Flashcards in Competition Deck (9)
What is the product-related definition of competition?
We compete with all companies offering similar goods in terms of architechture, design, main technical properties, manufacturing process or process of delivery
What is the Benefit or need-related definition?
We compete with all companies that in specific use context provide the same benefit or fulfill the same need for their customers
What is the goal of timing?
Reach advantages by entering markets at the right time or find conclusive evidence to leave markets when conditions imply insufficient success potential
Describe the three types of timing strategies?
Pioneer - First to provide a new product or service in the market, often a new market.
Early follower - Follows short after Pioneers, often with improved products or services.
Late follower - Steps into market after it stabilizes and the demand has evolved
What can be a companys complementary assets?
- Distribution and sales (exclusive access to communication channels, close customer relationship, long market experience of the sales of staff)
- Advertising, public relations or sales promotion
- Product and service execution
- Supply (long term contracts with high-quality suppliers)
Explain switching costs
Switching costs are the costs that a consumer incurs as a result of changing brands, suppliers or products. Ex: Phone company (cancellation fees), or switching computer brand (Microsoft - Apple) - new software (money), but also costs in time and effort to learn it
-> prevent customer from leaving
What are the pros of the Pioneer strategy?
- Building barriers for market entry (Patents, quality leadership image, strategic determent of imitators)
- Efficiency (Realizing learning curve effects, developing complementary resources, high efficiency of promotional activities)
- Positioning and commitment (Benefiting from switching costs, customers have quality uncertainty regarding followers)
. Shaping customer preferences (Image advantage of pioneers, intensive learning on the product, pioneer product becomes mental prototype)
What are the cons of the pioneer strategy?
- Free riding followers (Pioneer has the highest R&D investment, and highest investment for opening and developing a new market)
- Technologies and customer requirements change quickly (followers may use more efficient tech., followers may meet new emerging customer needs in a better way, followers may develop a more attractive market position)
- Pioneer Inertia (Investment in fixed and specilized production facilities, specilized sales organization, hesitation due to product cannibalization)