Rajagopal. Marketing Dynamics: Theory and Practice

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3. BRAND STRATEGY 103-141

Brand Categories • Brand Drivers In International Markets • Brand Architecture

• Brand Hierarchy • Brand Architecture Process • Brand Architecture Audit

• Brand Drivers • Reach of the Brand • Communication Sensitivity and Brand

Personality • Cognitive Dimensions in Branding • Brand Portfolio and

Advertising • Selected Readings.

Case 3.1

BMW: Building Brand through Relationship Networking – Customer Prospecting and

Retaining Trends – BMW Milestones (1916-2001) – Market Performance of BMW-2003 –

Conceiving Customer Delight: The Value Chain – Customer Relationship Tracking.

4. PRICING STRATEGY 143-192

Value and Skimming Pricing • Pricing With Demand Curve • Penetration

Pricing • Geographical Pricing • Conspicuous Pricing • Psychological Pricing

• Value-added Pricing • Complementary Product Pricing • Price Discounts

• Discriminate Pricing • Promotional Pricing • Mark-up Pricing • Pricing

Fundamentals • Cost-Plus Pricing • Customer Expectation-based Pricing

• Pricing Models • Price-Market Relationship • Pricing Strategies Management

• Price Control • Building Pricing Strategies • Other Pricing Modalities • Strategy

for Price Leadership • Non-price Factors • An Overview on Pricing Strategy

• References.

Case 4.1

The Air Cargo Competition.

Case 4.2

‘Crimson Nectar’ Blows-up in Boardroom : A Case of Building Marketing Policy of a

New Generation Product – Consumption Trends of Non-Alcoholic Beverages – Exotic

Fruit Nectars- Industry Dimensions – Idea Chain Management – Board Room

Discussions – Expert Voice in Board Room – Customer Value and Re-engineering

Process – Adjournment.

Case 4.3

Blockbuster Entertainment Corporation: Cross Promotion and Pricing Strategy.

5. DISTRIBUTION STRATEGY 193-227

Profile of Principal Distribution Strategies • Distribution Strategies • International

Channel Selection • Distribution in Gray Market • Logistics Management

• Channel Management • Developing Logistics Strategy • Physical Distribution

• Distribution Planning • Functional Excellence in Distribution Planning

• Seclected Readings.

Case 5.1

Domino’s Pizza Distribution Plan – Leadership Strategy – The Information Technology

Solution – Re-engineering for Cross-Functional Excellence – Phased Approach to

Implementation – Team-Development Initiatives – Achieving the Vision – Domino’s

Mission: Global Leadership.

6. PROMOTION STRATEGIES 229-283

Developing Advertising Strategy • Advertising Environment • The

Advertising Process • Advertising Categories • Advertising and Buyer

Perception • Strategies in Advertising • Advertising styles • Developing a

Media Plan • Media Scheduling • Direct Response Advertising • Display

Advertising • Brand Positioning and Advertising Evaluation • Positioning

Methods • Concept of Promotion Mix • Advertising Objectives • Advertising

Styles • Message Strategy • Creative-Mix • Strategies to Develop Word-

of-Mouth Advertising • Copywriting • Developing Media Plan • Direct

Response Advertising • Advertising Campaign • Institutional Advertising

• Advertising Appropriation • Advertising Research • Effectiveness in

Advertising • Web Advertising and Promotion • References.

Case 6.1

Penetrating Media Market across the Boundaries: The Strategy of Azteca America

– International Trend of Television Industry – Company Background and Time Line

– Hispanic Market in the US – Expansion in Hispanic American Regions – Advertising

Issues – Sales Force Deployment of the Company – Performance in Hispanic American

Market – Strategy Perspectives for Future • References.

7. MARKETING RESEARCH 285-308

Scope of Marketing Research • Marketing Research Process • Sampling

Techniques • Tools of Data Collection • Data Preparation • Data Analysis

Approaches • Market Information Management • Monitoring and Evaluation

Research in Marketing • SWOT Analysis • Qualitative Market Research

• Selected Readings.

