Imitation vs. Innovation: Competitive Strategies & Market Leadership

Posted on Feb 12, 2025 in Business Administration and Management (BAM)

Imitation and Innovation Strategies

Imitative Strategy

This strategy involves copying what other successful companies are already doing. Companies using this approach adopt similar business models, services, or products to those that already exist.

Innovative Strategy

This strategy focuses on creating something new and different from what other companies in the industry are doing, offering unique products or services.

Example: Coca-Cola used an imitative strategy when it copied RC Cola’s idea and launched its own diet cola product.

Types of Imitation

  1. Counterfeit: Copying products with the same brand name, which is illegal and aims to steal profits from the original creator.
  2. Design Copies: Copying the style or design of a popular product (like fashion) but making slight changes.
  3. Technological Leapfrogging: Imitators enter the market later and use new ideas or better products to surpass the original innovators.
  4. Knock-offs (Clones): Products that are similar to the original but with different brand names, often sold at lower prices.

Factors Affecting Imitation

  1. Time: The quicker imitators act, the faster they can capture market share from innovators.
  2. Legislation: Laws protecting patents and secrets can slow down imitation.
  3. Suppliers: The availability of raw materials and technology affects how fast imitation can happen.
  4. Product Process: If the production process is simple, imitation can happen faster.
  5. Spread of Technology: How quickly innovation knowledge spreads impacts imitation speed.

Imitation Strategies

Involves copying products, marketing, and distribution strategies of successful companies to reduce the risk of failure when entering a market. However, if used long-term, it keeps the company as a market follower and prevents it from becoming a market leader.

Types of Imitation Strategies

  1. Piracy Strategy: Companies copy products exactly, including brand and design, making them counterfeit.
  2. Cloning Strategy: Companies imitate a product but sell it under a different brand.
  3. Mimics Strategy: Companies copy the look or design of a product.
  4. Creative Adaptation Strategy: Companies copy a product but modify it for a new market or environment.

First Mover Advantage

Is the company that takes the first action to gain a competitive edge in the market. The benefits of being a successful first mover are significant, especially in fast-changing markets where advantages are hard to maintain. For example, Amazon wasn’t the first to sell books online, but it was the first big company to do so. Similarly, Ryanair was a first mover in the budget airline industry.

Advantages of First Movers

  • First movers can better meet customer needs.
  • Their products are seen as higher quality and more established.
  • They build strong brand loyalty and recognition.
  • Customers are more likely to trust and prefer their products over new competitors.

Free Rider Effects

Happens when one company benefits from another’s efforts without sharing the costs. For example, a market pioneer spends on research, development, and testing, but competitors can copy the success without bearing those costs.

Understanding Competitors

Understanding competitors is as crucial as understanding customers. It involves:

  • Competitor Analysis: Identify and assess key competitors. For example, Kodak focused only on film camera rivals and missed the rise of digital cameras, leading to its downfall.
  • Assessing Competitors: Examine their goals, strategies, strengths, weaknesses, and likely reactions.
  • Developing Strategies: Compare and adjust your products, prices, and promotions to outperform competitors and gain an edge.

This helps a company stay relevant and ahead in the market.

Interpreneurial marketing brings back creativity and innovation to refresh a company’s marketing. Big companies often rely too much on routine and data, losing the spark that made them successful.

By encouraging intrapreneurial thinking, they can explore new ideas and challenge the norm. For example, Virgin Group grew into 200+ companies by empowering employees to innovate and take bold steps, even if unconventional

Michael Porter’s Four Competitive Strategies

  1. Cost Leadership: Be the cheapest producer to offer low prices and make good profits.
  2. Differentiation: Make unique products that stand out, so customers are willing to pay more.
  3. Focus: Specialize in a specific group or market and meet their unique needs.
  4. Middle of the Road: A mix of strategies with no clear focus, often leading to weak results.

Competitive Positions

  • Market leader strategies (Expand total market, expand market share)
  • Market challenger strategies (Full frontal attack)
  • Market follower strategies (Follow closely)
  • Market nicher strategies (By customer, market, quality, price and service)

Market Positions

  1. Market Leader (40%): The biggest player with the largest share.
  2. Market Challengers (30%): Second-place firms working hard to grow.
  3. Market Followers (20%): Smaller firms keeping their share steady.
  4. Market Nichers (10%): Firms focusing on small, unique segments.

