competitive position

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A range of measures that assesses the overall competitiveness of one company relative to another company operating in a defined market. Traditionally, competitive position can be measured by means of a combination of the following variables:1Relative market share of the competitors. Here it is important to emphasize relativeness: the reason for this is that an apparently high market share of say 20% can be relatively weak if the nearest competitors have 40% and 35% of the same market; alternatively an apparently low share, of say 8%, can be the dominant share in a highly fragmented market where no one commands more than 10% of the total market.2Costs (either of production, running the enterprise, or marketing and selling, or a combination of all three), which are particularly important in price-sensitive and mature markets where consumers are looking for higher quality at lower cost.3Price of goods and/or services. Although this depends on the price elasticity of the market, prices have always tended towards affordability as the market expands. Only the most exclusive luxury brands and services can afford to ignore prices.4Quality of goods and services. As has often been said, the memory of price fades faster than the memory of poor quality; equally, exceptional quality will quickly erode the memory of high prices.5Accumulated experience of a service delivery or product, which factors into a lower and more effective way to serve the market. Experience and expertise in products and service delivery is a distinct competitive advantage, which can often enable higher prices to be charged for a rival product and particularly a service. ‘They're not cheap, but they are good’ is a familiar refrain for this type of company.6R & D performance: good research and development is critical to the development of good products. The linkage between marketing and research and development (R&D) is often neglected, given that marketing, being in regular touch with the market, can often inform where and how research investment ought to be spent. This prevents what is often known as an ‘engineering’ or ‘technology’ centric culture, that emphasizes the technical features and benefits of the product rather than tuning it to the needs of the marketplace. This mindset turns marketing and sales into blind functionaries who have to market and sell whatever is developed. There is always a fine line to tread between slavishly following the market and allowing research that leads to innovative products. The sales and marketing community is often fond of pointing out the examples of technically good products that, because they were developed in a market vacuum (e.g. K5, Ford Edsel, Concorde, nuclear power stations, Betamax, Visicalc, the Apple Newton), were market failures, whereas the engineers can point to the Sony Walkman, the laser, penicillin, the telephone, etc. that were developed without the assistance of market research and analyses.7Production effectiveness and capacity. Again, the efficiency of production determines the price and therefore the market competitiveness. A good product cannot survive if the costs of production exceed the amount of return that can be gained from the product. See also breakeven analysis.8Distribution channel and network: effective distribution is crucial to effective marketing, particularly for products in either consumer or business-to-business markets. Good products need to reach their target audience at the right time, place, and cost. Increasingly, there are many new channels of distribution, or new ways of reaching audiences, such as the World Wide Web, that can reduce the costs of engaging audiences with products on a worldwide scale that were previously beyond the reach of a single country or local producer. See also channels of distribution.9Brand and image reputation relative to competition; in a world where it is increasingly difficult to sustain product and service differentiation, and where consumers are increasingly discerning and better informed, the image and brand of a company are vital to retaining customer loyalty. A powerful brand and reputation in professional services is now an indispensable necessity to be able to compete. The recent fate of Andersen shows how a once venerable business can be completely wiped out in a very short space of time when trust in the brand is lost in the minds of clients and markets.10Competitive scope, meaning, for example, the breadth or narrowness, of an organization's focus as measured horizontally by the range of industries, market segments, or geographical regions that the company targets, with its range of products and services. Alternatively, competitive scope can also refer to the degree of vertical integration that a company has relative to other competitors in the same marketplace. For example, one company in the paper industry may be vertically integrated if it owns the forests, pulp mills, paper-making factories, distribution systems, and outlets for its paper products relative to another competitor that only manufactures paper but does not own the raw materials or the means of distribution and sale.11Competitive dynamics, which means the overall standing of a company or organization in its markets, relative to the standing of its competitors, when all competitors are described in terms of their size, resources, capabilities, product range and quality, marketing strategies, opportunities, goals, intentions, behaviour, and similar variables. Usually the dynamics of a market are those special or unique ingredients that cause the market to operate as it does and which tend to favour one competitor over another. Also, competitive market dynamics are constantly changing, therefore competitiveness can often be defined by the company that adapts more efficiently to changing market dynamics. See also competitive advantage.


Subjects: Marketing.

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