Competitive Strategy - PowerPoint PPT Presentation

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Competitive Strategy

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Success in attacking the leader is typically based on how well the challenger can reconfigure its market strategies and marketing mix strategies. ... Guerrilla attack. – PowerPoint PPT presentation

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Title: Competitive Strategy


1
Competitive Strategy
  • .

2
Outline
  • Introduction
  • Sustainable competitive advantage (SCA)
  • Sources of SCA
  • Strategies for
  • Market Leaders
  • Challengers
  • Followers, and
  • Nichers

3
Introduction
  • Having a competitive advantage is necessary for a
    firm to compete in the market
  • But what is more important is whether the
    competitive advantage is sustainable
  • A firm must identify its position relative to the
    competition in the market
  • By knowing if it is a leader, challenger,
    follower or nicher, it can adopt appropriate
    strategies to compete

4
Sustainable Competitive Advantage
  • A good strategist seeks not only to win the
    hill, but hold on to it. Subash Jain
  • Sustaining competitive advantage requires
    erecting barriers against the competition
  • Aakers suggested looking at the following
  • How you compete
  • Basis of competition
  • Where you compete
  • Whom you are competing against

5
Examples of SCA
  • For many years, Singapore Airlines were riding on
    its SCA of having the best in-flight service
  • As more airlines improved their service and
    narrowed the gap, SIA sought other competitive
    advantages among which are
  • The most modern fleet
  • Outstanding Service on the Ground
  • A super entertainment system in its cabins
  • Comfort in its First Class cabins at an
    unparallel level
  • Discuss whether the later initiatives had been
    sustainable

6
Sun Tzes defensive strategy
  • Do not assume the enemy will not come
  • but be prepared for his coming
  • Do not presume he will not attack,
  • but instead make your own position unassailable.

7
Sun Tzes Offensive Strategies
  • Overt-offensive strategy
  • To knock out a business rival so as to take over
    his company
  • To knock out a competing product so as to take
    over its market share
  • Covert-offensive strategy
  • Keep as low a profile as possible while making
    offensive moves

8
Strategies for Market Leaders
  • Market Leaders objectives
  • Expand the total market by
  • Finding new users
  • Creating new uses, and
  • Encouraging more usage
  • Protect its current market share by
  • Adopting defense strategies (see following
    slides)
  • Increase its market share
  • Note the relationship between market share and
    profitability

9
Which strategy to use?
  • Depends on your answer to the following
  • Is it worth fighting?
  • Are you strong enough to fight?
  • How strong is your defense?
  • Do you have any choice but to fight?

10
Defense Strategy
  • A market leader should generally adopt a defense
    strategy
  • Six commonly used defense strategies
  • Position Defense
  • Mobile Defense
  • Flanking Defense
  • Contraction Defense
  • Pre-emptive Defense
  • Counter-Offensive Defense

11
Defense Strategy (contd)
  • Position Defense
  • Least successful of the defense strategies
  • A company attempting a fortress defense will
    find itself retreating from line after line of
    fortification into shrinking product markets.
    Saunders (1987)
  • e.g. Mercedes was using a position defense
    strategy until Toyota launched a frontal attack
    with its Lexus.

12
Defense Strategy (contd)
  • Mobile Defense
  • By market broadening and diversification
  • For marketing broadening, there is a need to
  • Redefine the business (principle of objective),
    and
  • Focus efforts on the competition (the principle
    of mass)
  • e.g. Legend Holdings, the top China PC maker
    Legend has announced a joint venture with AOL to
    broaden its business to provide Internet services
    in the mainland

13
Defense Strategy (contd)
  • Flanking Defense
  • Secondary markets (flanks) are the weaker areas
    and prone to being attacked
  • Pay attention to the flanks
  • e.g. San Miguel introduced a flanking brand in
    the Philippines, Gold Eagle, as a defense against
    APBs Beerhausen

