Strategic Business Planning and Competitive Analysis

Posted on Feb 9, 2025 in Business Administration and Management (BAM)

Imitation and Innovation Strategies

Imitative Strategy: An overall strategic approach in which the entrepreneur does more or less what others are already doing.

Innovative Strategy: An overall strategic approach in which a firm seeks to do something that is very different from what others in the industry are doing.

Imitative strategy is adopted by companies to imitate or copy an existing model of a company and implement its services, business ideas, revenue model, etc. Example: Coca-Cola imitated RC Cola in replicating its diet cola product.

Types of Imitation

  1. Counterfeit or Product Pirates:
    • Counterfeits are copies that carry the same brand name or trademark as the original ones.
    • It is an attempt to rob the innovator of the due profit.
    • Counterfeiting is strictly illegal.
  2. Design Copies or Trade Dress (Primark):

    Design copies trade on the style, design, or fashion of a competitor’s popular product.

    In instances where fashion is more important than the actual design, the design is copied with some engineering modifications, giving it a slightly different look.

  3. Technological Leapfrogging:

    Firms that enter a growing market after an innovator will be able to read the market more accurately than the innovator solely because of the passage of time.

    As such, before entering the market, they have better ideas and responses to market situations, allowing the imitator to “leapfrog” the innovator with a superior product.

  4. Knock-offs or Clones:

    Clones are similar to the original, but they carry different brand names. Often, clones are legal products in their own right.

    The absence or expiration of patents, copyrights, and trademarks makes many of them legal.

    Clones usually sell the same products at a much lower price.

Factors Affecting Imitation

  1. Time
    • Time is an important factor that affects the success of both innovators and imitators.
    • If innovators are successful and receive positive market responses, the slower the imitators can imitate.
    • The faster imitators can imitate the innovations, the earlier they can grab market share from the innovators.
  2. Legislation
    • The presence or absence of legislation to protect manufacturing secrets or patents for innovation affects the imitation process.
    • Patents have a specified time range, and competitors cannot legally imitate during this period.
    • If there are higher levels of demand from customers and lower competition, there will be faster ways of imitation for such products.
  3. Suppliers: Suppliers that provide and spread raw materials and critical technologies for the manufacture of new products or services are another factor that affects the speed of imitation.
  4. Product Process: If the production process is simple and easy to imitate, then imitation can be faster.
  5. Spread of Technology: The degree of how much and how fast the knowledge of innovation can spread and be obtained.

Imitation Strategies

Imitation strategy not only mimics the strategy of other companies but also imitates their promotion and distribution strategies.

Imitation strategy is only used at the beginning. If companies continue to use it for the long term, they would be considered market followers and can never become market leaders.

Imitation strategy minimizes the risk of downside loss associated with new entry.

Free Rider Effects: The free-riding effect occurs when one firm (or individual) benefits from the actions and efforts of another without paying or sharing the costs. A firm bearing to be a market pioneer bears higher costs in market analysis, R&D, customer research, simple study pilot testing, etc., while those copying the same incur virtually no costs.

Types of Imitation Strategies

  • Piracy Strategy: Companies that perform this kind of imitation strategy sell products with the exact same brand and product design, often called counterfeit products.
  • Cloning Strategy: Companies using this strategy imitate an existing product but use another brand.
  • Mimics Strategy: This strategy mimics the design or trade dress (visual appearance of a product).
  • Creative Adaptation Strategies: Also termed a disguise strategy, this involves copying existing products and developing or adapting them to apply to a new environment.

First Mover

A first mover is a firm that takes an initial competitive action to build or defend its competitive advantages or improve its market position.

The benefits of being a successful first mover can be substantial, especially in fast-cycle markets where changes occur rapidly and it is virtually impossible to sustain a competitive advantage for any length of time.

For example, even though Amazon.com was not the first entity to sell books on the Internet, it was the first significant company to do so (many people think Amazon was the first – it wasn’t!). Ryanair is another good example.

Advantages of First Movers

  • First movers are better positioned to satisfy customers.
  • The pioneers’ products would be positioned as a higher brand in customers’ minds because of the supply of augmented products to the market.
  • A high amount of brand loyalty and brand association would be present.
  • Customers would prefer and believe in pioneers’ products rather than new entrants.

Understanding Competitors and Competitive Strategies

Competitor Analysis: Identifying, assessing, and selecting key competitors. Example: Kodak focused on film camera competitors but failed to recognize digital camera makers, leading to its decline.

Assessing Competitors: Evaluating their objectives, strategies, strengths, weaknesses, and reaction patterns.

