Four Levels of Competition (Kotler)

Four Levels of Competition (Kotler)

Competition, a critical factor in marketing management, comes from companies providing actual and potential rival offerings and substitutes that a buyer might consider. Although this may seem rather obvious, there's something more to it than you think.
Philip Kotler suggests to clearify the picture by distinguishing four levels of competition, based on the degree of product substitutability:

• BRAND COMPETITION: A company sees its competitors as other companies that offer similar products and services to the same customers at similar prices. Volkswagen might see its major competitors like Toyota, Honda, and other manufacturers of medium price automobiles, rather than Mercedes or Hyundai. Other examples are: Pepsi and Coca-Cola, various Unilever and Proctor & Gamble.
• INDUSTRY COMPETITION: A company sees its competitors as all companies that make the same product or class of products. Thus, Volkswagen would be competing against all other car manufacturers. Other examples: KLM and Singapore Airlines, Unilever ice cream and Mars ice creams.
• FORM COMPETITION: A company sees its competitors as all companies that manufacture products that supply the same service. They are competitors who compete for the same needs, although they are technically quite different. Volkswagen would see itself competing against manufacturers of all vehicles, such as motorcycles, bicycles, and trucks. Or speedboats and sports cars.
• GENERIC COMPETITION: A company sees its competitors as all companies that compete for the same consumer dollars. Volkswagen would see itself competing with companies that sell major consumer durables, foreign vacations, and new homes. Or foreign vacations and second homes.
  

Depending on the business challenges, financial goals, and circumstances, a company should look at all of these the levels of this competition.

Source: Philip Kotler, (2001), "Marketing Management Millenium Edition", 2001, 10th Edition, pp. 9-10

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