Chapter Three

Markets and
Competitive
Space

McGraw-Hill/Irwin
 MARKETS AND COMPETITIVE SPACE

 Markets and Strategies

 Product-Market Scope and Structure
 Describing and Analyzing End-Users
 Analyzing Competition
 Developing a Strategic Vision about the Future
 Market Size Estimation
MARKETS AND COMPETITIVE SPACE
The Challenges ―
Markets are increasingly complex, turbulent, and
interrelated.
Importance of a broad view of the market.
Essential to develop a vision about how the market
is likely to change in the future.
Continuous Monitoring is Necessary to:
Find promising opportunities
Identify shifts in value requirements
Understand competitors’ positioning
Guide targeting and positioning
decisions
 MARKETS AND STRATEGIES

Markets and Strategies are

Interlinked

Forming Value Migration Challenges

a Shared Vision
 Markets Impact Strategies

• Market changes often require

altering strategies
• Forces of change create both
market opportunities and threats
• Inherent danger in faulty market
sensing
 Value Migration
• Value Migration is the process of customers shifting
their purchases away from products generated by
outmoded business designs to new ones that offer
superior value.
– Examples : Migration from Typewrites to Word processing to
computers
– Official memos and mail from conventional print to
electronic mailing via internet and email
• What will be the impact of environment &
infrastructure on the auto industry ?
 PRODUCT-MARKET SCOPE AND
STRUCTURE

4Matching Needs with Product Benefits

4Product-Market Boundaries and Structure
4Forming Product-Markets for Analysis
4The Changing Composition of Markets
 Matching Needs with Product Benefits

• A product – market matches people with

needs to the product benefits that satisfy
those needs

“A product – market is the set of products

judged to be substitutes within those
usage situations in which similar patterns
of benefits are sought by groups of
customers.”*

*Srivastava, et al. (1984) Journal of Marketing, Spring, 32.

Mapping Product Market Boundaries and
Structures
Start with the Generic Need satisfied by the product
category of interest to management
Perform various kitchen functions - appliances

Identify the product categories (types) that can

Satisfy the generic need
Heating, cooling, washing, drying, cooking

Form the specific product-markets within

the generic product market
Cooling : refrigerators

A B A
Frost free Double Door PUF, Freshness
 Illustrative Fast-Food
Product-Market Structure

SUPER MICROWAVE
MARKETS OVENS
FAST-FOOD
MARKET

CONVENIENCE TRADITIONAL
STORES RESTAURANTS
Forming Product – Markets for Analysis

Factors influencing product – market

boundaries:

 Purpose of analysis

 Changing composition of markets

 Extent of market complexity

The Changing Composition of Markets

• Change due to new technologies and

emerging competition
• Consider existing and emerging
markets
• Identify alternative ways to meet
needs
• Extend product-market analysis
beyond industry boundaries (e.g.
Fast-foods)
 Extent of Market Complexity

• Three characteristics of markets:

– 1. Functions or uses of the product

– 2. The enabling technology of the product

– 3. Customer segments in the product-market

 Illustrative Product – Market Structure

Food and beverages •Generic Product

for breakfast meal Class

Cereals •Product Type

Ready to eat •Variant A

Regular
Natural •Variant B
Nutritional Pre-sweetened

Life Product 19 Special K •Brands

DEFINING AND ANALYZING MARKETS
Define Product-Market Boundaries and
Structures

Identify and Describe End-Users

Analyze Industry and Value Added

Chain

Evaluate Key Competitors

Forecast Market Size

and Growth Trends
 Identifying and
Describing Buyers

Building DESCRIBING How

Buyers
Customer AND Make
Profiles
ANALYZING Choices
END-USERS
Environmental
Influences
Identifying and Describing Buyers
Demographics Psychographics
Family Size, Age, Income, Attitude, Beliefs, Values,
Location
Sex, Occupation

Lifestyles Needs and Want Analysis

How they holiday, where Convergence of technology,
they eat, what types of Experimental, Traditional,
clothes they buy, what cars Conservative
they possess
 How Buyers Make Choices

• Problem recognition : Doesn’t like the sound of this

conventional magnetic tape music system and desires a
CD player
• Information Search : Uses past experience of friends, ads,
to seek information and discover alternatives
• Alternative Evaluation : Alternative players are then
decided based on attributes, price, availability
• Purchase Decision : Selected, bought and installed in his
room
• Post Purchase Behaviour : May be satisfied and advocates
or returns the same
 Environmental
Influences
• External factors influencing buyers’
needs and wants:
 Government, social change,
economic shifts, technology etc.
• These factors are often non-
controllable but can have a major
impact on purchasing decisions
 Building Customer Profiles

• Start with generic product – market

• Move next to product- type and variant
profiles >> increasingly more
specific
• Customer profiles guide decision making
(e.g. targeting, positioning, market
segmentation etc.)
 ANALYZING COMPETITION
1. Define Industry
Structure and
Characteristics

5. Identify 2. Identify and

New PRODUCT- Describe Key
Competitors MARKET Competitors
STRUCTURE
AND
4. Anticipate MARKET
Actions by SEGMENTS 3. Evaluate
Competitors Key
Competitors
Examples of Levels of Competition
Baseball
cards