Developing Competitive Strategies: Comparing and positioning the company’s strategies, products, prices, and promotions against competitors to gain a competitive advantage.

This process helps identify areas of strength and weakness to create effective marketing strategies.

Intrapreneurial Marketing

Intrapreneurial marketing focuses on reigniting creativity and innovation within a company to refresh its marketing strategies. Large, mature companies often fall into rigid, formulated marketing practices, relying heavily on data and research but losing the passion and creativity that drove their early success.

Intrapreneurial thinking allows companies to explore new opportunities and challenge conventional approaches. For example, the Virgin Group thrives on an intrapreneurial culture, enabling it to grow into a network of over 200 companies by empowering individuals to lead innovative efforts and seize new opportunities, even when they defy traditional methods.

Michael Porter’s Four Basic Competitive Positioning Strategies

Overall Cost Leadership: Focuses on being the lowest-cost producer in the industry to offer competitive pricing and high profitability.

Differentiation: Aims to offer unique products or services that stand out due to quality, innovation, or branding, allowing for premium pricing.

Focus: Targets a specific niche or market segment, tailoring products or services to meet the unique needs of that group.

Middle of the Road: A mixed strategy with no clear focus, often leading to weaker competitive positioning due to a lack of differentiation or cost leadership.

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.

Competitive Market Positions and Roles

Forty percent of the market is in the hands of the market leader, the firm with the largest market share.

Another 30 percent is in the hands of market challengers, runner-up firms that are fighting hard to increase their market share.

Another 20 percent is in the hands of market followers, other runner-up firms that want to hold their share without rocking the boat.

The remaining 10 percent is in the hands of market nichers, firms that serve small segments not being pursued by other firms.

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

The leading firm normally gains the most when the total market expands.

Finding New Users: Targeting untapped market segments, like Weight Watchers, which started appealing to men with the help of a male spokesperson.

Promoting New Uses: Encouraging creative ways to use their products, as WD-40 did by identifying and sharing 2,000 unique uses.

Increasing Usage: Convincing consumers to use their products more frequently or in larger quantities, such as Campbell’s promoting recipes to boost soup consumption.

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 adopt four orientations based on their focus on customers and competitors:

  • Product Orientation: Focuses on the product itself, paying little attention to customers or competitors.
  • Customer Orientation: Prioritizes understanding and meeting customer needs but overlooks competitors.
  • Competitor Orientation: Focuses on tracking and outperforming competitors while ignoring customer needs.
  • Market Orientation: Balances attention to both customers and competitors. Market-oriented companies build profitable relationships by delivering more value to customers than competitors do, focusing on innovation and long-term success.

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

Strategic Planning Activities

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

Building a Corporate Culture: Some define it as “the shared experiences, stories, beliefs, and norms that characterize an organization.”

Defining Strategic Business Units: – A specialized portfolio involves SBUs with fairly narrow assortments consisting of one or a few product lines. – A diversified portfolio involves SBUs with fairly broad assortments containing multiple product lines.

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, cheese products like macaroni, cream cheese, and cheese slices tailor their value propositions to specific consumer preferences, such as taste or convenience, to attract different segments of the market.

Identifying the Target Market

The 5 Cs

  • Customers
  • Collaborators
  • Competitors
  • Company
  • Context

Target Customers: are the individuals or organizations whose needs the company plans to fulfill.

Target customers in business-to-consumer markets are typically the end users of the company’s offerings, whereas in business-to-business markets, target customers are other businesses that use the company’s offerings.

Two key principles determine the choice of target customers:

The company and its collaborators must be able to create superior value for target customers relative to the competition, and the target customers chosen should be able to create value for the company and its collaborators.

Planning and Managing Market Offerings

G-STIC Approach

  • Set a Goal
  • Develop a Strategy
  • Design the Tactics
  • Define an Implementation plan
  • Identify a set of Control metrics

1. Goal: – Description: The ultimate criterion for success. The main objective to be achieved through marketing efforts. – Components: – Focus: The key metric used to measure success (e.g., increased sales, market share). Should be SMART (Specific, Measurable, Achievable, Relevant, Time-bound). – Benchmarks: Quantitative and temporal criteria for achieving the goal (e.g., “Increase sales by 15% in Q1”).

2. Strategy: – Description: Defines the value created in the target market. The overall plan to achieve the goal, setting direction and focus. – Components: – Target Market: The specific group of consumers targeted by marketing efforts (defined by demographics, geography, psychographics, and behavior). – Value Proposition: The unique value offered to the target market. Why should customers choose this product/service over the competition?

