Competitive Strategy - PowerPoint Presentation

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Competitive Strategy

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Outline

Introduction

Sustainable competitive advantage (SCA)

Sources of SCA

Strategies for

Market Leaders

Challengers

Followers, and

NichersSlide3

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 competeSlide4

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 againstSlide5

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 sustainableSlide6

Sun Tze’s 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.”Slide7

Sun Tze’s 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 movesSlide8

Strategies for Market Leaders

Market Leader’s 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 profitabilitySlide9

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?Slide10

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 DefenseSlide11

Defense Strategy (cont’d)

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. Slide12

Defense Strategy (cont’d)

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 mainlandSlide13

Defense Strategy (cont’d)

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 APB’s BeerhausenSlide14

Defense Strategy (cont’d)

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.

India’s TATA Group sold its soaps and detergents business units to Unilever in 1993Slide15

Defense Strategy (cont’d)

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 modelsSlide16

Defense Strategy (cont’d)

Counter-Offensive Defense

Responding to competitors’ head-on attack by identifying the attacker’s weakness and then launch a counter attack

e.g. Toyota launched the Lexus to respond to Mercedes attackSlide17

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 firmsSlide18

Market Challenger Strategies (cont’d)

Types of Attack Strategies

Frontal attack

Flank attack

Encirclement attack

Bypass attack

Guerrilla attackSlide19

Frontal Attack

Seldom work

unless

The challenger has sufficient fire-power (a 3:1 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 Slide20

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 Seibu’s flanks by opening numerous stores in overseas marketsSlide21

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 consumerSlide22

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 provincesSlide23

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 lowSlide24

Which Attack Strategy should a Challenger Choose?

Use a combination of several strategies to improve market share over timeSlide25

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--PanasonicSlide26

Market-Follower Strategies (cont’d)

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 leadersSlide27

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 beersSlide28

Market-Nicher Strategies (cont’d)

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 successfulSlide29

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