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Competition• A business’s attempt to get customers in the face of other
businesses selling the same or similar products• Forces companies to become more efficient• Keeps prices down and quality up
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8-2
Identifying Competitors
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8-3
Five Forces Determining Segment Structural Attractiveness
• Threat of intense segment rivalry—cellular phone market
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8-4
Five Forces Determining Segment Structural Attractiveness
• Threat of new entrants—Can come from anywhere
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8-5
Five Forces Determining Segment Structural Attractiveness
• Threat of substitute products—Greyhound and Amtrak profitability threatened by rise of air travel
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8-6
Five Forces Determining Segment Structural Attractiveness
• Threat of buyers’ growing bargaining power—Wal-Mart buying power
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8-7
Five Forces Determining Segment Structural Attractiveness
• Threat of Suppliers’ growing bargaining power—ExxonMobil, Shell, BP, and Chevron-Texaco are at the mercy of oil-supplying cartels such as OPEC.
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8-8
Analyzing Competitors
Share of market—target marketShare of market—target market
Share of mind--% of customers who names companiesShare of mind--% of customers who names companies
Share of heart--% of customers who prefer a companyShare of heart--% of customers who prefer a company
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8-9
Five Forces Determining Segment Structural Attractiveness
• Threat of intense segment rivalry—cellular phone market
• Threat of new entrants—Can come from anywhere• Threat of substitute products—Greyhound and
Amtrak profitability threatened by rise of air travel• Threat of buyers’ growing bargaining power—
Wal-Mart buying power• Threat of Suppliers’ growing bargaining power—
ExxonMobil, Shell, BP, and Chevron-Texaco are at the mercy of oil-supplying cartels such as OPEC.
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8-10
Five Forces Determining Segment Structural Attractiveness
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Price vs. Non-Price Competition• Price
• Established firms focus on keeping prices down• Revenue lost to lower prices is made up through higher sales
• Non-price• Factors such as quality service, and reputation• Customers are willing to pay more
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Who are your Competitors?• First level
• Specific brands which are direct competitors to your product or service, in your geographic locality
• Second level • Competitors who offer similar products in a different business
category or who are more geographically remote • Third level
• Competitors who compete for the “same-occasion” dollars • Toots
• 1st Other sports bars• 2nd Other sit down restaurants• 3rd Fast food or convenience stores
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Three Levels of Competition1 s t, 2 n d , 3 rd L eve l C o m p etito rs
P h illip 's B o o ks to re H a s tin gs
L ife w ay C hris tia n S h op B a rne s an d N o b le .com
H o llyw oo d V id eo L in e ba u g h P u b lic L ib ra ry R h ino G am es E le c tro n ics B o u tiq ue C D W are h o u se
B lu e R a id er B o oks to re A m azo n.com W a l-M a rt
H A S B o o ks to re C o rn er B o oks to re B o o ks -A -M illion
C h ris a n d B e n 's B o oks to re
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Competitors
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Competition Analysis
Colorado Bearcats• 1st level competitors: Other professional sports teams
• Denver Broncos• Denver Nuggets• Colorado Avalanche
• 2nd level competitors: Collegiate sports and geographically remote professional teams• Kansas City Chiefs• University of Colorado athletics• Air Force Academy athletics• Colorado Springs Sky Sox
• 3rd level competitors: Other businesses competing for money• Rocky Mountain Motorcycle Museum• Pro Rodeo Hall of Fame• World Figure Skating Hall of Fame
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Levels of Competition
WE Are Boats
West Marine
Bass ProDick’s
Sporting Goods
Academy Sports and Outdoors
Murfreesboro Outdoors
REIHibbett Sports
EBay OvertonsBoatowne
rs.com
Wal-Mart Kmart TargetSams Club
Boatersworld.com
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What Every Company Should Know About Their Competitors
• Who is the price leader?• Who is the quality leader?• Who has the largest market share?• Why have certain companies recently entered or withdrawn
from the market?
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Competition Analysis
• Buy your competitors’ products• Frequent your competitors’ territory• Read industry publications• Don’t forget to focus on your own
business
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Determine Competitors Strengths & Weaknesses
• Why customers buy from them?• Value • Service• Convenience• Reputation• “Perceived” or “Actual” Strengths
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Competition: Common Mistakes to Avoid
• Assuming you have no competition! • Demonstrates inexperience and minimal understanding of your
business• Failing to identify both direct and indirect competitors• Underestimating the power and strength of competitors• Omitting the specific competitive advantages you hold
over your competition• Demonstrating a lack of knowledge or strategy to combat
changing competitive conditions• Failing to define and clarify you position, strength, and
market niche focus
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Factors to Consider in Analyzing the Competition
ProductLine (Breadth)
Pricing Advertising SupplierAdvantage
Product Line (Depth)
Financial Resources
Employee Morale
Sales Force
Uses of Technology
Distribution Advantage
Operational Efficiency
Technology Competence
Market Share Strengths Weaknesses
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Analyzing Consumer Perceptions of Competitions
Quality ProductAttributes
Reliability TimelyService
FriendlyService
Knowledgeable Staff
Convenient Location
Store Hours
Delivery Parking Guarantees Brand Recognition
Credit Cards
Image of Competitor
Selection of Products
Installation