Case 7.1

Cadbury Schweppes: Positioning in Latin America – The Product Line – Modes of

Entry – Brand Management – Corporate Growth – Brand Promotion – Business Threats

– Issues of Concern.

8. SALES MANAGEMENT 309-338

Consultative Sales • Technical Sales • Commercial Sales and Direct Sales

• Organizing the Sales Force • Retailing • Departmental Store • Exclusive

Retail Stores • Super Markets • Convenience Stores • Discount Stores

• Catalogue Showroom • Non-store Retailing • Decision Making in Retailing

• Tools of Retailing • Distribution • Information on Sales • Selling and Buying

Process • Measuring Sales Performance • Sales Compensation • Selected

Readings.

xii

Case 8.1

Canon in Mexican Business Environment – Corporate Philosophy – Key Areas of

Canon in Mexican Market – Buyer Behaviour and Distribution – Product Distribution

and Sales – Organizational Restructuring – Compensation Program – Future

Perspectives: Beyond Customer Satisfaction • References.

9. STRATEGIC MARKETING 341-364

Focus of Strategic Marketing • Strategic Marketing Screening Process

• Strategic Directions • Strategic Management • Growth Strategies • Strategic

Marketing Planning • Developing Activity Schedule • References.

Case 9.1

Tropicana Fruit Beverage in India.

10. INNOVATIVE MARKETING STRATEGIES 364-412

Economic Value-Added (EVA) Concept • Market Entry Strategies • Developing

Entry Plan • Control Management • Profit Impact on Marketing Strategy

• Marketplace Standing • Market Uncertainties and Entry Decisions • Managing

Social Marketing • Comprehensive Branding • Selected Readings.

Case 10.1

Dell Takes a Different Tack in China.

Case 10.2

Consumer Preferences on Buying Automobiles – Chronology of Growth – Recent

Performance – PT Cruiser : Performance Appraisal – Slump in Chrysler’s Market

– The Time Ahead.

Chapter

UNDERSTANDING COMPETITORS AND

COMPETITION

roductivity differs across individual, monopolistically competitive firms in each country. Firms face

some initial uncertainty concerning their future productivity when making an irreversible investment

to enter the domestic market. In addition to the sunken entry cost, firms face both fixed and per-unit

export costs. Only a subset of relatively more productive firms export, while the remaining, less productive

firms only serve their domestic market. This microeconomic structure endogenously determines the

extent of the traded sector and the composition of consumption baskets in both countries. Exogenous

shocks to aggregate productivity, sunken entry costs, and trade costs induce firms to enter and exit both

their domestic and export markets, thus altering the composition of consumption baskets across countries

over time

. The microeconomic features have important consequences for macroeconomic variables.

Macroeconomic dynamics, in turn, feed back into firm level decisions, further altering the pattern of

trade over time. The aggregate picture of world economic growth shows a remarkable diversity in

CHAPTER FOCUS

• To understand and analyze the competitor moves in the market,

• To acquaint skills in competitor learning models, market place strategy

and theory of competitive advantage, and

• To learn competitor signals, moves, strategies and approaches to win

the rival attacks in the competitive business arena

• To gain knowledge about the business re-engineering strategies and

competitive forces.

1 Fabio Ghironi and Marc Melitz : International Trade and Macroeconomic Dynamics with Heterogeneous

Firms, Society for Economic Dynamics, Annual Meeting Papers, 2004.

Marketing Dynamics: Theory and Practice

growth performance, both geographically and across time. There exist high growth countries and low

growth countries on the panorama of global economy. Some countries have grown rapidly over time

while others have experienced growth spurts for a decade or two. What is the role of policy in this

diversity? How can policy help transform this picture? However the increasing globalization tries to

answer these questions in terms of catalyzing the economic growth and institutional innovations in the

developing countries. Analysis of the success story of China, with an astonishing annual growth rate of

8.0 percent since the late 1970s, together with other well-known East Asian experiences that have

taken place in countries such as South Korea and Taiwan, provide the basis to build some stylized facts

about the take-off and the process of sustaining economic growth. On the other hand, the experience of

liberalization, deregulation and privatization in countries such as Mexico, Argentina, Brazil, Colombia,

Bolivia, and Peru have offered substantial evidence that allows us to question the standard formulae

used to propel and maintain economic growth.