14
Defense Strategy (contd)
  • Contraction Defense
  • Withdraw from the most vulnerable segments and
    redirect resources to those that are more
    defendable
  • By planned contraction or strategic withdrawal
  • e.g. Indias TATA Group sold its soaps and
    detergents business units to Unilever in 1993

15
Defense Strategy (contd)
  • Pre-emptive Defense
  • Detect potential attacks and attack the enemies
    first
  • Let it be known how it will retaliate
  • Product or brand proliferation is a form of
    pre-emptive defense e.g. Seiko has over 2,000
    models

16
Defense Strategy (contd)
  • Counter-Offensive Defense
  • Responding to competitors head-on attack by
    identifying the attackers weakness and then
    launch a counter attack
  • e.g. Toyota launched the Lexus to respond to
    Mercedes attack

17
Market Challenger Strategies
  • The market challengers strategic objective is to
    gain market share and to become the leader
    eventually
  • How?
  • By attacking the market leader
  • By attacking other firms of the same size
  • By attacking smaller firms

18
Market Challenger Strategies (contd)
  • Types of Attack Strategies
  • Frontal attack
  • Flank attack
  • Encirclement attack
  • Bypass attack
  • Guerrilla attack

19
Frontal Attack
  • Seldom work unless
  • The challenger has sufficient fire-power (a 31
    advantage) and staying power, and
  • The challenger has clear distinctive advantage(s)
  • e.g. Japanese and Korean firms launched frontal
    attacks in various ASPAC countries through
    quality, price and low cost

20
Flank attack
  • Attack the enemy at its weak points or blind
    spots i.e. its flanks
  • Ideal for challenger who does not have sufficient
    resources
  • e.g. In the 1990s, Yaohan attacked Mitsukoshi and
    Seibus flanks by opening numerous stores in
    overseas markets

21
Encirclement attack
  • Attack the enemy at many fronts at the same time
  • Ideal for challenger having superior resources
  • e.g. Seiko attacked on fashion, features, user
    preferences and anything that might interest the
    consumer

22
Bypass attack
  • By diversifying into unrelated products or
    markets neglected by the leader
  • Could overtake the leader by using new
    technologies
  • e.g. Pepsi use a bypass attack strategy against
    Coke in China by locating its bottling plants in
    the interior provinces

23
Guerrilla attack
  • By launching small, intermittent hit-and-run
    attacks to harass and destabilize the leader
  • Usually use to precede a stronger attack
  • e.g. airlines use short promotions to attack the
    national carriers especially when passenger loads
    in certain routes are low

24
Which Attack Strategy should a Challenger Choose?
  • Use a combination of several strategies to
    improve market share over time

25
Market-Follower Strategies
  • Theodore Levitt in his article, Innovative
    Imitation argued that a product imitation
    strategy might be just as profitable as a product
    innovation strategy
  • e.g. Product innovation--Sony
  • Product-imitation--Panasonic

26
Market-Follower Strategies (contd)
  • Each follower tries to bring distinctive
    advantages to its target market--location,
    services, financing
  • Four broad follower strategies
  • Counterfeiter (which is illegal)
  • Cloner e.g. the IBM PC clones
  • Imitator e.g. car manufacturers imitate the style
    of one another
  • Adapter e.g. many Japanese firms are excellent
    adapters initially before developing into
    challengers and eventually leaders

27
Market-Nicher Strategies
  • Smaller firms can avoid larger firms by targeting
    smaller markets or niches that are of little or
    no interest to the larger firms
  • e.g. Logitech--mice
  • Microbrewers--special beers

28
Market-Nicher Strategies (contd)
  • Nichers must create niches, expand the niches and
    protect them
  • e.g. Nike constantly created new niches--cycling,
    walking, hiking, cheerleading, etc
  • What is the major risk faced by nichers?
  • Market niche may be attacked by larger firms once
    they notice the niches are successful

29
Multiple Niching
  • A firm should stick to its niching but not
    necessarily to its niche. That is why multiple
    niching is preferable to single niching. By
    developing strength in two or more niches the
    company increases its chances for survival.
  • Philip Kotler
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