Marketing for Lawyers Determination position in the market Lesson 6 Eva Tomášková eva.tomaskova@law.muni.cz Market dominance lMarket dominance is a measure of the strength of: la brand, lproduct, lservice, or lfirm, lrelative to competitive offerings. l Market share lThe most often used for calculating market dominance l lThis is the percentage of the total market serviced by a firm or a brand. l lIt is generally necessary to commission market research (generally desk/secondary research, although sometimes primary research) to estimate the total market size and a company's market share. l lMarket share is influenced by customers, suppliers, competitors in related industries, and government regulations. l lRelationship between market share and market dominance: lA company, brand, product, or service that has a combined market share exceeding 60% most probably has market power and market dominance. l lA market share of over 35% but less than 60%, held by one brand, product or service, is an indicator of market strength but not necessarily dominance. l lA market share of less than 35%, held by one brand, product or service, is not an indicator of strength or dominance and will not raise anti-combines concerns of government regulators. l Concentration ratio lis used as an indicator of the relative size of leading firms in relation to the industry as a whole. l lOne commonly used concentration ratio is the four-firm concentration ratio, which consists of the combined market share of the four largest firms, as a percentage, in the total industry. l lThe four-firm concentration ratio measures the percentage of total industry output attributable to top four industries. For monopoly the four firm ratio is 100 % while the ratio is zero for perfect competition. lThe four firm concentration domestic (U.S) ratio for cigarettes is 93%. lThe four firm concentration domestic (CZ) ratio for mobile operators was 100 % in 2012. lThe four firm concentration domestic (CZ) ratio for petrol stations is 85 %. l lThe higher the concentration ratio, the greater the market power of the leading firms. Herfindahl=Hirschman Index lIt is a measure of the size of firms in relation to the industry and an indicator of the amount of competition among them. l lIt is defined as the sum of the squares of the market shares of each individual firm. As such, it can range from 0 to 10,000. l lThe HHI index for perfect competition is zero; for monopoly, 10,000. l lDecreases in the Herfindahl index generally indicate a loss of pricing power and an increase in competition, whereas increases imply the opposite. Question lWhy is monopol inefficient? lHow are monopols regulated in your country? Market power lA firm with market power has the ability to individually affect either the total quantity or the prevailing price in the market. l lMany countries have anti-trust or other legislation intended to limit the ability of firms to accrue market power. l lSuch legislation often regulates mergers and sometimes introduces a judicial power to compel divestiture. l lA firm usually has market power by virtue of controlling a large portion of the market. l lIndicators of market power: lMarket share lBarriers to entry (predatory pricing, product typing, creation of overcapacity) Decision of customers lMarket share of a company is an important decision for customers. l l“Is the company I am buying from stable?” l lDo you prefer buying at smaller companies or at bigger companies? Why? l Brand Positioning lemotional branding can also be extremely powerful l lBrand managing: lfrom Diagnostics (defining the field of play) lCreation (defining the brand architecture) lRealization (giving meaning to the brand) lMonitoring (if brand fulfills expectation of firms) Question lDo you satisfy with a brand? lDoes the brand fulfill your expectations? Brand managing in dynamic environment Market structure Market share constant dynamic constant dynamic McDonalds, Kodak Jägermeister Nivea, Hugo Boss, Disney Benetton, Gucci Brand structure decision One brand (one product or conception of unique brand) Advantages: Clear product profile Concentration on defined segments Disadvantages: Big expenditures for brand profile Family brand (spread of product line) Advantages: It is possible to brand transfer Concentration on defined segments Disadvantages: It is necessary to have the similar image Danger of brand erosion Roof brand (conception of brands a company) Advantages: More effective – it is not necessary to have high invests at new brand or at support of present brands Disadvantages: There is not any clear position There are not known target segments Strategy of market spread Decision about market spread It is necessary to fulfill whole strategy of a company It is necessary to target on choosing segments It is necessary to be accepted for choosing segment It is necessary to connect product brand with the name of a company It is necessary to be different from competitors It is necessary to have a long-time conception More effective is to concentrate for a few of brands than a lot of brands Decision about brand structure One brand strategy - Henkel: Persil, General, Pril Brand family strategy - Beiersdorf: Nivea, Babypflege, Sonnenpflege, Haarpflege, etc. Roof brand strategy - Siemens, Apple, Dr. Oetker Position analysis lPsychological model lBased on brand perception by customers l lMain presumption: lTo have differences recognizable by customers lCustomers have to place product of a company and products of competitors to the graph lTo know the best position for customers lTo measure differences between ideal position of customers and current position l l+ Clear perception and wishes of customers l- To realize a large research Creation of position graph Price Design Individuality Technology Comfort Elementary transport Safety Environment People who searching the lowest prices People who like prestige People who like speeding Udělej si sám Critisc of impact on environment Car = transport People who like technology People who prefer safety People who like comfort People who like design Prestige Position analysis I. Price Design Individuality Prestige Technology Comfort Elementary transport Safety Environment People who searching the lowest prices People who like prestige People who like speeding Udělej si sám Critisc of impact on environment Car = transport People who like comfort People who prefer safety People who like technology People who like design FIAT HONDA OPEL SEAT PEUGEOT FORD MERCEDES VW NISSAN MAZDA ŠKODA AUDI BMW Position analysis II. Price high low Specialization rate low high ORGANICS PANTENE EL. VITAL GLISS KUR SCHAUMA TIMOTEI NIVEA GUHL SANDRA ULTRA BEAUTY SCHAMTU GARD Brand I. Brand II. Brand III. Task lChoose an industry and create position map l