Wilson and Gilligan (2005) identify four types of market competitive positioning (market leaders, followers etc): describe each position and suggest the key strategies appropriate to each- illustrate each position with reference to an organization known to you.
The need to plan exit strategies is often overlooked: explain why the need to withdraw from a market may be necessary and describe typical exit strategies.
The market leader represents the most dominant form of market interferes in a specific market industry. Usually, there is in one industry one firm that interacts as the market leader. It is characterized by having the largest market share. Furthermore, the market leader determines pace and bases of competition as for example the pricing or advertising intensity and last its ability to create a benchmark which means that it then influences the activities of other companies (Wilson and Gilligan, (2006)). For example the sports brand NIKE is the market leader in the sports industry in the USA but also operating strongly on a global basis due to an enormous potential purchasing power worldwide. However, regarding the European market, ADIDAS dominates the sports industry market (Smit, 2006).
There are three key strategies for market leaders in order to achieve and maintain its strong position. The first strategy is the expansion of the overall market (Wilson and Gilligan, 2006). According to Wilson and Gilligan (2006), “the company typically stands to gain the most”. This may be emphasized by NIKE´s strategy to target also non-users by promoting their sporting clothes also for casual occasions in the leisure time and not only for sports-purposes. Furthermore, the strategy implies the identification of new uses of product (Wilson and Gilligan, 2006). NIKE expanded in the Golf market, producing golf wear and thus launching their products in a new area of sports (online). Another point of the expansion of the overall market strategy is to increase the usage rates of the products (Wilson and Gilligan, 2006). NIKE developed new running shoes with a special sole, which is connected to your Ipop. You can read than your speed onto your Ipod (Online).
The second strategy for market leaders is to guard their existing market share. This may be done in several ways. In order to maintain their market share, companies concentrate on their significant competitive advantage(s). Furthermore, continuous product innovation and process is important to increase the competitive effectiveness and value to the customer (Wilson and Gilligan, 2006). Heavy advertising, strong customer and distributor relations are important in this strategy. NIKE advertises with very famous sportsmen as for example Tiger Woods. Furthermore, the web site of NIKE.com provides a selection of various languages appropriate to each customer all over the world (online).
The third strategy for market leaders in order to remain leaders is the expansion of market share. This involves heavy advertising, improved distribution, price incentives and new product development (Wilson and Gilligan, 2006). Furthermore, market leaders may build mergers and takeovers as for example in the case of ADIDAS which has bought up the sports company REEBOK (online). Another opportunity is the geographic expansion and the distributor expansion (Wilson and Gilligan, 2006).
Market challengers identify themselves as company who always wants to gain more marketshare and who use aggressive strategies to beat of the market leader (Kotler et al, 2005). According to Dolan (1981) are the used strategies cost intensive and risky if they challenge the market leader. Nike in the europen market challenges Adidas as the market leader, they can also attack companies who are smaller such as Nike challenges Puma and small regional firms (Wilson and Gilligan, 2006). In Germany Intersport always challenges with Runnerspoint which both are offering sportwearproducts.
We have two different market challengers if we go internationly. ADIDAS is a market challenger for Nike in the american market and Nike is a challenger for ADIDAS in the europan sportsmarket (Smit, 2006). In America ADIDAS challenged Nike with basketball which is of high importance in the United States (Adidas, 2007). In order to explain the three strategies which a company can use to attack the leader we will focus on Adidas as an challenger.
In one of the commercial Adidas challenged Nike with a frontal attack as they show Nikes strenghts and weaknesses (Kotler et al, 2005). In this case Adidas directly compared its product with the Nike products and stated that people who are wearing Adidas are increasingly powerful . Adidas named the company Nike and offended Nike’s product in their qualit and showed that “normal” people are more powerfull than athlets wearing Nike (clip online).
The Flank attacks of Nike demonstrates that this strategy is bascially focused on the business where the competitor is either geographically or in a certain market segment weak (Wilson and Gilligan, 2006). Nike used the chance to grab the golfmarket and has build up the “NikeGolf” brand which is now sold in the european market as golfing becomes more popular (online).
Nike in the european market has Roger Federer and Tiger Woods under its contract for advertising (online). Both are the best players. Nike encircled Adidas with these Icons, as Adidas now has no chance to compete with other players as they would not be the best. (Kotler et al, 2005).
The buypass atack is an indirect strategy. (Kotler et al, 2005). Puma used the buypass strategy to get most of the african soccer teams for the World Soccer Championships in 2010 which will be held in South Africa. They did not use a aggressive strategy against their competitors. Bypass attacks are focusing on the future aspect and are not aggressive ( Wilson and Gilligan, 2006).
Another form of market participants are the market followers which are usually small firms and mainly characterized by having a slightly smaller market share. The website of The Chartered Institute of Marketing (2008) provides a very clear definition: “A market follower is a firm that is happy to follow the leader in a market place without challenging them and perhaps taking advantages of opportunities created by market leaders without the need for much marketing investment of its own”. According to Wilson and Gilligan (2006) market followers adopt a less aggressive stance in order to maintain a status quo and also adopt a far less proactive posture simply by following what others do. Famous market follower brands of the sports industry are UMBRO, FILA and the former REEBOK.
The brand FILA, in the European market, represents a typical market follower as it launches imitated products just after the market leaders, especially shoes and sweat shirts (online). Market followers have also the advantage of market segmentation, i.e. they choose one specific market with the best potential in order to make as much profit as possible (Wilson and Gilligan, 2006).
There are 3 main aspects of following. A market follower may either follow closely, i.e. they use as similar marketing mix and market segmentation combination as possible as in the case of UMBRO which copies the marketing strategy of ADIDAS which is to sponsor national football teams. ADIDAS sponsors France, Germany or Argentina and UMBRO as a traditional english brand sponsors the national team of England (online).
The next strategy is to follow at a distance. Though similarities there are also differentiations between market leader and follower, i.e. the follower differentiates himself by using marketing aspects either of its own or different from the leader (Wilson and Gilligan, 2006). Thirdly, they can follow selectively which means that there are no differences as the same product and market terms are offered to the buyer. Thus direct competition concerning product and market terms is minimized (Wilson and Gilligan, 2006).
- Quote paper
- Christian Berger (Author), 2008, The 4 types of market competitive positioning and its key strategies, Munich, GRIN Verlag, https://www.grin.com/document/118064