COMPETITION â€“ ESTABLISHED PRODUCTS
The mass production and mass distribution brought by the industrial revolution led to the stage of competition. The increase in number and size of the manufacturing firms generated the competition, in the early stages of industrial revolution. The industrial firms could no longer confine themselves to distribution when the competitive threat became more prevalent. The situation demanded a conscious effort to face the competitors and the firms has to ensure that their products are accepted in preference to the other competitors.
The following case would illustrate the competition in Indian market:
Promise vs Colgate
Early eighties witnessed one of the most interesting wars between the colgate, the multinational giant an Balsara the small scale Indian firm. It was a unique fight in which the Balsara,, recorded a real success in positioning its new brand of toothpaste â€™Promiseâ€™ against the leader â€˜Colgateâ€™. Within a span of three years it took a 14% share of the market and become the second largest brand of toothpaste in India. A careful preparation before launching, choice of right pricing strategy, effective marketing communication and creative promotional activities had produced the success.
Therefore, it is very essential for any firm to undertake SWOT analysis. (i.e. Strengths and Weakness, and Opportunities and Threats) before entering into the market.
The essence of formulating competitive strategy is relating a company to its environment. The intensity of competition in an industry is rooted in its underlying economic structure. According to Micheal-Porter the state of competition in an industry depends on five basic competitive forces. The collective strength of these forces, determines the ultimate profit potential in the industry , where profit potential is measured in terms of long run return on invested capital. Not all industries have the same potential. They differ fundamentally in their ultimate profit potential as the collective strength of the forces differs.
The goal of competitive strategy for a business unit in an industry is to find a position in the industry where the company can best defend itself against these competitive forces or can influence them in its favor. Since the collective strength of the forces may be painfully apparent to all competitors, the key for developing strategy is to delve below the surface and analyze the sources of each. Knowledge of these underlying sources of competitive pressure highlights the critical strengths and weakness of the company, animates its positioning in its positioning in its industry, clarifies the areas where strategic changes may yield the greatest payoff, and highlights the areas where industry trends promise to hold the greatest significance as either opportunities or threats.