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MODULE 1 : UNDERSTANDING PRODUCT & CATEGORY
ROLE OF PRODUCT IN COMPETITIVE STRATEGY FORMULATION
MDI MURSHIDABAD
Lecture Series-No 2
Dr. Vibhas Amawate
10/28/2020
In the next 90 minutes
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Competitive Analysis of Industry- Porter
(focus on substitutes)
Ansoff analysis
Concept of Product Lifecycle
What is competitive strategy
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Considerations for formulating of the
competitive strategy
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Competitive Strategies adopted by Firms to
achieve Market Growth
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Research suggests that only one-tenth of 1 percent of
companies will ever reach $250 million in annual
revenue.
An even more microscopic group, just 0.036 percent,
will reach $1 billion in annual sales.
To achieve market growth
Companies introduce new products in existing markets or
explore new markets
Companies modify their existing products in existing
markets or explore new markets
Porters five forces model
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Class Case Study Readings
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An analysis of the
telecommunication industry in the
Sultanate of Oman using Michael
Porter’s competitive strategy model
THREAT OF ENTRY
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New entrants to an industry
bring new production capacity
the desire to gain market share
often substantial resources.
Prices can be brought down or incumbents' costs inflated as
a result, reducing profitability.
The threat of entry into an industry depends on the
barriers to entry that are present, coupled with the
reaction from existing competitors that the entrant can
expect. If barriers are high and/or the newcomer can expect
sharp retaliation from entrenched competitors, the threat
of entry is low.
BARRIERS TO ENTRY
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Economies of scale Economies of scale deter entry by forcing the entrant -to
come in at large scale and risk strong reaction from
existing firms come in at a small scale and accept a cost
disadvantage, both undesirable options.
Product Differentiation It means that established firms have brand
identification and customer loyalties, which stem
from past advertising, customer service, product
differences, or simply being first into the industry
Capital Requirements The need to invest large financial resources in order to
compete creates a barrier to entry, particularly if the
capital is required for risky or unrecoverable
Switching Costs A barrier to entry is created by the presence of switching
costs, that is, one-time costs facing the buyer of switching
from one supplier's product to another's.
Access to Distribution A barrier to entry can be created by the established players
Channels to block the entry of new entrant's by blocking the
distribution for its product
INTENSITY OF RIVALRY AMONG EXISTING
COMPETITORS
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Rivalry among existing competitors takes the
familiar form of jockeying for position—using tactics
like
Price competition
Advertising battles
Product introductions
increased customer service or warranties
INTENSITY OF RIVALRY AMONG EXISTING
COMPETITORS
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Intense rivalry is the result of a number of
interacting structural factors
Factor Impact on Product
Differentiation
Numerous Competitors High
Slow Industry Growth Low or High (Debate)
High Fixed or Storage Costs Low
Capacity Augmented in Large Increments Low
Diverse Competitors High
High Strategic Stakes High
High exit barriers, e.g. specialized assets with Low
low liquidation values, redundancy costs,
social implications, etc.
EXIT BARRIERS AND ENTRY BARRIERS
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High exit and entry barriers lead to low product
differentiation and innovation.
PRESSURE FROM SUBSTITUTE PRODUCTS
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All firms in an industry are competing, in a broad
sense, with industries producing substitute products.
Substitutes limit the potential returns of an industry
by placing a ceiling on the prices firms in the
industry can profitably charge. The more attractive
the price performance alternative offered by
substitutes, the lower the industry profits and lesser
the product differentiation.
Strategic Choices- Ansoff Matrix
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Ansoff Matrix
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Market penetration: the company seeks increased sales
for its present products in its present markets through
more aggressive promotion and distribution.
Market development: the company seeks increased
sales by taking its present products into new markets.
Product development: the company seeks increased
sales by developing improved products for its present
markets.
Diversification: the company seeks increased sales by
developing new products for new markets.
Ansoff Matrix
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Case Study –Coke In US
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