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Strategic Management - Environmental Analysis and Diagnosis

Concept and Types of Competition - Competitive Analysis

   Posted On :  26.06.2018 03:00 am

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 Competition
 
 
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. 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. 
 
1. Economist’s view of competition form seller point of view
 
2. Marketer’s 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 competitors.
 
Figure 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.



In the 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. 

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