Identifying the Companys Competitors

Normally, it would seem a simple matter for a company to identify its competitors. Coca-Cola knows that Pepsi is its strongest competitor; and Caterpillar knows that it competes with Komatsu. At the most obvious level, a company can define its product category competition as other companies offering a similar product and services to the same customers at similar priecs. Thus Volvo might sue Saab as a foremost competitor, but not Fiat or Ferrari.

In competing for people's money, however, companies actually face a much wider range of competitors. More broadly, the company can define its product competition as all firms making the same product or class of products. Volvo could see itself as competing against all other car manufacturers. Even more broadly, competitors might include all companies making products that supply the same service. Here Volvo would see itself competing against not only other car manufacturers, but also the makers of trucks, motor cycles or even bicycles. Finally and still more broadly, competitors might include all companies that compete for the same consumer's money. Here Volvo would see itself competing with companies that sell major consumer durables, foreign holidays, new homes or extensive home repairs or alterations.

Companies must avoid 'competitor myopia'. A company is more likely to be 'buried' by its latent competitors than its current ones. For example, Eastman Kodak worries about growing competition for its film business from Fuji, the Japanese filmmaker. However, Kodak faces a much greater threat from the recent advances in 'digital camera' technology. These cameras, sold by Canon and Sony, take video still pictures transmitted on a TV set, turned into hard copy and later erased. What greater threat is there to a film business than a filmless camera?2

industry

A group affirms which offer a product or class of products chat are close substitutes for each other. The set of all sellers of a produce or

• The Industry Point of View

Many companies identify their competitors from the industry point of view. An industry is a group of firms that offer a product or class of products that are close substitutes for each other. We talk about the car industry, the oil industry, the pharmaceutical industry or the beverage industry. In a given industry, if the price of one product rises, it causes the demand for another product to rise. In the beverage industry, for example, if the price of coffee rises, this leads people to switch to tea or lemonade or soft drinks. Coffee, tea, lemonade and soft drinks are substitutes, even though they are physically different products. A company must strive to understand the competitive pattern in its industry if it hopes to be an effective 'player' in that industry.

Instead of identifying competitors from the industry point of view, the company can take a market point of view. Here it defines its task competition as companies that are trying to satisfy the same customer need or serve the same customer group. From an industry point of view, Heineken might see its competition as Beck's, Guinness, Garlsberg and other brewers. From a market point of view, however, the task eompetition may include all 'thirst quenching' or 'social drinking'. Iced tea, fruit juice, 'designer' water and many other drinks could satisfy the needs. Similarly, Crayola might define its task competitors as other makers of crayons and children's drawing supplies. Alternatively, from a market point of view, it would include as competitors all firms making recreational products for the children's market. Generally, the market concept of competition opens the company's eyes to a broader set of actual and potential competitors. This leads to better long-run market planning.

The key to identifying competitors is to link industry and market analysis by mapping out product/market segments. Figure 12.2 shows the product/market segments in the toothpaste market by product types and customer age groups. We see that P & G (with several versions of Crest and Gleam) and Colgate-Palmolive {with Colgate) occupy nine of the segments; Lever Brothers (Aim), three; and Bceeham (Aqua Fresh) and Topol, two. If Topol wanted to enter other segments, it would need to estimate the market size of each segment, the market shares of the current competitors, and their current capabilities, objectives and strategies. Clearly each product/market segment would pose different competitive problems and opportunities.

Determining Competitors' Objectives

Having identified the main competitors, marketing management now asks: What does each competitor seek in the marketplace? What drives each competitor's behaviour?

The marketer might at first assume that all competitors would want to maximize their profits and choose their actions accordingly. However, companies differ in the emphasis they put on short-term versus long-term profits, and some competitors are oriented towards 'satisfying' rather than 'maximizing' profits. They have profit goals that satisfy them, even if the strategics eould produce more profits.

Marketers must look beyond competitors' profit goals. Each competitor has a mix of objectives, each with differing importance. The company wants to know the relative importance that competitors place on current profitability, market

Children/Teens

Customer segmentation Age 19-35

Age 36+

Children/Teens

Customer segmentation Age 19-35

Age 36+

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Colgate-Palmolive

Procters Gamble ^«¿¡fc

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Colgate-FaSmotiwe Procter & Gamble

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Procter & Gamble t:;

Colgate-Palmolive/Procter & | Gamble/Levei^iraE^^^^^^^

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Beecham

Beecham

Topol

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(Source: William A. Cohen, Winning on the Marketing Front (New Vor.k: Wiley, 1986), p, 63m

(Source: William A. Cohen, Winning on the Marketing Front (New Vor.k: Wiley, 1986), p, 63m

Figure 12.2

Product/market segments for toothpaste share growth, cash flow, technological leadership, service leadership and other goals. Knowing a competitor's objectives reveals if it is satisfied with its current situation and how it might react to competitive actions. For example, a company that pursues low-cost leadership will react much more strongly to a competitor's cost-reducing manufacturing breakthrough than to the same competitor's advertising increase. A company must also monitor its competitors' objectives for attacking various product/market segments. If the company finds that a competitor has discovered a new segment, this might be,-in opportunity. If it finds that competitors plan new moves into segments now served by the company, it-will be forewarned and, hopefully, forearmed.

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Reasonable care has been taken to ensure that the information presented in this book is  accurate. However, the reader should understand that the information provided does not constitute legal, medical or professional advice of any kind.

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  • winta
    How to define companys competitors?
    6 years ago

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