Developing a Marketing Plan

Three main functions:

  1. Describes the company’s goal and proposed course of action.
  2. Informs the relevant stakeholders about the goal and action plan.
  3. Persuades the relevant decision-makers of the viability of the goal and the proposed course of action.

Contents of the Marketing Plan

G-STIC section — the core of the marketing plan

  • Goal: The company aims to achieve.
  • Strategy: Target market and value proposition.
  • Tactics: Marketing mix.
  • Implementation: Execution of strategy and tactics.
  • Control: Evaluate performance.

Exhibits, tables, charts, and appendices.

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?

Organization of the Marketing Plan

1. Executive Summary: – Key Question: What are the key aspects of the company’s marketing plan? – This section provides a concise overview of the entire plan, highlighting the most important points. It’s written last, after the rest of the plan is complete.

2. Situation Overview: – Divided into two subsections: – Company: – Key Question: What is the company’s history, culture, resources, offerings, and ongoing activities? – This analyzes the company’s internal situation, including its history, values, available resources (human, financial, technological), the range of products or services it offers, and its current activities. – Market: – Key Question: What are the key aspects of the markets in which the company competes? – This analyzes the external environment, including market size, trends, competition, customers, and other relevant market environment factors.

3. Goal: – Divided into two subsections: – Focus: – Key Question: What is the key performance metric the company aims to achieve with the offering? – This defines the main objective of the marketing plan in terms of a measurable metric, such as increased sales, market share, brand awareness, etc. – Benchmarks: – Key Question: What are the criteria (temporal and quantitative) for reaching the goal? – This establishes the criteria for measuring success, including specific deadlines and quantitative targets (e.g., “increase sales by 15% in the next year”).

4. Strategy: – Divided into two subsections: – Target Market: – Key Question: Who are the target customers, competitors, and collaborators? What are the company’s resources and context? – This defines the target audience for the offering, analyzes the competition, and identifies potential collaborators. It also considers the overall context and available resources. – Value Proposition: – Key Question: What value does the offering create for target customers, collaborators, and company stakeholders? – This defines the unique value that the company offers its customers, differentiating itself from the competition and meeting their needs.

5. Tactics: Market Offering: – Key Question: What are the product, service, brand, price, incentives, communication, and distribution aspects of the offering? – This details the specific actions that will be taken to implement the strategy, including decisions about product, price, promotion, distribution, and other elements of the marketing mix.

6. Implementation: – Divided into two subsections: – Development: – Key Question: How is the company offering being developed? – This describes the product or service development processes. – Deployment: – Key Question: What processes will be used to bring the offering to market? – This details the launch plan and how the offering will be made available to customers.

7. Control: – Divided into two subsections: – Performance: – Key Question: How will the company evaluate progress toward its goal? – This establishes the monitoring and evaluation mechanisms for the plan, including the key performance indicators (KPIs) that will be used to measure progress. – Environment: – Key Question: How will the company monitor the environment to identify new opportunities and threats? – This defines how the market environment will be monitored to identify changes, new trends, opportunities, and potential risks.

8. Exhibits: – Key Question: What are the details/evidence supporting the company’s action plan? – This includes supporting documents, such as market research, competitive analysis, financial projections, etc.

3. Tactics: – Description: Specific details of the market offering. Concrete actions taken to implement the strategy. – Components (Marketing Mix/7 Ps): – Product: Physical, functional, and symbolic characteristics of the offered good/service. – Service: Complementary activities accompanying the product (e.g., customer support, warranties). – Brand: Name, logo, symbols, and other elements identifying the company and its products. – Price: Monetary value assigned to the product/service. – Incentives: Promotions, discounts, special offers to stimulate purchases. – Communication: Advertising, PR, digital marketing, social media, and other ways to convey messages. – Distribution: Channels and processes used to get the product/service to the end consumer.

4. Implementation: – Description: Focuses on the logistics of creating the offering. Defines how tactics will be put into practice. – Components: – Development: Creation and improvement of the product/service (design, production, testing). – Deployment: Launching marketing actions (product launch, advertising campaigns, managing distribution channels).

5. Control: – Description: Monitors progress toward the goal. Evaluates the effectiveness of actions and makes adjustments if needed. – Components: – Performance: Measures the performance of marketing actions using KPIs (e.g., ROI, new customers, web traffic). – Environment: Monitors the market environment for changes, trends, opportunities, and threats (competitor analysis, consumer trends, regulatory changes).