UNDERSTANDING COMPETITION

Competition may be defined as an object centered process in business performance. Competition

may be semantically described as a combination of two distinct Latin words - com (together) and

petere (to seek). Similarly conflict is derived from com (together) and fligere (to strike). This

distinction between the quest and the blow, to strive or to strike seems precisely the pertinent one

for clarity and efficiency in social science.

Competition may be characterized as striving together

to win the race not to destroy the other competitors from the point of view of the supporters of

globalization. The local market competition is targeted towards the customers and the competitors

strive to win the customer, temporarily or permanently. However, in business-to-business process,

the competition may turn more tactical and strategic in order to outperform the rivals firms. In this

way competition can be seen as regulated struggle. There are rules of economic competition and

they do not generally include the destruction of competitors. The technology of marketing research

is devoted to the difficult tasks of discovering customer needs, and the sub-disciplines of consumer

and organizational buying behavior attempt to provide theoretical bases for the results. In this

process the emphasis is on determination to win customers where competitors turn tactical towards

brand or product positioning.

Emergence of virtual shopping, liberalization of economic policies in the developing countries all

over the world competition has become like a traditional derby in which many companies participate for

neck-to-neck race. In this business game the rules are subject to change without notice, the prize

money may change in short notice, the route and finish line is also likely to change after the race begins,

new entrants may join at any time during the race, the racers may form strong alliances, all creative

strategies are allowed in the game and the governmental laws may change without notice and sometimes

with retrospective effect. Hence, to win the race any company should acquire the strategies of outwitting,

2 Pessoa Argentino: Institutional Innovations, Growth Performance and Policy, Conference Paper, European

Regional Science Association, 2004.

3 Mack R F: The Components of Social Conflicts, Social Problems, 22 (4), 1965, 388-397.

Understanding Competitors and Competition

outmaneuvering and outperforming the competitors. In this process a company must understand

thoroughly all the moves of the rival firms from various sources. The locales of the business rivalry have

to be spotted to assess their strengths. An intriguing aspect of the marketplace is that the nature of

competition can change over time. A technology, company, or product does not need to remain prey to

another forever. Competitive roles can be radically altered with technological advances or with the right

marketing decisions. External light meters, used for accurate diaphragm and speed setting on photographic

cameras, enjoyed a stable, symbiotic (win–win) relationship with cameras for decades. As camera

sales grew, so did light-meter sales. But eventually, technological developments enabled camera companies

to incorporate light meters into their own boxes. Soon, the whole light-meter industry became prey to

the camera industry. Sales of external light meters diminished while sales of cameras enjoyed a boost,

and the relationship passed from win–win to predator–prey.

Table 1.1 exhibits the competitors’ arena,

which has to be studied comprehensively, and strategies to be build accordingly.

Table 1.1 Possible Arena of Business Rivalry

Business Customer Institutions and

factors locale Geography Channels patrons

• Supply • Market • Spread • C&F • Government

Chain Place • Regional Agents agencies

• Promotion • Segments • Retailers • Co-operatives

• Investment • Individual • Wholesalers

• Franchisees

• Mailers

The access to the infrastructure, raw material, the process, supplies and the other vital business

factors is the most vulnerable to the competition. The competing firms pay more attention to the sources

of factors, quality thereof, cost and management of the factors in order to prove better over each other.