A note tagged to the chart reads “Each market position calls for a different competitive strategy. For example, the market leader wants to expand total demand and protect or expand its share. Market nichers seek market segments that are big enough to be profitable but small enough to be of little interest to major competitors.”

Market Leader Strategies

Leading firms benefit most when the market grows. They do this by:

  1. Finding New Users: Reaching new groups, like Weight Watchers targeting men.
  2. Promoting New Uses: Showing creative ways to use products, like WD-40 sharing 2,000 uses.
  3. Increasing Usage: Encouraging people to use products more often or in large qualities, like Campbell’s promoting recipes to use more soup.

Competitor Strategies

Expand market share by:

  • Increasing profitability with increasing market share in served markets
  • Producing high-quality products
  • Creating good service experiences
  • Building close relationships

Balancing Customer and Competitor Orientations

Companies can focus on customers, competitors, or both:

  1. Product Orientation: Focuses only on the product, ignoring customers and competitors.
  2. Customer Orientation: Prioritizes customer needs but doesn’t pay attention to competitors.
  3. Competitor Orientation: Concentrates on beating competitors while ignoring customer needs.
  4. Market Orientation: Balances both, delivering better value to customers than competitors for long-term success.

Market orientation is essential for sustainable growth as it combines customer insights with competitive strategies.

Marketing Planning Activities

Four Planning Activities

  1. Defining the corporate mission
  2. Building the corporate culture
  3. Establishing strategic business units
  4. Assigning resources

Building a corporate culture: is the shared values, beliefs, behaviors, and practices that shape how employees work and interact in a company. It influences decision-making, teamwork, and the overall work environment.

Strategic Business Units (SBUs)

Strategic Business Units (SBUs) can be:

  1. Specialized Portfolio: Focuses on a few product lines with a narrow range.
  2. Diversified Portfolio: Includes many product lines with a broad range.

Developing the Marketing Strategy

Two components: Target Market, Value Proposition (USP).

Target Market: The specific group of customers the company aims to serve.

Value Proposition: The unique value the company offers to its customers, collaborators, and itself.

Together, these components form the foundation of the company’s business model and guide tactical decisions such as product design, pricing, and promotion. A well-defined target market and value proposition enable companies to create offerings that meet customer needs effectively and distinguish them from competitors.

For example, Apple’s business model is built on targeting tech-savvy consumers who value innovation and design. Their value proposition centers around offering premium, user-friendly products that work seamlessly together. This drives decisions like designing sleek, cutting-edge products, pricing them higher to reflect quality, and using creative advertising to highlight their uniqueness.

Identifying the Target Market

The 5 Cs

  1. Customers
  2. Collaborators
  3. Competitors
  4. Company
  5. Context

Target customers are the people or businesses a company aims to serve. In B2C markets, they’re the end users, while in B2B markets, they’re other businesses using the company’s products. Choosing target customers depends on two things: the company must offer more value than competitors, and the target customers should help the company grow and succeed.

Planning and Managing Market Offerings

G-S T I C Approach

• Set a Goal: Define what you want to achieve. ( Focus, benchmarks)

• Develop a Strategy: Plan how to reach that goal. (target market, value proposition)

• Design the Tactics: Decide on the specific actions to execute the strategy (product, service,brand,price, incentives,communication, distribution)

• Define an Implementation Plan: Create a step-by-step plan to carry out the tactics.(development, deployment)

• Identify Control Metrics: Set measures to track progress and success.(performance, environment)

Developing a Marketing Plan

A marketing plan has three main functions:

  1. It explains the company’s goals and how to achieve them.
  2. It informs stakeholders about the goals and the plan.
  3. It convinces decision-makers that the goal and plan are achievable and worth pursuing.

Contents of the Marketing Plan

G-S T I C section — the core of the marketing plan

  1. Goal: The specific objective the company wants to achieve, like increasing sales or brand awareness. (focus) and what is the criteria for reaching the goal (benchmarking)
  2. Strategy: Defines the target market (who you’re selling to) and the value proposition (why they should choose your product).
  3. Tactics: The marketing mix (product, price, place, promotion) used to execute the strategy. (market offering)
  4. Implementation: The actual execution of the strategy (development )and tactics to achieve the goal and bring the offering to the market (deployment9
  5. Control: Measuring and evaluating performance to ensure the plan is working and making adjustments if needed. (performance) and how it will monitor the environment to identify new opportunities( environment)

Evaluating a Marketing Plan

  1. Is the plan simple/succinct?
  2. Is the plan complete?
  3. Is the plan specific?
  4. Is the plan realistic?