Question: Explain the types of competition marketers face and the steps necessary for developing a competitive strategy. Three types of competition exist:

(1) direct competition among marketers of similar products,

(2) competition among goods or services that can be substituted for one another, and

(3) competition among all organizations that vie for the consumer's purchasing power.

To develop a competitive strategy, marketers must answer the following questions:

(1) Should we compete? The answer depends on the firm's available resources and objectives as well as its expected profit potential.

(2) If so, in what markets should we compete? This question requires marketers to make product, pricing, distribution, and promotional decisions that give their firm a competitive advantage.

(3) How should we compete? This question requires marketers to make the technical decisions involved in setting a comprehensive marketing strategy.