1. Chapter Three
Markets and
Competitive
Space

2. 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

3. 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

4. MARKETS AND STRATEGIES
Markets and
Strategies are
Interlinked
Forming
a Shared Vision
Value Migration
Challenges

5. • Market changes often require altering
strategies
• Forces of change create both market
opportunities and threats
• Inherent danger in faulty market sensing
Markets Impact Strategies

6. • Customers shift purchasing to new
business designs with enhanced value
offering
• Beware of disruptive technologies
• Market sensing and organizational
learning are essential
Value Migrations

7. PRODUCT-MARKET SCOPE AND
STRUCTURE
Matching Needs with Product Benefits
Product-Market Boundaries and Structure
Forming Product-Markets for Analysis
The Changing Composition of Markets

8. 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.

9. INNOVATION FEATURE
• In the period 1994 to 2004, Progressive Insurance increased sales from $1.3 billion to
$9.5 billion, and ranks high in the Business Week Top 50 U.S. companies for
shareholder value creation.
• The company invents new ways of providing services to save customers time, money
and irritation, while often lowering costs at the same time.
• Loss adjusters are sent to the road accidents rather than working at head office, and
they have the power to write checks on the spot.
• Progressive reduced the time needed to see a damaged automobile from seven days to
nine hours.
• Policy holders’ cars are repaired quicker, and the focus on this central customer need
has won much automobile insurance business for Progressive.
• These initiatives also enable Progressive to reduce its own costs – the cost of storing a
damaged automobile for a day is $28, about the same as the profit from a six-month
policy.
Progressive Insurance:
Customer Needs at the Center of Strategy
Source: Adapted from Mitchell, Adrian (2004)”Heart of the Matter,” The Marketer, June 12, 14.

10. Product – Market Boundaries and Structure
• Determining Product-Market Structure
1. Start with the generic need satisfied by the
product category of interest to management
2. Identify the product categories (types) that
can satisfy the generic need
3. Form the specific product – markets within
the generic product – market

11. SUPER
MARKETS
MICROWAVE
OVENS
CONVENIENCE
STORES
TRADITIONAL
RESTAURANTS
Illustrative Fast-Food
Product-Market Structure
FAST-FOOD
MARKET

12. Forming Product – Markets for
Analysis
Factors influencing product – market
boundaries:
 Purpose of analysis
 Changing composition of markets
 Extent of market complexity

13. 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)

14. 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

15. Illustrative Product – Market
Structure
•Generic Product
Class
•Product Type
•Variant A
Regular
•Variant B
•Brands
Food and beverages
for breakfast meal
Cereals
Ready to eat
Natural
Pre-sweetened
Life
Nutritional
Special KProduct 19

16. 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

17. Identifying and
Describing Buyers
How
Buyers
Make
Choices
Building
Customer
Profiles
Environmental
Influences
DESCRIBING
AND
ANALYZING
END-USERS

18. Identifying and Describing End-Users
• Illustrative buyer characteristics in
consumer markets:
 Family size, age, income,
geographical location, sex, and
occupation
• Illustrative factors in organizational
markets:
 Type of industry
 Company size
 Location

19. How Buyers Make Choices
 BUYING DECISION PROCESS:
1. Problem recognition
2. Information search
3. Alternative evaluation
4. Purchase decision
5. Post-purchase behavior

20. 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

21. 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.)

22. ANALYZING COMPETITION
1. Define Industry
Structure and
Characteristics
2. Identify and
Describe Key
Competitors
5. Identify
New
Competitors
3. Evaluate
Key
Competitors
PRODUCT-
MARKET
STRUCTURE
AND
MARKET
SEGMENTS
4. Anticipate
Actions by
Competitors

23. Examples of Levels of Competition
Diet-Rite
Cola
Diet PepsiDiet
Coke
Product from
competition:
diet colas
Regular
colas
Diet lemon
limes
Lemon
limes
Fruit
flavored
colas
Product category
competition:
soft drinks
Bottle
water
Wine
Beer
Coffee
Juices
Generic competition:
beverages
Baseball
cards
Fast
Food
Video
Games
Ice
Cream
Budget competition:
food & entertainment

24. 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

25. Defining Industry Structure &
Characteristics
Industry Form
Industry
Environment
Competitive
Forces Value
Added
Chain
SUPPLIERS
PRODUCERS
WHOLESALERS/ DISTRIBUTORS
RETAILERS/DEALERS
CONSUMER/ ORGANIZATIONAL END
USERS

26. Competitive Forces
1. Rivalry among existing firms.
2. Threat of new entrants.
3. Threat of substitute products.
4. Bargaining power of suppliers.
5. Bargaining power of buyers.
Source: Michael E. Porter, Competitive Advantage, Free Press, 1985, 5.

27. Key Competitor Analysis
• Business scope and objectives
• Management experience, capabilities, and
weaknesses
• Market position and trends
• Market target(s) and customer base
• Marketing program positioning strategy
• Financial, technical, and operating
capabilities
• Key competitive advantages (e.g., access to
resources, patents)

28. Extent of
Market Coverage
Customer
Satisfaction
Current
Capabilities
Past
Performance
Competitor
Evaluation

29. DEVELOPING A STRATEGIC VISION ABOUT
THE FUTURE
 Industry Boundaries Blurring and Evolving
 Competitive Structure and Players Changing
 Value Migration Paths
 Product Versus Business Design Competition
 Firms are Collaborating to Influence Industry
Standards
Source: C. K. Prahalad, Journal of Marketing, Aug. 1995, vi.

30. MARKET SIZE ESTIMATION
Unrealized
Potential
Company
Sales
Forecast
Industry
Sales
Forecast
Market Potential
Estimate
Product-Market Forecast
Relationships
(area denotes sales in $’s)

31. 0
100
200
300
400
500
600
700
800
900
Sales (in 1000s
of units)
2001 2002 2003 2004 2005 2006 2007 2008
Market
Potential
Sales Forecast
Company XYZ
Sales Forecast
Product-Market Forecast
Relationships for Industrial
Painting Units