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CREATING COMPETITIVE ADVANTAGEINTENDED LEARNING OUTCOMESAfter studying this chapter, students should be able to:1.Discuss the need to understand competitors as well as customers through competitor analysis.2.Explain fundamentals of competitive marketing strategies based on creating value forcustomers3.Illustrate the need for balancing customer and competitor orientations in becoming a trulymarket-centered organization.A.COMPETITOR ANALYSISTo plan effective marketing strategies, the company needs to find out all it can about its competitors.It must constantly compare its marketing strategies, products, prices, channels, and promotions withthose of close competitors. In this way, the company can find areas of potential competitive advantageand disadvantage.Identifying CompetitorsNormally, identifying competitors would seem to be a simple task. At the narrowest level, acompany can define its competitors as other companies offering similar products and services to thesame customers at similar prices. Thus, Abercrombie & Fitch might see the Gap as a major competitor,but not Macy’s or Target. The Ritz-Carlton might see the Four Seasons hotels as a major competitor, butnot Holiday Inn, the Hampton Inn, or any of the thousands of bed-and-breakfasts that dot the nation.Assessing CompetitorsHaving identified the main competitors, marketing management now asks: What are thecompetitors’ objectives? What does each seek in the marketplace? What is each competitor’s strategy?What are various competitor’s strengths and weaknesses, and how willeach react to actions thecompany might take?Determining Competitors’ ObjectivesEach competitor has a mix of objectives. The company wants to know the relative importancethat a competitor places on current profitability, market share growth, cash flow, technologicalleadership, service leadership, and other goals. Knowing a competitor’s mix of objectives reveals whetherthe competitor is satisfied with its current situation and how it might react to different competitiveactions. For example, a company that pursues low-cost leadership will react much more strongly to acompetitor’s cost-reducing manufacturing breakthrough than to the same competitor’s advertisingincrease.13
Identifying Competitors’ StrategiesThe more that one firm’s strategy resembles another firm’s strategy, the more the two firmscompete. In most industries, the competitors can be sorted into groups that pursue different strategies.A strategic group is a group of firms in an industry following the same or a similar strategy in a giventarget market. For example, in the major appliance industry, GE and Whirlpool belong to the samestrategic group. Each produces a full line of medium-price appliances supported by good service.Incontrast, Sub-Zero and Viking belong to a different strategic group. They produce a narrower line ofhigher-quality appliances, offer a higher level of service, and charge a premium price.

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