Customer, the end user, is the ultimate target of competitor for building aggressive and defensive strategies

in business. The competing firms try to attract the customers by various means to polarize business and

earn confidence in the market place. It is necessary for the successful business companies to look for

such a place of business that provides them more location advantage and hold the customers for their

goods and services. The business cordoning or securing the trade boundaries is an essential decision to

be taken for building competitive strategies to attack rivals across regions. Even small business company

can compete globally with the firms of all sizes through the Internet. The distribution channels, franchisees,

carrying and forwarding agents, retailers and mailers with value added services represent an increasingly

intense business rivalry or competition in all markets or competitive domains. Many firms like Godrej

(Diversified Products), Proctor and Gamble (Consumer Goods), Compaq (Computers) reward their

managers handsomely for winning the business battles in their channel wars. In succeeding to the

market competition, the institutional and political patronage provides long run support to the companies.

4 Modis Theodore: Conquering Uncertainty, McGraw-Hill, New York, 1998.

Marketing Dynamics: Theory and Practice

The wining in product, channel and factor market place in many instances may not last long in building

relationships with the customers. Many business firms have found themselves outmaneuvered in various

functional aspects of business by the adept actions of rivals in the institutional arena. An intriguing

aspect of the marketplace is that the nature of competition can change over time. A technology, company,

or product does not need to remain prey to another forever. Competitive roles can be radically altered

with technological advances or with the right marketing decisions. The need of the hour is to apply

scientific methods to manage competition. Only then could modern corporations withstand the pressures

of intense competition of a dynamic business era. The paper examines issues involved in the scientific

approach of managing competition

Struggle between fountain pens and ballpoint pens had a different ending. The substitution

of ballpoint pens for fountain pens as writing instruments went through three distinct stages.

Before the appearance of ballpoint pens, fountain pen sales grew undisturbed to fill the

writing- instrument market. They were following an S-shaped curve when the ballpoint

technology appeared in 1951. As ballpoint sales picked up, those of fountain pens declined

in the period 1951 to 1973. Fountain pens staged a counterattack by radically dropping

prices. But that effort failed. Fountain pens kept losing market share and embarked on an

extinction course. By 1973, their average price had dropped to as low as 72 cents, to no avail.

Eventually, however, the prices of fountain pens began rising. The fountain pen underwent

what Darwin would have described as a character displacement to the luxury niche of the

executive pen market. In the early 1970s, the strategy of fountain pens became a retreat into

non-competition. By 1988, the price of some fountain pens in the United States had climbed

to $400. The Volterra-Lotka model indicates that today the two species no longer interact but

each follows a simple S-shaped growth pattern. As a consequence, fountain pens have

secured a healthy and profitable market niche. Had they persisted in their competition with

ballpoint pens, they would have perished.

Many factors determine the nature of competition, including not only rivals, but also the economics

of particular industries, new entrants, the bargaining power of customers and suppliers, and the

threat of substitute services or products. A strategic plan of action based on this might include

positioning the company so that its capabilities provide the best defense against the competitive

forces, influencing the balance of forces through strategic moves and anticipating shifts in the factors

underlying competitive forces.

In outwitting the competitors the companies must detect the changes

in the strategy game in reference to the market players’ status in gaining more knowledge, networking,

entrepreneurship and increasing ambitions. The changes that are taking place in all the arenas as

discussed in Table 1.1 have to be considered. The driving forces of competing firms, their organization

and micro-economic environment need to be studied carefully by the company planning to overtake

competitors in the business. Further in the process of winning the battle of rivals it would be helpful

for a company to understand the changing stakes of the competitors and the forces after such

developments. A company can outmaneuver the rival by being more skillful in particular tasks

and reshaping the stakes in one or more business arenas. Outmaneuvering the rivals is the

5 Modis Theodore: A Scientific Approach to Managing Competition, The Industrial Physicist, 9 (1), 25-27, 2003

6 Porter Michael E: How Competitive Forces Shape Strategy? Harvard Business Review, March, 1979.

Understanding Competitors and Competition

core of changing the rules of market place. The strategy for outperforming the competitor is largely

based on two basic issues- the performance parameters and assessment criteria of the performance.

