2. What this topic is about
• The possible impacts of
market conditions and
degree of competition
• Determinants of
competitiveness
• Methods of improving
competitiveness
4. Competitive Advantage
• The ability of a business to add
more value for its customers
than its rivals and attain a
position of relative advantage
• A situation where a business
has an advantage over its
competitors by being able to
offer better value, quality
and/or service
7. Market Structures in Context
Non-price competition – brand | service | USP
Efficiency | lowest unit cost | compete on price
8. Market Structures – Three Key Issues
• The extent of current competition
• The potential for new firms to enter the
market
• The extent to which the firm produces an
homogenous product (indistinct from
rivals) or a differentiated product (distinct
from rivals)
9. The Threat of New Market Entrants
• The possibility of newcomers entering the
market is an important aspect of
competition within the market
• High profits will tempt newcomers to
enter a market and this will drive down
prices and profits
• Therefore the maintenance of monopoly
power depends upon erecting and
maintaining barriers to market entry
10. Economics – Four Market Structures
• Perfect competition
– Many firms all producing or selling homogeneous goods
– E.g. CDRs
• Monopolistic competition
– Competition between many firms producing differentiated goods
– E.g. restaurants, fast-food outlets
• Oligopoly
– Competition between a small number of suppliers
– E.g. banking, chocolate bars, tour operators
• Monopoly
– Single suppler
– E.g. water & gas
12. Example Porter Model – Grocery Retailing
The force Comment
Entry barriers High- high cost of entry will deter newcomers
Suppliers power Large suppliers may enjoy some degree of power
but the small suppliers are in a weak position
Buyer power Collectively, buyers are strong but individual
buyers are in a weak position
Threat of Medium threat in some parts of the market in but in
substitution general there is little threat
Existing rivalries Intense competition as supermarkets fight over
market shares
13. Market Forces – What Can Be Done
• Customer reliance
– Reduce over-reliance on customers
– Focus marketing efforts on most profitable
customers
• Supplier reliance
– Build relationships
– Have an alternative source of supply
• Barriers to entry
– Build a brand
– Capture a fair share of distribution
– Operate efficiently to compete at low cost
14. More on Barriers to Entry
• Product differentiation (including brands)
– Will act to increase customer loyalty making it difficult
for newcomers to gain market share
• Access to raw materials and distribution
channels
– A lack of access will make it difficult for newcomers to
enter the market
• Retaliation by established products
– E.g. the threat of price war
– Will act to discourage newcomers
18. Questions to Test Marketing Competitiveness
What is different or better about this
1 business compared with the competition?
Is this business operating and organised
2 efficiently?
Does this business do all it can to delight
3 its customers?