Bottle Video
Fast water Games
Food
Regular Diet lemon Ice
Beer colas limes Cream
Diet-Rite
Cola
Fruit
Diet Diet Pepsi
flavored Wine
Coke
colas Product from
competition:
Lemon
diet colas limes
Juices Product category
competition: Coffee
soft drinks
Generic competition:
beverages
Budget competition:
food & entertainment
 Key Competitor Analysis
• Competitor analysis is conducted for firms
that compete directly with each other. Eg.
Nike vs Reebok, Unilever vs P&G
• The aspects of competitor analysis that is
important are
– Preparation of descriptive profile for each
competitor
– Evaluating the competitors strengths and
weaknesses
 Describing the Competitor
• A key competitor is any organization going after the
same target market as the firm conducting the analysis.
Jet, Kingfisher and Air India are key competitors on
many Indian routes and certain international routes.
• Key competitors are often brands that compete in the
same product market or in segments within the market.
Surf Excel and Ariel
• Different product types that satisfy the same need or
want may also actively compete with each other. Sony
Walkman and Apple i-pod
 Information needed to Describe Key
Competitors
• Business Scope and objectives
• Management experience, capabilities and weaknesses
• Market position and trends
• Market target and customer base
• Marketing programme and positioning strategy
• Financial, technical and operating capabilities
• Key competitive advantage
– Sources : Annual Reports, Industry reports, Articles,
Interviews, etc.,
 Evaluating the Competitor
Evaluation considers the strengths and weaknesses of each competitor
in the areas shown below :

Scope of
Market
Coverage
Market Share
Distinctive Past
Capabilities Performance

Customers
Value
Proposition
 Perceptual Maps
Perceptual Maps are useful in analyzing the competitive positioning
of competing brands. Analgesics brand in the US
Gentleness
Tylenol o
o Extra Strength Tylenol
Area of
Aspirin Free Excedrin o
Vulnerability

Bufferin o
Efficacy
Bayer o Advil o
Anacin o Nuprin o
Ecotrin o

o Extra Strength Bayer

o Extra Strength Anacin
 Anticipating Competitors Actions
• Estimating Competitors’ Future Strategies
– May be in the same direction. Assuming this may
not be wise as their current action may signal
probable future threats. Eg. Swatch introduced the
plastic lifestyle brands. Timex licensed Nautica,
Timeberland, offered $40 Expedition range.
Customers moved to metal watches.
– Surf vs Nirma, Maruti vs Tata Motors
 Anticipating Competitors’ Actions
• Identifying Potential Customers : May come from
four major sources a) companies competing in a
related market b) companies with related
technologies c) companies targeting similar customer
groups with other products d) companies competing
in similar geographical regions with similar products
• Market entry by new players is under the following
conditions a) High profit margins b) Future growth
opportunities c) No high market entry barriers d)
Few Players
 Strategic Vision about the Future
• Are industry boundaries clear and static ? Are customers
and competitors identifiable? Or are industry
boundaries blurring and evolving?
• Do firms compete as distinct entities or as families of
suppliers and end product firms ?
• Is there competition for managing migration paths ?
• Is competition taking place at product line, business and
corporate levels ? Do these levels influence each other?
• Can there be competition to influence industry
standards and evolutions?
 Phases of Competition
• Phase 1 : Initial Stages : companies compete in
identifying product concepts, making technology
choices and building competencies. This phase
involves experimentation with ideas and the path to
market leadership is not clearly defined
• Phase 2 : Involves Partnering of companies to
controlling industry standards
• Phase 3 : As markets become clearly defined the
competitive process concentrates on market share
for end products and profits
 Anticipating the Future
• Hamel and Prahalad Model
– What are the influences (discontinuities) present in
the product market that have the potential to
profoundly transform market/competitor structure
?
– Investigate each discontinuity in substantial depth
• Affect on customers
• Economic impact
• How fast, who is exploiting this trend
• Who gains, who loses
• New opportunities ??
 Industry Analysis
• Industry size, growth, and composition
• Typical marketing practices
• Industry changes that are anticipated
(e.g. consolidation trends)
• Industry strengths and weaknesses
• Strategic alliances among competitors
 Defining Industry Structure &
Characteristics
SUPPLIERS
Industry Form
Industry PRODUCERS
Environment
Competitive WHOLESALERS/
Forces DISTRIBUTORS
Value
RETAILERS/DEAL Added
ERS Chain

CONSUMER/
ORGANIZATIONAL END
USERS
 Industry Analysis
• Analysis of the Value Added Chain : Supplier and
Distribution channels is important to understanding
and servicing product markets. Example : ITC vs Coca
Cola
• Competitive Forces : Need to recognize the five
competitive forces that affect industry performance
– Rivalry among existing firms Eg. Coke vs Pepsi
– Threat of New Entrants Eg. Kodak vs HP/Sony
– Threat of Substitute Products Eg. Ency. Brit vs CD Rom
– Bargaining Power of Suppliers Eg. Commercial Airlines
– Bargaining Power of Buyers Eg. Walmart with suppliers
 Strategic Vision about the Future
• Are industry boundaries clear and static ? Are customers
and competitors identifiable? Or are industry
boundaries blurring and evolving?
• Do firms compete as distinct entities or as families of
suppliers and end product firms ?
• Is there competition for managing migration paths ?
• Is competition taking place at product line, business and
corporate levels ? Do these levels influence each other?
• Can there be competition to influence industry
standards and evolutions?
 MARKET SIZE ESTIMATION
Product-Market Forecast
Relationships
(area denotes sales in $’s)
Market Potential
Estimate

Unrealized
Potential

Company Industry
Sales Sales
 Product-Market Forecast
Relationships for Industrial
Painting Units
Sales (in 1000s
of units)
900
800
Market
700 Potential
600 Sales Forecast

500
400
300
200 Company XYZ
Sales Forecast
100
0
2001 2002 2003 2004 2005 2006 2007 2008