor information include trade publications, alert sales reps, middlemen, and other industry experts. In business markets, customers may be quick to explain what competing suppliers are offering.
The search for information about competitors sometimes raises ethical issues. For example, it’s not unusual for people to change jobs and move to a competing firm in the same industry. Such people may have a great deal of information about the competitor, but is it ethical for them to use it? Similarly, some firms have been criticized for going too far — like waiting at a landfill for competitors’ trash to find copies of confidential company reports.
Beyond the moral issues, stepping over the line of ethical behavior can prove to be very costly. Spying on competitors to obtain trade secrets is illegal, and damage awards can be huge. For example, the courts ordered Keebler Co., Nabisco Brands, and Frito-Lay to pay Procter & Gamble about $125 million in damages for stealing secrets about its Duncan Hines soft cookies. Nabisco had obtained Duncan Hines’ recipe by entering a restrictedarea. Keebler has gone so far as to hire an airplane to take aerial photographs of a Duncan Hines manufacturing facility that was under construction. A Frito-Lay employee posed as a potential customer to attend a confidential sales presentation.
1. Find the following words in italics in the text, read the sentences and guess their equivalents in Russian:
2. Say if these statements True (T) or False (F). Correct the false ones.
1.A marketing manager will be able to avoid head-on competition, if he finds new or better ways to satisfy customers’ needs.
2.Competitor analysis is an organized approach for estimation the weaknesses of current or potential competitors’ marketing strategies.
3.The idea of competitor analysis is that you compare your current market and marketing mix with what competitors did last year in response to your previous strategy.
4.It is reasonable to identify potential competitors from the viewpoint of target customers.
5.If no specific competitors can be identified, marketing managers may start doing some other work.
6.It is very difficult to dislodge an established market leader.
7.Spying on competitors to obtain some information is absolutely legal.
3. Match the questions to their answers (below).
1.Why do marketing managers often turn to competitor analysis?
2.What are competitive barriers?
3.Where do Dow ZipLock bags, Reynold's aluminum foil, Saran Wrap, and Tupperware containers compete?
4.What kind of errors can marketing managers make?
5.Why is it so difficult to dislodge a competitor who is already a market leader by attacking with a strategy that has similar strengths?
6.May the information about competitors be available?
7.Who is an ‘alert marketing manager’?
8.How much did Keebler Co., Nabisco Brands, and Frito-Lay pay Procter & Gamble for stealing secrets about its Duncan Hines soft cookies?
A.The court ordered them to pay $125 million in damages.
B.Yes, much public information may be available, though most firms try to keep the specifics of their plans secret.
C.They do it because the search for a breakthrough opportunities requires an understanding not only of customers but also of competitors.
D.It is difficult because a market leader can usually defend its position by quickly copying the best parts of what a new competitor is trying to do.
E.These are the conditions that may make it difficult, or even impossible, for a firm to compete in a market.
F.They compete in the same generic market for food storage needs.
G.It’s easy to make a mistake of assuming that there won’t be competition in the future — or of discounting how aggressive competition may become.
H.It is a person who can make adjustments quickly.
4. Complete the sentences using the information from the text.
1. Competitive barriers may_______competitors’ responses to an innovative strategy.
2. Finding a sustainable competitive advantage requires special attention to competitor’s________.
a)strengths and weaknesses
b)target market and marketing mix
c)trade publications and middlemen
3. Right Guard did not quickly fight back against Old Spice because
a)they didn't have any new strategy
b)they didn't need it as the company was an established leader.
c)Right Guard was afraid that it might even help the competitor
5. Work with a partner to complete the sentences below with the following words.
to satisfy to assume to discount
to sustain to dislodge an established leader
to make adjustments a middleman to spy on smb.
1.Don’t________the strengths of current and potential competitors!
2.All famous companies do their best to________customers’ needs.
3.The use of competitor analysis will help you to________a competitive situation.
4.A company which has already won a target market is an________ there.
5.Trade publications, alert sales reps and_______are sources of competitor information.
6.If a marketing manager_______ that there won't be competition in the future, he will make a big mistake.
7.A market situation changes very quickly, you should_______ according to it.
8.Frito-Lay decided to_______Procter & Gamble to obtain trade secrets.
9.It is very difficult to_______a market leader by attacking with a strategy that has similar strengths.
6. Answer the following questions:
1.What is the best way to avoid head-on competition?
2.Why should marketing managers use competitor analysis and consider competitive barriers?
3.Can companies offering quite different products be competitors? Why?
4.Where do such companies as Dow ZipLock and Saran Wrap compete?
5.Is it possible to dislodge an established competitor? When? Give an example.
6.What are the main sources of competitor information?
7.Is it legal to spy on competitors?
8.Why is it very costly to step over the line of ethical behaviour? Give some examples.
7. Explain what the following words and phrases mean.
1) competitor analysis 2) competitive barriers 3) an established leader
4) an alert marketing manager 5) damage awards
8. Split into pairs and act out the following situation.
Student A. You are an experienced marketing manager. Help your niece who is just starting to work in this sphere. She knows that one of the aspects of her job will be avoiding competition and fighting against it. Give her some reasonable advice and answer all her questions.
Student B. You are very happy because last week you were employed by a big company as a marketing manager. Your boss told you that the company had many competitors and your task was to attack them. Ask your uncle, a good marketing manager, what you should do.
1. Word combinations with ‘market’:
‘Market’ is often used in these combinations:
In the late 1990s, Internet use was doubling every 100 days. Market growth was incredible.
Women are a particularly interesting target for the Volvo V70. They are an important market segment for Volvo.
The software company divides the software market into large companies, small companies, home office users, and leisure users. This is its market segmentation.
Among UK supermarkets, Tesco sells more than any of the other chains. It has the highest market share.
Tesco is the market leader among UK supermarkets as it sells more than any of other chains.
2.Replace the underlined expressions with expressions from the above word combinations. You may need to add a verb in the correct form.
I’m a marketing manager for CrazyCola in a country called Newmarket. In this market, we (1) sell more than any other cola. In fact, we (2) have 55 per cent of the market. (3) Sales are increasing at seven to eight per cent per year. There are two main (4) groups of users: those who drink it in cafes, bars and restaurants, and those who buy it to drink at home. Of course, many users belong to both groups, but this is our (5) way of dividing our consumers.