We begin the Forum this week for discussions on Chapters 13

We begin the Forum this week for discussions on Chapters 1-3. The syllabus outlines the general questions for forum discussions. In addition to those questions, please address the following question this week: In Chapter 3, we discussed how to outline the four levels of competitive structure for a product category. We may think that the form level or the category level competition is the most important level for most categories but we found out in class last week how budget level competition could be very important for a sports franchise such as Chicago Bulls. For each of the four levels of competition viz. form, category, generic and budget, identify a product or category for which the specific level is the most critical. Briefly explain why you think so.

Solution

The four most important levels of competitive structure for a product category are as follows:

1. Form Level - In this level the competition is among the brands that serve the same customers. The products also act as close substitutes as the products will have the same attributes. For example, two different brands producing similar coffee granules or detergent are competitors in the form level. Form level competition is very critical for consumer products that are used frequently in the day-to-day activities of the consumers.

2. Category Level - Category level of competition is one in which the main the competition is not limited to only the close substitutes whereas it extends to product forms in a wider market. For example, while coffee companies are competing with each other for instant coffee granules, it will also have to close completely with companies that offer various different types of coffee like filter coffee or roasted coffee which is a premium competition for instant coffee granules.Electronic appliances will have to compete among themselves in the category level to retain the market share.

3. Generic Level - In this level of competition, products compete with anything that meets the same broad need. For example, the instant coffee granules manufacturing companies will have to face stiff competition from various health drink manufactures like tea compnies, green tea companies and various other milk powder companies. Companies that once were market leaders in manufacturing of camera are now facing stiff competition from mobile manufactures as all the mobiles are coming with a built in camera, the requirement for a separate camera has come down.

4. Budget Level- Budget competition is one in which there is a stronger call on limited discretionary income. It is hard to determine the competitive effects in this level of competition. All league matches that are played in various kinds of sports are having a stiff budget level competition.