CHAPTER 2: DEFINING THE COMPETITIVE SET

Chapter Focus

The important concept for students to understand in this chapter is that competition must be defined from the customer’s perspective. This often leads to broader (and different) definitions of competition compared to the way product managers normally see them. Often, managers are primarily driven by the competition “closest” to them, what we call product form competitors. This is due to the way data are collected by companies such as IRI and Nielsen for grocery and drug stores and trade publications (i.e., Twice for durable goods), which have particular ways of defining product categories that become the category norm. Of particular importance are generic and budget competitors that give the product manager a broader perspective on competition for both short-run applications (i.e., in emerging categories) and in the long run as other categories seeking growth start to market against the target category’s main benefits.

The class lends itself to good discussion, either with or without case studies. The first part of the class can be devoted to explaining the basic principles behind the different definitions and making the point that broader definitions of competition are entirely consistent with the customer/market orientation that they have learned about (hopefully) in the basic marketing management course. In the second part of the class, the instructor can give as many examples as necessary to get the points across. It is difficult to find a product category where the concepts do not apply. Relatively new technology-based products (like the PDA’s in the text) always work well as their primary competition are generic in nature. For example, the job of product managers working on a product in a new technology is to convince customers that the new way is better than the old way (the competition). In particular, the instructor should mix in industrial marketing examples as business-to-business products and services are particularly prone to budget-based competition as purchases often come from the same overall budget (i.e., office capital improvements) that is applicable to many purchases. In the final part of class, the instructor can review different ways of defining competition. Of particular importance is the product by use analysis as this does the best job of implementing the broad views of competition.

Cases

Depending on the instructor’s wishes, cases can be used to supplement a one-day session on this topic or can extend the topic to a second day. Some cases that have worked well in the course are the following:

Desktop Printer Industry in 1990 (Harvard; #9-390-173)

Disposable Diaper Industry in 1974 (Harvard; #9-380-175)

Heinz U.S.A. (Baby Foods) (Harvard; #9-381-102)

MCI (Harvard; #9-585-097)

Nokia-Mobira OY (Harvard; #9-589-112)

Note on the Disk Drive Industry, 1985 (Harvard; #9-586-040)

Swatch (INSEAD; #589-005-1)

U.S. Retail Coffee (A), (B) (Harvard; #9-586-134, 582-088)

U.S. Securities Industry, 1979 (Harvard; #9-379-190)

Exercises

The material also lends itself well to two kinds of in-class exercises:

1. Students can be given a target brand or category and asked to develop a list of competitors accounting for the different levels of competition. It is interesting to note the different perspectives taken. It is also interesting to do this at the beginning of class before the material has been discussed to see who comes into class with a narrow perspective (this also checks to see who read the material before coming to class).

2. We describe in the text a valuable focus group approach to defining competition developed by Stefflre (see footnote number 21), substitution in use. The instructor can use the class as a focus group to develop a list of competitors for a target brand. This not only gives the students an idea about how broad competition can be but also highlights the use of marketing research, in this case, qualitative research, in the product manager’s job.

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