Page 297 - DMGT408DMGT203_Marketing Management

Marketing Management/Essentials of Marketing

Notes Introduction

Since late 1980s, we have witnessed the increasing awareness and impact of competition in India
in almost all product categories, including many types of services. Every company wants to gain
an edge over its competitors. A competitive advantage is an advantage over competitors gained
by offering consumers greater value, either by means of lower prices or by providing greater
benefits and service that justifies higher prices.
Competitive forces promote new thinking and innovations in every area of business activity. In
a highly competitive global economy, with changing consumer wants, lifestyles, and preferences,
companies must carefully and on an ongoing basis assess their competition. Generally companies
view and analyse competition both from an industry and a marketing perspective. In this unit,
you are going to learn how companies analyse their competition and what strategies do they
use to gain competitive advantage.

13.1 Competitive Forces

Michael Porter has identified five interactive competitive forces that determine an industry’s
long-term attractiveness:

1. Present competitors
2. Potential competitors
3. The bargaining power of suppliers

4. The bargaining power of buyers
5. The threat of substitute products
Figure 13.1: The Determinants of Industry Attractiveness

Threat of New
Entrants

Rivalry
Bargaining Power Bargaining Power
of Suppliers Among Existing of Buyers

Industry Firms

Threat of Substitute
Products

13.1.1 Rivalry among Present Competitors

Rivalry takes place among companies that produce close substitute products and when
competitors try to improve or maintain their position. Whatever action one company takes and
affects others. The greater the competitive intensity in an industry, the less attractive it is to
current or would-be entrants. As the intensity of rivalry increases, generally the profitability
starts decreasing. This happens when the industry has many strong, or aggressive competitors,

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