Scribd
Upload
46 views16 pages

Analyzing Direct and Indirect Competition

This document discusses the importance of understanding competition for effective marketing strategy. It defines direct competitors as those offering similar products, while indirect competitors may not compete directly but could become future threats. Competitors should be analyzed using Porter's five forces model and value chain analysis to identify strengths, weaknesses, and sources of competitive advantage. Understanding competitors involves analyzing their types, strengths, weaknesses, and reaction patterns.

Uploaded by

angelinasarma9584
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
46 views16 pages

Analyzing Direct and Indirect Competition

This document discusses the importance of understanding competition for effective marketing strategy. It defines direct competitors as those offering similar products, while indirect competitors may not compete directly but could become future threats. Competitors should be analyzed using Porter's five forces model and value chain analysis to identify strengths, weaknesses, and sources of competitive advantage. Understanding competitors involves analyzing their types, strengths, weaknesses, and reaction patterns.

Uploaded by

angelinasarma9584
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd

Understanding Competition

02/07/05
Objectives
 Why do we need to focus on competition?
 Types of competitors
 How can we identify current and potential
competitors?
Understanding competition
 For an effective marketing strategy, a
company must study its actual and potential
competitors as well as customers
 Competitor analysis is an essential aspect of
environmental analysis
 Competitors can be of two types
 Direct
 Indirect
Types of Competitors
 Direct competitors
 Offering similar or same products to the same
target segments
 Indirect competitors
 May not be competing in the same market
segment, but may be a source of potential future
competition
Marketing Myopia
 Defining competition flows from the definition
of our business
 If our business is defined too narrowly, we
will fail to see important competitive threats
and could fail
Marketing Myopia
Company Product-Oriented Market-oriented

Missouri-Pacific We run a railroad We are a people-and-


goods mover
Standard Oil We sell gasoline We supply energy
Columbia Pictures We make movies We market entertainment
Competition and Strategy
 As far as immediate strategy is concerned,
indirect competition may not need attention

 However, as you calculate market potential


and possible market share, the size of the
market will be determined in part by the
indirect competition
Porter’s 5-factor model of
competition
 Michael Porter has proposed a highly popular
structure of industry competition

 In this structure, competition arises from


direct competitors within the sub-market, and
from a host of other participants in the
industry
Porter Model
Potential Entrants

Suppliers Industry Competitors Buyers

Substitutes
Porter model
 Potential entrants
 Entry barriers
 Exit barriers
 Substitutes
 Buyers’ bargaining power
 Suppliers’ bargaining power
 Segment rivalry – industry competitors
Value Chain Analysis
 Porter further proposed that true competitive
advantage is obtained by outperforming
competition at any point on the value chain

 Competitive advantage, simply stated, is your


ability to either offer superior quality at the
same price as competition, or offer same
quality at lower price
Value Chain

Inbound Operations Outbound


Logistics logistics

Marketing and Service


Sales
Understanding Competition
 Thus, when you plan your product concept, you
should look for sources of competitive
advantage that may not necessarily be in
product features, but may be in other areas of
the value chain
 Each key competitor is thus analyzed, their
strengths and weaknesses tabulated, and the
position of your product is gauged against theirs
to understand the market place thoroughly.
Strategy planning follows this exercise
Understanding Competition
 Some ways in which we can analyze
competitors
 Direct and indirect
 Strengths and Weaknesses
 Reaction Patterns

 We can also use positioning maps and


perceptual maps to analyze competitors
Perceptual Mapping
Upscale, Classy
•Mercedes •Porsche
•Lincoln •Volvo •BMW
•Cadillac •Chrysler •Saab
•Buick •Honda

Conservative •Ford •Nissan Sporty


•Dodge •Toyota
•Plymouth •Chevrolet
•Hyundai

Practical, Affordable
Conclusions
 Competitor analysis goes hand-in-hand with
customer understanding
 Competition can be direct or indirect
 The value chain provides a useful way to
identify sources of competitive advantage
 It is important to balance customer
orientation with competitor orientation

You might also like