However the critical parameters may include probe for the following information as who is:

• Creating new customer needs that do not exist

• Developing and establishing the new attributes of the product

• Establishing new channels to reach all the existing and potential customers

• Reinventing stakes to make others confined to play catch-up roles

• Creating new capabilities as the source of new products and customer needs

• Creating knowledge base for driving the capabilities for the new goods and services

• Establishing new relationships with the channels, institutions and customers

• Winning or loosing in the business battle

• Establishing new chain of customer delight

• Leading the product

• Dominating the price-value relationship

Parameters and assessments of the above actions would help in focusing both the thinking and

strategy building process for sailing through the competition successfully. The current and future

strategy of competitors must be considered by any company planning to outwit, outmaneuver and

outperform them.

THEORETICAL FRAMEWORK OF COMPETITION

Philosophy of free enterprise system has been laid on the basics of competition. Competition is found in

all marketing functions which include the prices at which products are exchanged, the attributes and

qualities of products manufactured, the volume of products exchanged, the methods of distribution and

promotion. The school of thought, which has constructed the competition related theories, may be

categorized in two groups - economic theory and industrial organization perspective. The economists of

former group have discussed many different models of competition. The focus of their work is the

model of perfect competition, which is based on the premise that, when a large number of buyers and

sellers in the market are dealing in homogeneous products, there is complete freedom to enter or exit

the market and everyone has complete and accurate knowledge about everyone else. The latter group

of the school of thought on competition in reference to industrial organizations postulates that a firm’s

position in the marketplace depends critically on the characteristics of the industry environment in

which it competes. The industry environment comprises structure, conduct, and performance. Structure

refers to the economic and technical perspectives of the industry in the context in which firms compete.

It includes concentration in the industry such as the number and size distribution of firms, barriers to

entry and product differentiation. The competition theories have further laid emphasis also on the

market competition on functional dimensions, which include non-price competitions towards the product

differentiation and quality competition. Products are differentiated when the products of different firms

are not perfect substitutes and companies may compete by changing the characteristics of the product

Marketing Dynamics: Theory and Practice

they sell. Such strategy may not be necessarily to make a product better than the competitor, but just to

differentiate it in order to create an appeal to a different market niche.

Niche strategies provide a classic instance of such situations. No market is entirely homogeneous.

There are always groups of customers which differ in terms of their needs. The environment thus

created may well be fragmented; at the very least it will be structured. There exists the possibility of

the occurrence of niches which individual competitors may occupy. Niches are unlikely to be complete,

separate and well-defined. There will always be overlap. However, if such niches are rather subtly

defined they may not always be obvious to all the players. Thus niche players may appear to compete

but in practice do not do so or at least not fully. The competitive strategy of product differentiation

helps the company in enhancing the product-mix by introducing many varieties, which increase the

range of consumer choice. However, it divides up the market, leading to higher prices and costs for

the firm. From an economist’s point of view this definition of competition most closely resembles the

category of monopolistic competition. In this case it is assumed that a large number of buyers and

sellers exist, with each seller producing a variety of the essentially differentiated product which

characterizes the product group. The distinctive features of each attribute yield the firms to gain

small but nevertheless positive monopolistic advantage. This in turn accords the firms in question

some of the features of the monopoly described earlier, but at a more modest level. The precise level

of monopoly power enjoyed by each of the firms depends crucially upon the number of competing

varieties in the market, and the distribution of consumers’ preferences.

Modern economic theories on functioning of a firm have been developed since 1960. These

have examined, why firms grow at different rates and tried to model the normal life cycle of a

company, from fast-growing start-up to lumbering mature business. The more competition there is,

the more likely are firms to be efficient and prices to be low. Economists have identified several

different sorts of competition. In perfect competition every firm is competitive and plays in the

market as a price taker. Where there is a monopoly, or firms have some market power, the seller

has some control over the price, which will probably be higher than in a perfectly competitive

market. By how much more will depend on how much market power there is, and on whether the

firm(s) with the market power are committed to profit maximization. Firms earn only normal

profits, the bare minimum profit necessary to keep them in business. If firms earn more than this

(excess profits) other firms will enter the market and drive the price level down until there are only

normal profits to be made. The market power may be stated as when one buyer or seller in a

market has the ability to exert significant influence over the quantity of goods and services traded

or the price at which they are sold. Market power does not exist when there is perfect competition,

but it does when there is a monopoly, monopsony

or oligopoly. The basic attributes of the

monopolistic competition include:

• Many buyers and sellers

• Differentiated products

• Sufficient knowledge

• Free entry

7 Monopsony may be described as the market dominated by a single buyer unlike monopoly wherein

there exists a single seller.

