Chonlaros Rattanataros ID # 5202040142 MK. 601 Economic Analysis (Part II) Homework II – Judo in Action 1. In each of the four cases, does the entrant or challenger (i. e. Softsoap, Red Bull, supermarkets, Freeserve) have a competitive advantage when they market? Would they if the incumbents imitated their product offerings immediately? Softsoap According to the time of the case, bar soap is the product which is the market leader until late 1977, Minnetonka release Soap Machine that is the first time to have liquid soap in the market and continuously launch Softsoap in 1980.
Softsoap entered to the market as the first mover, gain a competitive advantage and become to the market leader. However, competitive advantage of Softsoap is not able to preserve the market share when it is attacked by big players in the market as P&G and Armour-Dial which are produce the liquid soap after. Red Bull Red Bull has a competitive advantage in term of focusing on the specific market and distribution strategy. It focus on the energy drink segment which has a small percentage from soft drink industry.
They success in access to the consumer which is Red Bull assess that big player as Coke and Pepsi are probably not come to play in this category. Moreover, using its own distribution network can build brand image and it’s the easy way to keep Red Bull uniqueness. Supermarkets In U. K. Petrol Price War case, supermarkets had the competitive advantage but they are not sustainable because it’s depend on gasoline price and the location. Lower price gasoline was the factor to persuade customers to the store while the authority of setting gasoline price was the major gasoline retailers.
Freeserve Cutting price is not quite a competitive advantage, in case of Freeserve, it effort to provide service in low price expect to outcome AOL while AOL not only be internet service provider but also provide content valuable as interactive news, entertainment shopping, information, email service and so on. It’s probably that Freeserve was operating in on loss by too low of service fee. 2. In the Softsoap and Red bull cases, what kept the incumbents from fighting back aggressively, at least initially?
In case of Softsoap and Red Bull, the big players as P&G, Armour-Dial, Lever Brothers and Colgate Palmolive (Softsoap Case), Coke and Pepsi (Red Bull Case) penetrate their market share and have a strong brand. It’s quite too risky to fighting back aggressively because it probably damage their current brand, decreasing brand image, decreasing the market size by cannibalize to current product and maybe lesser profit from fighting because of more spending on promotion and advertising for launching new product. 3. In the case of the UK petrol war, how do you think the supermarkets expected the major gasoline retailers to react to their entry?
Was this expectation reasonable? In U. K. Petrol War case, I think supermarkets expected the major gasoline retailers to react their entry because the sales volume and revenue of supermarket was high or low depend on gasoline price which was controlled by major gasoline retailers. The expectation is reasonable because it’s the only one way the gasoline stands compete is price. When price war occurred, in one area where compete in price, the petrol station in that area have the same low price, leading to loss in profit margin.
Moreover, the variety of consumer behaviors, consumers may prefer the convenient in filling up the gasoline then ignore to find the lowest gasoline price and sometimes it’s not reasonable to save a few money for lower gasoline price by the wasting time. 4. In the Freeserve vs AOL case, which consumers do you think are most readily switching to Freeserve? How can AOL retain these customers? Because of the low price of Freeserve, it probably gain the customers who are price sensitive as teenagers who get low income and don’t pay attention more to value-added service while AOL was the higher price but providing more than internet accessing.
Ways to retain AOL customers are create network effect in order to create high switching cost by build up special things which create community among the users such as instant messaging, provide contents which is the strength of AOL service such as interactive news, entertainment, information, shopping, email service and so on. Last but not least, AOL is the largest internet service provider, It can communicate this strength point to users to rely on AOL then they will not switch to freeserver.