The exchange process between seller and buyer characterizes market. Seller has a product to offer at a price and buyer has a need that can be satisfied by the product.
Concept and Types of
exchange process between seller and buyer characterizes market. Seller has a
product to offer at a price and buyer has a need that can be satisfied by the
product. In this sense, the seller and buyer are major actors in the market.
Competition is said to exist when there is more than one seller and more than
one buyer. Thus there are two views of competition.
view of competition form seller point of view
view of competition from buyer point of view
The economists view of competition
Economists have taken the resource distribution
trough price mechanism as the keyhole and viewed competition. They analyzed
competition, therefore, from sellers’ point of view or the industry structure.
Industry is defined as a collection of sellers who offer similar or same
product to the same type of customers.
Take for example, toothpastes. There are several
competitors. For instance, HUL (Close up), Colgate (Colgate), and Dabur Balsara
(Promise) are in the race along with many others.
Economists describe the industry or market
structures based on demand and supply forces. Table 7-1 shows the different
market situations and describes their characteristics.
In this sense, even though ‘physical products’ may
belong to different industries or technologies, they become competitors to each
other to satisfy a specific need or desire. This ubiquitous view can be perceived
as belonging to four types of competitors. Kotler( (1988) has labeled them as
desire competitors, generic competitors, form competitors and brand
7-1 provides an illustration for a situation where the need is to ‘break monotony’
at the ‘desire level’ and terminates into a specific ‘brand’ situation for a
south Indian Restaurant. Desire
competitors The alternative suppliers of different products that can satisfy a basic desire- the
need expression of a consumer. For example, you desire to break monotony. You
have several options and you choose to eat out. Generic competitors The
suppliers of a specific product/service category.
In this example, the next question is where and what? The physical product or
service is visualized here. You have again options by variety of foods and
places. You decide, say, in favor of restaurant. Form
competitors The suppliers of different product/service form. They are explored here. Which form of
restaurant? is the next choice problem. Say South Indian. Brand
competitors Different marketers of different brands of a particular product form. The
consumer now focuses on brand choices. Say India coffee house.
backdrop of this framework, the South Indian Restaurant owners will be myopic
if they focus only on their brand competitors. A challenge to any marketer is
to expand the primary demand and hence enhance the area of opportunities. To do
this, the South Indian Restaurant owners have to be concerned about the trends
in the ‘eating-out’ environment. And this has been done very successfully by
some of the South Indian Restaurants in large cities. Having gained a wide
popularity amongst a large segment, they have also started offering Non-South
Indian dishes and have thus expanded their market size and fairly their
opportunities. This kind of a view provides a wide terrain to
radar the competitive environment. Theodore Leavitt’s classic article. “The
Marketing Myopia”, is an excellent illustration of shifting the focus from product
to need to ensure long-term survival and growth of a firm.
Tags : Strategic Management - Environmental Analysis and Diagnosis
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