The
Competitive Environment
The interactive exchange in the
marketplace as organizations vie with one another to satisfy customers creates
the competitive environment. Marketing decisions by each individual firm
influence consumer responses in the marketplace. They also affect the marketing
strategies of competitors. As a consequence, decision makers must continually monitor competitors’ marketing
activities – their products, channels, prices and promotions.
Structurally,
competition can be viewed in the following way.
(i) Monopoly
Few organizations enjoy monopoly
positions in the marketplace. In India, Indian Railways is a monopoly firm.
Utilities such as electricity, water and cooking gas accept considerable
regulation from local authorities. Other firms, such as manufacturers of
pharmaceutical products, sometimes achieve temporary monopolies as a result of
patents.
(ii) Oligopoly
When competitors are few and each
one exercises some influence on market dynamics, it is called oligopoly. Firms
in telecom, cement, and steel are examples. Prices and production levels are
fixed by formation of cartels or pools.
(iii) Monopolistic competition
When competitors are many and
each one has a unique product to offer same needs the competition is termed as
monopolistic competition. It is called non-price competition and features
competition. Products like toothpastes, shampoos, fairness creams, have number
of brands rolled out by companies like HUL, P&G, Dabur, Godrej, CavinKare.
They compete within a price range offering a different feature.
Yet another way of looking at
competition is by considering the three types of competition.
Generic competition
Every product is in competition
with every other product. The income of a consumer is divided into savings,
consumption and investment.
Therefore, TV is in competition with products of savings like insurance
or savings bonds, investment options like shares of companies, interest
payments for housing loan, or consumption products like refrigerator, micro
oven, Steel cupboard, scooter and holiday trip.
Form competition
The second type of competition
involves products that users can substitute for one another. In the transportation industry, the
no-frills, low-cost airliners compete with train and luxury bus services.
A change such as a price increase
or an improvement in a product’s capabilities can directly affect demand for
substitute products.
Brand competition Direct
competition occurs among marketers of similar products, as when an insurance
firm competes with other insurance firms. LIC
competes with Postal department , Reliance, Birla and others.
Traditional economic analysis
views competition as a battle among companies in a single industry or among
firms that product substitute goods and services. Marketers must, however,
accept the argument that all firms compete for a limited pool of discretionary
buying power.
Because the competitive
environment often determines the success or failure of a product, marketers
must continually assess competitors’ marketing strategies. A firm must
carefully monitor new product offerings with technological advances, price
reductions, special promotions or other competitive variations, and the firm’s
marketing mix may require adjustments to counter these changes.
Every firm’s marketers must
develop an effective strategy for dealing with its competitive environment. One
company may compete in a broad range of markets in many areas of the world.
Another may specialize in particular market segments, such as those determined
by customers’ geographic, age or income characteristics. Determining a
competitive strategy involves answering three questions:
(1) Should we
compete?
The answer to this questions
depends on the firm’s resources, objectives and expectations for the market’s
profit potential. A firm may decide not to pursue or continue operating a
potentially successful venture that does not mesh with its resources,
objectives or profit expectations.
(2) If so, in
what markets should we compete?
The answer requires marketers to
acknowledge their limited resources (sales personnel, advertising budgets,
product development capabilities and so on). They must accept responsibility
for allocating these resources to the areas of greatest opportunity.
(3) How
should we compete?
This requires marketers to make
product, pricing, distribution and promotional decisions that give their firm a
competitive advantage in the marketplace. Firms can compete on a wide variety
of claims, including product quality, price and customer service. For example,
a retailer may gain competitive advantage by providing superior customer
service, while another retailer competes by providing low prices.
With increased international
competition and rapid changes in technology, many firms are using time as a
strategic competitive weapon. A
time-based competition strategy
seeks to develop and distribute goods and services more quickly than
competitors. The flexibility and responsiveness of a time-based strategy
enables the firm to improve product quality, reduce costs, respond to
competition and expand the variety of its products to cover new market segments
and enhance customer satisfaction.