Understanding Competitors and Competition

Hair dressing industry may be a good example

to understand monopolistic competition.

There are many hairdressers in the country,

and most hairdressing firms are quite small.

There is free entry and it is at least possible

that people know enough about their hair-

dressing options so that the “sufficient

knowledge” condition is fulfilled. But the

products of different hairdressers are not

perfect substitutes. At the very least, their

services are differentiated by location. A

hairdresser in the downtown of Mexico may

not be a perfect substitute for a hairdresser

in the suburbs, although they may be good

substitutes from the point of view of a cus-

tomer who lives in the suburbs but works in

downtown. Hairdressers services may be

differentiated in other ways as well. Their

styles may be different; the decor of the

salon may be different, and that may make a

difference for some customers; and even the

quality of the conversation may make a dif-

ference. A very customer of a hair dressing

firm may change hairdressers because an

old hairdresser was an outspoken market

protectionist.

In the contemporary analysis of

competition and related strategies thereof, it

is observed that the competitive firms intend

to ascertain a continuous organizational

learning process with respect to the value

creation chain and measure performance of

the new products introduced in the market.

In the growing competitive markets the large

and reputed firms are developing strategies

to move into the provision of innovative

combinations of products and services as

‘high-value integrated solutions’ tailored to

each customer’s needs than simply ‘moving

downstream’ into services. Such firms are

developing innovative combinations of service

capabilities such as operations, business

consultancy and finance required to provide

complete solutions to each customer’s needs

Strategy Focus 1.1: Organizational Competencies

and Competitive Efficiency of Multinational

Companies

The high-performing companies like Barclays, Cisco, Dow

Chemical, 3M, and Roche drive to establish some basic

rules for setting and delivering strategy which include simple

executable strategy, realistic, short-run result oriented and

transparency in process of strategy implementation. The

above companies work on debating over the assumptions,

and do not construct strategic frameworks on forecasts.

The high performing companies create cross-functional

teams drawn from strategy, marketing, and finance to ensure

the assumptions underlying your long-term plans which

reflect both the real economics of the company’s markets

and its actual performance relative to competitors. It has

been observed that rigorous analytic framework is used by

the high performing companies. Such companies as above

ensure that the dialogue between the corporate office and

the business units about market trends and assumptions is

conducted within a rigorous framework, such as that of

profit pools. These companies manage the resources

deployments early to support the scheduled production

and marketing activities. Proper resources management

would in turn help the company create more realistic forecasts

and more executable plans by discussing up-front the level

and timing of critical deployments. The companies like

Barclays, Cisco, Dow Chemical, 3M, and Roche clearly

identify priorities and prioritize tactics so that employees

have a clear sense of where to direct their efforts and

continuously monitor performance. Tracking resource

deployment, monitoring and evaluating results against plans,

using continuous feedback to reset assumptions and

reallocate resources have been principal activities performed

by the business monitoring centers of these companies. The

monitoring and evaluation reports are directly reported to

the top management periodically. The Reward is set for the

best strategy, product, brand and sales managers who achieve

the targets and non-planned market shares in the up-stream

markets. These companies also develop execution capabilities

and motivational tools for the staff. Following these rules

strictly the high performing companies narrow the strategy-

to-performance gap and achieve sustainable growth among

the competitors.

Source: Euro Monitor Online

www.euromonitor.com

For more comprehension on the functional efficiencies

of high performing companies see Mankins Michael C

and Steele Richmond: Turning great strategies into great

performance, Harvard Business Review, July 2005