Principles of Marketing
Seventeenth Edition
Chapter 18
Creating Competitive Advantage
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Learning Objectives
18-1 Discuss the need to understand competitors as well as customers
through competitor analysis.
18-2 Explain the fundamentals of competitive marketing strategies based on
creating value for customers.
18-3 Illustrate the need for balancing customer and competitor orientations in
becoming a truly market-centered organization.
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Learning Objective 1
Discuss the need to understand competitors as well as customers through
competitor analysis.
Copyright © 2018 Pearson Education Ltd. All Rights Reserved.
Creating Competitive Advantage
Competitive advantages require delivering more value and satisfaction to target
consumers than competitors.
Competitor analysis is the process of identifying, assessing, and selecting key
competitors.
Competitive marketing strategies are how companies analyze their
competitors and develop value-based strategies for profitable customer
relationships.
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Competitor Analysis
Copyright © 2018 Pearson Education Ltd. All Rights Reserved.
Competitor Analysis
Identifying Competitors
Competitors can include:
• All firms making the same product or class of products
• All firms making products that supply the same service
• All firms competing for the same consumer dollars
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Competitor Analysis
Assessing Competitors
Competitors’ Competitors’ strategies
objectives
• Profitability • Strategic group offers the
• Market share growth strongest competition
• Cash flow
• Technological leadership
• Service leadership
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Competitor Analysis
Assessing Competitors
Competitors’ strengths Estimating competitors’
and weaknesses reactions
• What can our competitors • What will our competitors
do? do?
• Benchmarking
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Competitor Analysis
Selecting Competitors to Attack and Avoid
Customer value analysis determines the benefits that target customers’
value and how customers rate the relative value of various competitors’
offers.
• Identification of major attributes that customers value and the importance of
these values
• Assessment of the company’s and competitors’ performance on the valued
attributes
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Competitor Analysis
Selecting Competitors to Attack and Avoid
• Close or distant competitors
• Good or bad competitors
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Competitor Analysis
Designing a Competitive Intelligence System
• Identifies competitive information and the best sources of this information
• Continually collects information
• Checks information for validity and reliability
• Interprets information
• Organizes information
• Sends key information to relevant decision makers
• Responds to inquiries about competitors
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Competitor Strategies
Michael Porter’s Four Basic
Competitive Positioning Strategies
Overall cost
leadership Differentiation
Middle of the
Focus
road
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Competitor Strategies
Basic Competitive Strategies
Overall cost leadership strategy:
A company achieves the lowest production and distribution costs and allows it
to lower its prices and gain market share.
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Competitor Strategies
Basic Competitive Strategies
Differentiation strategy:
A company concentrates on creating a highly differentiated product line and
marketing program so it comes across as an industry class leader.
Focus strategy:
A company focuses its effort on serving few market segments well rather than
going after the whole market.
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Competitor Strategies
Basic Competitive Strategies
A company that pursues a clear strategy will achieve superior performance.
A company without a clear strategy, “a middle-of-the-roader”, will not succeed.
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Competitor Strategies
Basic Competitive Strategies
Michael Treacy and Fred Wiersema suggest companies can gain leadership
positions by delivering superior value to their customers in three strategies or
“value disciplines.”
• Operational excellence
• Customer intimacy
• Product leadership
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Competitor Strategies
Basic Competitive Strategies
Operational excellence refers to a company providing value by leading its
industry in price and convenience by reducing costs and creating a lean and
efficient value delivery system.
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Competitor Strategies
Basic Competitive Strategies
Customer intimacy refers to a company providing superior value by segmenting
markets and tailoring products or services to match the needs of the targeted
customers.
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Competitor Strategies
Basic Competitive Strategies
Product leadership refers to a company providing superior value by offering
a continuous stream of leading-edge products or services. Product leaders
are open to new ideas and solutions and bring them quickly to the market.
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Competitor Strategies
Competitive Positions
Market
Market leader
challenger
strategies
strategies
Market follower Market nicher
strategies strategies
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Competitor Strategies
Copyright © 2018 Pearson Education Ltd. All Rights Reserved.
Competitor Strategies
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Competitor Strategies
Market Leader Strategies
Expand total market demand by developing:
• New users
• New uses
• More usage
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Competitor Strategies
Market Leader Strategies
Protect current market by:
• Fixing or preventing weaknesses that provide opportunities to competitors
• Maintaining consistent prices that provide value
• Keeping strong customer relationships
• Promoting continuous innovation
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Competitor Strategies
Market Leader Strategies
Expand market share by:
• Increasing profitability with increasing market share in served markets
• Producing high-quality products
• Creating good service experiences
• Building close relationships
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Competitor Strategies
Market Challenger Strategies
Challenge the leader with an aggressive bid for more market share.
Second mover advantage: Challenger observes what has made the leader
successful and improves on it.
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Competitor Strategies
Market Follower Strategies
• Play along with competitors and not rock the boat
• Copy or improve on leader’s products and programs with less investment
• Bring distinctive advantages
• Keep costs and prices low or quality and services high
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Competitor Strategies
Market Nicher Strategies
An ideal market niche is big enough to be profitable with high growth potential
and has little interest from competitors.
The key to market niching is specialization:
• Market
• Customer
• Product
• Marketing mix
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